December Market News
Do old fashion laws still apply?
Prices felt in the USA as expected and announced in Panda’s last market announcement. Last week the official price on the domestic market felt by US$ 11-17 per mt due to the weak export market mainly to China, export price felt with 22-28 per mt.
In addition several large US mills took downtime resulting in lower demand for OCC.
The reason for the fall of export prices was that some sellers had to meet the Chinese deadline for the 2014 import permits.
The middle grades like SOP, CBS and SWL the same happened, a price reduction. Classical during the winter period the consumption of tissue is lower and different where more hygiene aspects play a critical role using more virgin fibres instead of secondary fibres.
Better grades kept stable with HWEC going up due to the successful price increase of pulp.
In addition a GRI is announced by the shipping lines as per January of US$ 100 per Box, for inland origins US$ 150 per Box.
Some market participants belief the fall of prices for OCC will stabilize as buying interest for the period after Chinese Lunar New Year (starting end of January) is coming to the surface. The fall of the Chinese prices is starting to slow down.
Classical large Chinese mills like to commence purchasing when the price is bottoming subsequently buying heavily. Will it happen and if so who will stand up having the power start buying first? Should therefore be stocked due to this and who will be able to do this in a market where cash is king?
In Europe the export price for OCC recently increased slightly caused by a forced leadership change between the three big Chinese procurement offices as the new leader cannot make a fist in the US market. Will it endure? Time will tell.
It will most likely not change the overall supply-demand situation which will result gradually in a further price softening with the possibility to go under the psychological price of € 100 per mt during the first part of 2014, with a possible shift in spring time.
The European mills did not reveal their official prices yet for December but when they keep their price unchanged, a price softening beginning next year seems to be unavoidable. Globally the inventory levels of end products are simply going up. The mills will probably be forced to get movement using price as stimulus on both ends (for secondary fibre and reels) to reach this goal.
For the short term the market needs for the first time in history snow or a cold winter to stabilize prices to stop the expected price reduction. Normally when snow was hitting the ground the market could anticipate on price increases.
The global market is waiting for an economic resurrection which most likely will not come soon or at least not sufficient to bring balance in the overall supply-demand situation.
In 2015 it will be 7 years ago the financial crises started in our global economy, will we see after this period 7 good years again making old fashion laws applicable even in our modern world of today?