The world market for waste paper has resulted in the creation of some common recyclable grades which are used by paper mills all over the world. The business of recovered paper is a mature industry in North America, Western Europe, Japan, Singapore and Australia. These countries are net exporters of waste paper. The major importers of this waste paper are China, Indonesia, Taiwan and India. Indigenous waste paper recovery in these countries is still in the nascent stage.
The market for waste paper has created several common grades which are actively traded between packers and traders and sold to paper mills.
The constant factors which affect the price of waste paper are
Point of Collection
Pre consumer paper, all else constant, sells for more than post consumer paper.
Printing
All unprinted grades are more expensive than printed grades. Printed grades need to pass through a deinking process which is expensive to install and operate.
Type of Paper
Mechanical grades, which contain smaller fiber lengths, fetch a lower price than chemical grades.
Ease of Pulping
The easier it is to convert waste paper to pulp, the more expensive is the grade. The presence of "out-throws" or prohibited material also reduces the value of scrap.
Ash Content
Inorganic fibers such as kaolin, calcium carbonate, talcum etc, which are added to make paper soft and flexible, reduce the reusable amount of paper during the recycling process and are converted to "ash". Hence high ash content causes the price of scrap to come down.
Some variable factors which affect the price of waste paper are:
Weather
In the winter months of November to March, in North America and Western Europe, heavy snowfall impedes the collection of waste paper and the inland movement of trucks. Since these countries are major exporters of waste paper, this leads to a significant tightness in supplies and an increase in prices.
Holiday Collections
In the months of June to August, recovered paper collection in Europe, North America and the Middle East drops by 30 to 40% because of the holiday season. The drop is caused because of the decrease in consumption of paper by households and businesses.
Freight rates
Freight rates play an important role in the pricing of paper, as they do with any commodity. Frequency of trading between two ports decreases the price of freight. Increase in fuel prices which result in an increase in freight rates also affects the price of waste paper.
Currency Factors
Waste paper is purchased in local currencies but sold in the world market in US dollars ($). The movement of various currencies like the British Pound, the Euro, the Singapore dollar, the Australian dollar and the Canadian dollar against the USD causes fluctuations in the price of waste paper.
Trade barriers
Import duties, tariffs or other government regulations have a direct effect on the price of imported commodities.
Large market demand
Chinese and Indonesian paper mills have significant capacities and have a major effect on the price of traded scrap. Similarly, an increase in American scrap demand causes a shortage of paper in the market. .
