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Industry suffers trickle-down effects of reduced finished product demand

The main feature of the market has been the lack of demand across all parts of the world, principally because of low consumption of finished products and therefore weakened demand for packaging material. The financial crisis, high inflation rates and the Ukraine conflict are all likely to have contributed to this reduced demand for finished products. Fortunately, freight rates to Asia have dropped significantly such that the market, although weak, has retained some life. 

Prices have been reduced during recent months despite weak supply and low stock levels in collectors’ and paper mills’ yards. In Europe, OCC and white grade prices have dropped around Euro 20 per tonne since May whereas the deinking grades have remained relatively stable, albeit at low levels. In the USA, domestic OCC prices climbed slightly in some regions at the beginning of July, but all other grades continued to fall.

The trend seems to be changing currently in Asia, with hikes of up to US$ 15 per tonne in India and of US$ 5-10 in other countries. The reason for this could be low production levels during recent months and weak local collection volumes while paper mills were trying to reduce stock levels in a downward-trending market. Mills are now trying to replenish their stocks amid a low collection scenario, and so prices are moving slowly upwards.

China has not provided much assistance over recent months, demanding very low volumes of recycled pulp from other Asian countries owing to the global backdrop of low demand for consumer goods and thus also for the boxes in which they are packed. Low demand for recycled pulp in China means the same for recovered paper in other Asian countries, as that recovered paper is often used to produce recycled pulp for China.