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BIR World Mirror on Recovered Paper / Quarterly Report – January 2017: “steep hike in sea freight rates; OCC prices remained firm in 4Q/16”

(Brussels, Belgium, January 13, 2017) Global economies are continuing to grow at a rather slow pace, with Europe achieving just over 1.2% while the Chinese economy is still maintaining its projected growth of 6.5% and India’s GDP is rising at a rate of 7.5%.
Overall demand levels appeared to firm in the final three months of 2016 when compared to the previous three quarters, pointing towards increasing global demand for fibre. With the approach of the US election, there was also volatility in the currency market, with a weakening of the US dollar and the Euro continuing on its softening trend following the Brexit vote.
The Hanjin Shipping bankruptcy, the realigning of shipping alliances and the possibility of mergers have greatly affected both availability of containers and shipping space, resulting in sea freight rate increases and delays to shipments during last year’s final quarter. Exporters are likely to be faced with increasing freight rates going into 2017.
Feedback from Indonesia, meanwhile, suggests the first effects of the Hanjin Shipping bankruptcy were becoming apparent in last year’s final quarter, with sea freight rates, shipping space and container availability coming under significant pressure.
While Chinese buyers had quickly accepted higher rates, buyers in other Asian countries initially adopted a wait-and-see approach to rising freight costs and elevated material prices, but ultimately had ‘no choice other than to step into the market with competitive offers’.
In Vietnam, the response by some mills to the higher price levels coming out of Europe and the USA was to seek out new supplier regions capable of delivering the required quality at an affordable price. ‘They seem to have satisfied these requirements in the Mediterranean and North Africa,’ it is observed. ‘One advantage of the material from this area is that the moisture content is much lower than that from, for example, sources in Northern Europe.’
Export prices firmed during the fourth quarter, benefitting both from increasing demand and weakening currencies. Following the holidays in the third quarter, collection levels also increased and so enabled more fibre to be exported. Domestic demand levels improved, as did European mill prices.
With increasing collections within Asia, an increasing number of the continent’s mills preferred to use larger volumes of domestic fibre because it was cheaper and helped them to deliver against prevailing weak market prices for finished goods.
Fiber Prices:
OCC prices continued to strengthen during the fourth quarter, having started October at US$ 170+ per tonne to end the year at US$ 180-plus whereas mixed paper climbed from US$ 143-plus to US$ 158-plus over the same period.
To access complete report (Members Only) go to: (Source: press release)

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