Red Sea crisis overshadows paper trade

The final two months of 2023 confirmed a positive trend for finished product and recovered paper demand in Asia and Europe, according to BIR.

The conclusion comes in the latest quarterly Mirror Prices from the world recycling organisation. According to a market overview from Simone Scaramuzzi of LCI (Italy), prices had been increasing slightly despite an earlier shipping cost increase of around US$ 200 per container announced for January 2024. This ahead of the intensification of attacks on Red Sea vessels.

‘The surcharge of between US$ 1 000 and US$ 3 000 per container suddenly applied by the shipping lines blocked the loadings between the final week of 2023 and the opening week of 2024,’ Scaramuzzi says. Finished product demand and prices fell up to 10% when compared to their levels of the previous two months.

‘The significantly higher increase in shipping costs to Indian ports compared to other Asian destinations put India out of the market as sales prices had to be 30 to 40% higher than for other countries in Asia in order to be competitive,’ he adds.

‘Significant challenges’

Division president Francisco Donoso, of Dolaf Servicios Verdes (Spain) reinforces the view that the global recovered paper market is facing significant challenges because of the situation in the Red Sea.
‘Suppliers and buyers in Asia, particularly in southeast Asia, have been struggling to settle recovered fibre import deals, especially from Europe and the USA, in recent weeks,’ he says. ‘Mills in the region have reduced purchases of European brown grades over recent months and have turned to local collections owing to slow domestic packaging demand and weak exports to China.’

He points out that delivery uncertainties have become a major concern for buyers of European paper: transit times have been extended by at least two weeks, making it difficult to plan procurement. Sellers reported risks of cancelled orders and revoked vessel space bookings for recovered paper cargoes owing to container shortages and intense competition for lower shipping rates.

Scaramuzzi, meanwhile, notes that more material has been available in Europe despite decreasing local recovered paper demand. He thinks China is unlikely to see a short-term recovery amid low consumption, higher costs and a lack of orders for finished products.

US perspective

In his report on north America, Myles Cohen of Vipa (Switzerland) says elevated prices are caused by weaker supply rather than increased demand.
‘Domestic mills remain nervous about not being able to get enough recovered fibre feedstock to keep their machines running, so they are scrambling to find tonnes and bidding up the price in the process,’ he says.
As for US exports of recovered fibre, the first 10 months of 2023 saw a reduction in purchases by India, Indonesia, Taiwan and South Korea whereas Malaysia and Thailand significantly increased their buying of US material.