Wastepaper Prices Decline on Lower Demand from China

October 29 00:00 2011

NEW YORK, October29 (RainbowNewsLine.com) – Analyst Mark Wilde of Deutsche Bank Securities cites decline in Wastepaper prices has speeded up rapidly in recent weeks.

In a research note published on October 27, analyst Mark Wilde of Deutsche Bank Securities evaluates the reasons for the fall in wastepaper markets during the last few weeks. If this downward trend continues, the Q4 and Q3 may see even larger drops. The main underlying reason is the drying demand for wastepaper from China, the analyst says. Moreover, the slowing demand within china, inventory reduction drive by big Chinese producers and their agents, and tighter credit conditions in China adds to the cause of weakening Chinese demand. The deteriorating wastepaper prices are like mixed blessings, declining wastepaper costs may provide cost relief to paper & packaging companies, but it’s a bad indicator for global wastepaper markets, the analyst adds.

The paper & packaging companies are trading below their historical averages. The analyst has given BUY rating to International Paper (NYSE:IP, Target Price $39) and Rock-Tenn (NYSE:RKT, Target Price $80) while affirmed HOLD rating on Sonoco (NYSE:SON, Target Price $33). In addition, the analyst has issued Chinese companies, Nine Dragon Paper a BUY rating and a HOLD rating on Lee & Man Paper with target prices at HKD 6.00 & HKD 6.90, respectively. The major risks involved in Paper & Packaging Industry are momentum in the economy, demand patterns, inflation, and execution risk with recent increase in M&A activities, the analyst adds.