Quarterly Report – July 2019

Fears of global economic slowdown increased during the second quarter as the US/China trade war continues to bite. The trade war is greatly affecting China’s exports, which continue to fall, and thus in turn has a direct effect on its imports.

The Chinese economy grew only 6.2% in the second quarter, which is said to be the lowest in 27 years. With the mounting trade pressures, China’s economy has failed to respond to fiscal stimuli in the form of massive tax cuts. Markets are looking forward to further interventions to prop up demand in the second half of 2019.

Weakening Chinese and other Asian economies are not helping to sustain fibre demand and prices. Simultaneously, exporters are having to absorb increasing sea freight rates imposed by the shipping lines whose revenues are also challenged by decreasing exports.

China is continuing to issue fibre import licences in batches, although for much lower volumes than last year. By the end of the second quarter, close to 7.5 million tonnes of licences had been issued, with around 65% of these used so far. Markets are expecting more to be issued over the August to October period for a further 4 to 5 million tonnes.

With a sluggish demand cycle, prices for European OCC started the second quarter at around US$ 120 per tonne and ended it at nearer US$ 105. Demand trickled in for other grades such as news and magazines, but in much smaller volumes. China’s domestic fibre prices were at US$ 270 to 290 per tonne for OCC, US$ 220 to 285 for mixed paper, and US$ 425 to 475 for ONP. Mixed paper continued to be exported to other markets - namely India, Indonesia, Vietnam and Thailand. Exports of 95/5 and 90/10 OCC also continued to these markets, but all are at reduced price levels.

By the end of the second quarter, new inspection regulations had been imposed on exports to Indonesia in a move which is likely to slow the container loading process. We are looking to the second half of the year to see how export volumes and overall prices will be affected by these new controls.

Ranjit Baxi - Ranjit Baxi (India)

Ranjit Baxi

J&H Sales International Ltd (GBR)

Quarterly Report – July 2019