After a strained first quarter on the markets, the crisis gathered pace in the second three months of the year. Demand is a little weak and stocks are swelling everywhere. In the lower grade market, Chinese buyers are absent for the time being. There is no need to remind you that they do not have enough quotas to meet their needs and that their imports are limited to a few sources such as Japan and the USA.
After a euphoric 2018, packaging demand has calmed down in the European market. Reel prices are tight as paper mills are finding trouble at times in offloading their finished products. As they are faced with plentiful offers of recovered paper and significant stocks, they are gradually dropping their prices. The market is also being disrupted by abundant competition from the USA and the UK. Delivered-to-factory prices in Europe are low and some paper-makers are not hesitating to use it as a source of supply.
The major problem to be managed this summer is the lack of space granted for our tonnage by paper-makers.
The South East Asian market is overflowing with offers of material from the USA, the UK and elsewhere. Prices are under pressure and sharp thinking is required when placing orders.
Indonesia shut down its imports in June; new regulations based on ISRI specifications have been agreed and controls are gradually being put in place.
The market needs to rediscover its balance and calm as some players have been apt to lose their patience and temper.
The medium-grade market is also under pressure. Usually at this time of year, prices and demand are rising together, but the opposite has been the case this year. There are not enough exports and demand is low, with some paper mills stopping their machines from time to time in order to control their stocks and reduce the pressure. Prices are therefore dropping and buyers are becoming difficult to find for some grades such as magazines.
This summer is going to be complicated as we will have to deal with high stocks at a time when there are almost no exports to Asia. The situation for some grades - such as white heavily-printed multiply board and newspapers - is becoming ever more complex. Sales are hard to make and prices are unstable.
Regarding the high grades, prices have kept dropping for several months after reaching peaks in 2018. Pulp prices are falling too, as are its substitutes.
It is valid to talk about a crisis as prices are reaching very low levels and it is difficult if not impossible at times to sell certain grades or origins. Paper-makers can afford to be selective and to take what they want. So have we hit rock bottom? It is difficult to forecast what will happen in the second half of the year, but there are few positive signs at present. New machines will be arriving on the market within a year and beyond. We also have to keep in mind that Chinese quotas should fall by 50% next year to around 6 million tonnes.
The market is cyclic, so we have to expect that the wheel of fortune will turn and the market will set off again.