On the main trends and indicators of the Ukrainian market of waste paper.

Waste paper is a strategic kind of secondary raw materials. According to the consumer value, this type of recyclable materials is in line with scrap metal. Therefore, it is from the balance, transparency and understanding of the laws of this market that the stability of the work of the Ukrainian paper industry depends.

In 2016-2017, a number of cardinal changes occurred on the Ukrainian market of paper waste. These changes were reflected not only on the volume of procurement, imports and exports, but also contributed to a significant change in price parameters. Imagine that in this period prices for certain types of waste paper exceeded the price of scrap metal.

The volume of waste paper production in Ukraine theoretically allows to meet the needs of paper processing plants. But the low level of collection and harvesting does not allow to meet the technological needs of paper producers with this type of raw materials.

The reasons for this situation are different. However, the “red line” of all problems is the low culture of market relations and the absence of “rules of the game.”

A remarkable trend in 2016-2017 is the rapid growth of exports of waste paper from Ukraine. This is due to the loss of the largest market for Ukrainian paper products – the market of the Customs Union, namely Russia, Belarus, Kazakhstan.

As a result, the purchase prices of paper mills for some brands of waste paper have become lower than in foreign markets, which has led to an increase in external shipments.

Thus, the export of waste paper for January-July of 2017 increased by 50% compared to the full 2016. In general, the waste paper wastes MS 7B – white office paper was exported. But in 2017, exports began and MS 5B – cardboard – companies that collect collectors of waste paper in close proximity to major seaports.

It should be noted the high dependence of Ukrainian enterprises on the import of waste paper. If in 2016, Ukraine imported about 271.9 thousand tons of raw materials, then for 7 months of 2017 – about 191.1 thousand tons.

At the same time, the geography of imports has changed. If in 2015 the Russian waste paper market prevailed, then in 2016-2017, Significant volumes of raw materials were imported from Romania, Hungary and Moldova.

The popularity of imported waste paper is explained by a number of conjuncture factors inherent in the Ukrainian market. This is the presence of imports, which constrains domestic price increases. And the deficit of sufficient supply of quality raw materials in the market. And the lack of a modern system of harvesting and processing of paper waste in Ukraine. And, also, the lack of a state waste management program.

Analyzing the last three years, the tendency of increasing the export of waste paper is prevailing. At the same time, the growth of exports from the border regions of Ukraine to the EU and Asia will only increase.

Ukrainian combines can change this dynamics by increasing purchase prices. But then it will affect the price of the finished product of the enterprises, which will lead to a decrease in the competitiveness of the products, and will completely equalize the purchasing prices with the world ones. This difficult choice – import or purchase on the domestic market – will completely disappear.

On the other hand, the export potential of waste paper is also limited by the model of the introduction of business in Ukraine. Collection and harvesting is a rather opaque type of activity, where most small and medium-sized enterprises operate according to schemes that require cash settlement. This state of affairs will limit access to the “expensive” world markets. It can be considered a deterrent for the export of waste paper.

The analysis shows that the globalization of markets affected the Ukrainian market of waste paper. But the reluctance or inability of market participants to negotiate, as well as a large shadow segment, will not lead to any significant changes, or price shocks in the waste paper market in the short term.

The minimum export performance in relation to the gross demand for waste paper for paper mills, will not affect the internal purchase price.