Exporting recovered fibres, in the first quarter of 2008 was a major challenge in balancing firm to strong export demands with changing monthly freight rates due to a variation in BAF & CAF rates and a highly volatile Dollar.
The strengthening of the Dollar, seen towards the end of 2007, was reversed within the first quarter, as Dollar/Sterling rates rose once again above 2, and the Dollar/Euro rates weakened from 1.46 to well over 1.55.
Demand into the New Year continued on a firmer basis, with export prices of most grades rising steadily. Projected demand from China & other Asian countries, for 2008 was positive with more new capacities being announced, particularly in China.
In the year 2007, total imports into China were in the region of 22.6million MT, of which America supplied some 10 million MT (44%), and Europe supplied 7.15 million MT (32%).
Year on year growth from 2006 to 2007 was just under 3 million MT – meaning 15% more recovered fibre was imported by China.
The growth in exports from Europe to China from 2006 to 2007 was 1.6 million MT, which is an increase of almost 30%.
Demand from other Asian countries (India, Thailand, Indonesia, Vietnam and many others) has also continued to grow.
During the current quarter we saw prices for European OCC strengthen from USD 210+ to USD245+, whereas US OCC prices moved from about USD225 to USD255+.
Exporters from USA were experiencing container shortage problems, and were therefore not able to meet the projected export volume for the quarter.
UK exporters were similarly affected, but with a shortage of vessel space, following the crane collapse at Southampton in January, which took many weeks to put right.
With the easing of the Winter, and increased availability of fibre, and the reduced container availability in the USA, we saw the first signs of a slight weakening in the price of fibre, generally.
Between mid to end March, we saw a small correction in USA OCC export prices, moving downwards from USD255+ to nearer USD250+. At the same time, European OCC prices adjusted from USD245+ to USD240+.
OCC exports from other regions (Japan, Australia, etc.) were adjusted likewise.
With the US recession and the sub-prime crisis, already filtering into weakness in the global stock markets, this will eventually have some impact on demand & liquidity within the industry.
The demand & supply trends in the second and third quarters will pose some new challenges for our industry, which like other industries, we will have to work hard to work through.
Finally, once again, the Shipping Lines have announced their intention of a possible freight increase between April and May, which besides the BAF & CAF increases will be another hurdle for us to overcome in the coming quarter.
- Mr. R.S. Baxi
