Secondary markets commentary – 9 February 2018

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FROM THE 9TH FEBRUARY 2018 INTELLIGENCE REPORT:

Paper grades fell again this week but the drop was not as dramatic as last week. OCC lost around £6 per tonne, mixed paper lost a further couple of quid. Copper grades also came off by £100 per tonne, while plastics were stable. However, the pound has fallen back dramatically today and this could have an impact next week if it continues. The pound reached above $1.42 during the week following the Bank of England governor Mark Carney suggesting interest rate rises would happen soon and jump sharply on the back of good economic data. Although it did ease back as the week went on. But at a press conference today, the EU chief negotiator Michel Barnier told journalists that a transition period for Brexit was not “a given” and this caused the pound to slump back to the $1.38 level seen at this point last week.

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A higher pound could be a hindrance to exporters trying to sell material into already tricky markets, and a lower pound would give some advantage. Another factor that will impact on the market is next week’s Chinese New Year. While it shouldn’t affect new orders too much, there has often been a period of blank sailings and shortages of containers in the period afterwards. This year could be different as shipping lines are eager for business, but it is something to be aware of.

Plastics
The market for plastics remains tough, with domestic and export destinations largely reporting that they are full up. Bottle grades are still able to move on the whole though, particularly if the bale is good quality, as domestic and European buyers are still interested in this, supported in addition by the PRN value. Films continue to be really difficult to find a home for, with low grade material either being stored or finding alternative ways to be processed rather than recycling. For once, the Chinese New Year celebrations are unlikely to affect the plastics market, unless it has an impact on container availability to alternative destinations in Asia.

Paper
Paper Demand for OCC is reported to be really poor at the moment, with almost all destinations in UK, Europe and Asia said to be at full inventories. However, in contrast to that, the volume of material being presented to the market is also coming off, and that could lead to a little material need if it continues into March.
The very best quality material is still able to find a home, and those that are buying are focussing on this. But with Chinese New Year happening next week, it could be that the market will ease back further as it looks unlikely that there will be any great demand for OCC from there next week or in the period after.
If demand is to come back, the market thinks March at the earliest will be when some of the pressure comes off. But there isn’t a huge amount of confidence about that. Mixed paper slid in value this week, and finding outlets is becoming increasingly difficult, with some starting to talk about charging for transport of the material, rather than paying for it.

Metals
Copper came off by £100 per tonne as demand on the LME fell back a touch.

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