During the BIR’s Paper Division meeting held during the association’s fall meeting, attendees cited higher freight rates, increasing oil prices and a volatile U.S. dollar as weighing heavily on the paper stock market.
Ranjit Baxi, the new president of BIR’s Paper Division, noted that since Oct. 1, European exporters to main Asian ports have been facing freight increases of around $ 600 per 40-foot container, while further BAF increases are anticipated for this month and December. "Exporting is a rather difficult task at the present time," he stated.
Baxi added that Taiwan had banned the export of recovered fiber with effect from August 1 and, as a result, China will be looking to replace about 50,000 metric tons per year obtained from Taiwan.
Baxi added that in Europe, Norway and Poland are growing as exporters of recovered fiber to China. Meanwhile, Japan remains "a major player" in the Asian market, having shipped slightly more than 2 million metric tons to other countries in the region during the first half of 2007, including almost 1.7 million metric tons to China.
Michael Kühl, president of the European Recovered Paper Association, as well as the head of the German company Kühl Unternehmungsgruppe, called for paper recyclers to set high quality standards, something that Baxi earlier called for. "We can survive in this industry only if we produce quality."
Kühl also discussed the progress being made on updating the European list of standard grades of recovered paper and board. He pointed out that a ninth draft, including definition of tolerance levels, has been sent to the Confederation of European Paper Industries.
Reviewing the world markets, Kühl noted that, in addition to freight and currency factors, EU exporters have also been forced to contend with revised Waste Shipment Regulations that came into force this past summer. "Freight increases have been a source of particularly acute concern in the UK, which exports more than 50 percent of its recovered fiber - with a very high proportion of this tonnage going to China, India and other Indian destinations."
The first of two guest presentations to the Paper Division meeting in Warsaw was delivered by Marek Skorwider, raw materials purchasing director of Mondi Packaging Paper Swiecie SA of Poland. He explained that Polish collections of recovered fiber had increased from less than 900,000 metric tons in 2002 to more than 1.4 million metric tons last year, roughly a 35 percent recovery rate.
Skorwider added that it is possible to increase those collection levels to 3 million metric tons by 2015, although significant investments in collection systems will be needed to reach that level.
Om Bhatia, global head - Forest Products at Barclays Capital in the USA, outlined the scope for using financial hedging in the "highly volatile" recovered paper market. He identified fixed price swaps and minimum price protection (put option) as two of the most common hedging strategies, adding that these provided operators with an opportunity to minimize their risks. According to Bhatia, uptake of hedging instruments has been "very slow" in Europe, with between 500,000 metric tons and 1 million metric tons hedged over the last four years compared to upwards of 10 million metric tons in the United States.