‘We don’t know where the bottom is’

Paper mills worldwide are struggling with the consequences of rocketing energy prices and BIR’s senior paper representative Francisco Donoso says the mills can only respond by cutting the prices they pay for recovered paper, hitting the recyclers.

Donoso made his comments at BIR World Recycling Convention in Dubai where vhe is president of the paper division. Hesaid prices for OCC had fallen by between 80% and 90% in recent months, amid extremely low demand all around the world with high stocks at paper mills.

‘The high cost of energy – and specifically gas – is one of the reasons for this as it has become by far the largest production cost for mills. They cannot pass on this cost in their sales prices because demand for their products is also low owing to the financial crisis, and neither can they reduce their energy costs. Therefore, the only cost they can manage is what they pay for their raw material.’

In the USA, Mr Donoso said, prices for mixed paper had reached zero dollars in some locations and thousands of tonnes were being landfilled. Prices had fallen fastest in Europe and he anticipated further downtime, suggesting ‘it is difficult to know where the bottom is’.

The Indian position was set out during the convention by Nishant Sahney, managing director who said the high prices of more than six months ago had fallen away dramatically. ‘We don’t have exports to China anymore because the Chinese are not buying pulp.

On top of that, because of less demand in US and Europe, we are now competing with manufacturers from the Middle East and other Asian countries. Mills in India are now running at 70% capacity so that is why they cannot afford the prices of six months ago.’

Ranjit Baxi, president of the Global Recycling Foundation, was more upbeat, saying the paper sector had always proved to be resilient. ‘It’s the expertise and commitment of our people that makes it work. Demand for paper is not falling – it will still be there.

‘It’s time we supported new countries elsewhere – in the GCC or countries in Africa which could be the next manufacturing hub. Let’s not be upset by the price fluctuation; market demand will be strong, so let’s be positive.’