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February Market News

2014: global recovery, a bridge too far?  

In Europe deficits have fallen by half. Productivity is improving, labour costs are falling, in addition current-account deficits in Italy, Spain and Portugal are disappearing. UK is growing again. The Eurozone, will grow again in 2014, although little and the cracks in its foundation have not yet disappeared. A banking union as fundament for stabilising the EURO, will be work in progress.

The American economy has created the last 2 years 4.3 million jobs and could create another 2 million in 2014. Cheap shale gas is driving down energy costs, making American manufacturing more competitive. The Federal Reserve will slow down printing money in 2014 as the economy recovers. It will boost the interest rates and the dollar, luring footloose capital back to America.

China is the global wild card. The new government that took power in 2013 accepts the years of 10% growth are over. The economy will most probably grow with 7% in 2014, however for an economy of $10 trillion, middle-income economy fast enough.

Japan is enjoying a resurrection. Falling prices have been a scourge for the economy for the past 20 years. However the bank of Japan’s money-printing operation has pushed currency down and prices up, normally a worrying combination but not in deflation-prone Japan. Structural reforms are needed. In 2014 taxes will increase to overcome the burden of huge deficit, which can stop the economy suddenly.

Global economy’s growth pattern seems to go through a shift, USA will add more to the global economic growth than China, Japan will add more than India.

The economic outlook  can be unwrapped in the global market of RCP. The classical models in the global market are gradually changing with less export of RCP to the Far East/China in particular from Europe. In total China imported last year 29 million mt, 2,8% less compared with 2012.

Currently the market of RCP in Europe is slow, prices dropped with around Euro 5 after a quick but short start of the year now to Euro 120/mt FAS for OCC on the export. Depending on the area concerned price will most probably be too short to be competitive relative to the domestic prices. In Europe, the inventory levels of finished products are going up, the orders books down while prices for finished products are under pressure. The question is, will domestic soften?

The shipping lines announced the yearly increase for Eastbound rates with $300-$400/40”, commencing as from March. Timing is everything as the lower space due to Chinese Lunar New Year end March- beginning April will temporally effect space-and equipment supply. How long will it hold? Could it be one of the signs of a structural changing global economy?

Middle- and better grades are well sought for, however less available driving prices slowly to a higher level in particular multi printing.

In America OCC prices held stable by domestic mills at the East and increased $5/short ton along the West Coast, with higher export prices.

For the higher grades almost all went up with $10 especially SOP in all regions of the USA, this increased also the export prices. Demand from Mexico was strong for SOP. Export prices to China and South America went up with $10-15 per ton.

The other grades like mixed paper, ONP and the pulp substitutes kept stable for the US mills.

The cold weather across the Midwest and East coast partly effected the generation and delays in delivery.

Due to Chinese lunar New year export to China was in soft demand. Because of the weather problem many tons went to the domestic mills. The Last month export prices went up $10 per ton in Los Angeles, New York/New Jersey as well as Chicago CY.

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