Writing in the latest BIR quarterly report (to end of 2018), Ranjit Baxi of J&H Sales International Ltd (GBR) explains that the Chinese economy remained weak, with sluggish growth resulting primarily from declining domestic demand, a slowing global economy, increasing US interest rates and the ongoing trade dispute with the USA (China’s largest trading partner). In last year’s final quarter, China posted its slowest growth in nearly three decades, although the economy managed to hold up better than expected in expanding by 6.6% thanks to higher infrastructure spending policies.
Fibre exports during the quarter were governed by the staged release of import licences, which were issued in 21 batches by the end of the third quarter of 2018 and totalled 15.6 million tons as opposed to market expectations of around 14 million tons for the year. To the market’s surprise, an additional three or four lots of licences were issued in October and November to give a total for the year of around 18.5 million tons.
With some 11 million tons of fibre having arrived by the end of the third quarter, exporters were under pressure to ship the remaining 7 million tons or so within the fourth quarter to use up the licence allocations. This heightened pressure on fibre prices along with increasing sea freight rates during the final quarter of 2018. Increasing demand for containers resulted in shipping lines imposing freight increases as well as fuel surcharges.
Demand from other Asian markets – namely India, Indonesia and Vietnam – remained on a rising trend, with export volumes for mixed paper, OCC and SOP continuing to grow.
Exporters are looking forward to a new direction from the market after the Chinese New Year in February, especially following the announcements that exports of recycled fibres and other scrap grades will not be allowed into China as of January 1 2021. Following the imposition of a 25% tariff as of January 1 2019, the direction of the Chinese economy will also have a major impact on ex-works fibre prices in the USA and therefore on global fibre prices.
