Recovered paper sector hit by export price hike (03.10.2007)
With shipping lines enforcing higher charges for exporting containers of recovered paper to China, the UK recovered paper sector is on the brink of a crisis.
Exports of waste material to the Far East have dropped significantly since large price increases came in on Monday
The increases have come on the back of recommended price rises from the Far Eastern Freight Conference, a grouping of most of the major shipping lines although some firms are not members. It has proposed sharp increases for shipping containers eastbound.
As a consequence, this week major exporters, such as SCA, are understood to have decided not to ship containers of recovered (waste) paper as the discussions with shipping lines continue.
Some merchants are already warning the businesses or councils they collect from that they should expect to receive considerably less for their cardboard although others consider such warnings as premature.
The big question now is how some compromise is reached. "If shippers gained a little on price, the Chinese buyers accepted some extra costs and the UK side also bore a fiver or so per tonne of this, then there is room for agreement."
Another said: "There is tremendous confusion in the market. You have to be very patient and hope that there will be some compromise. There is a lot to be worked out at the moment including the exchange rate and rises in diesel costs."
The situation is complicated by a move to breakdown cost increases into all parts of the chain, including transport rates within the UK. Some overseas buyers arrange for collection of material themselves and this is reflected in an inland collection fee, which can typically be £125 a tonne or more for short distances to Felixstowe for a 40 tonne container. Now, increases are being sought in this.
One factor impacting here is the demise of northern mills in recent years which means more material is shipped out of northern England via southern ports and there is little price differential to reflect the extra costs of moving the material in the UK.
Shipping
Speaking today, the Far Eastern Freight Conference said that cargo being sent by its members to China had definitely fallen since Monday, but that did not know if this was because the material had been sent out early or if some of the shipping lines outside of the conference were offering lower export prices.
There are areas where savings can be made but it depends on geographical location
Orient Overseas Container Line
The organisation explained that in the past, this had put pressure on the shipping lines to negotiate their prices down after around two or three weeks but that it was "too early to judge" if that would happen again.
However, the FEFC stressed that any decisions would depend on each shipping line and how much cargo it lost, and that financially the lines were better offer exporting less material at a higher price.
Rod Riseborough said: "The shipping lines have said they are prepared to lose cargo, especially as there has been substantially more pressure this year to get ships back to the Far East as the growth in Westbound cargo is so high."
Firm
A spokesman for Orient Overseas Container Line, which is member of the FEFC, said that he thought the shipping lines would stand firm on their increased freight rate, claiming "the shipping lines have had to take a stand because they have lost so much money."
However, the Orient Overseas Container Line explained there might be some room to manoeuvre on UK haulage prices.
He said: "There are areas where savings can be made but it depends on geographical location. Competitiveness will come on the UK haulage side."