In the wake of attacks by Yemeni Houthi rebels on commercial shipping traffic in the Red Sea, shipping companies have redirected their vessels and sharply increased freight rates. The recovered paper sector is "grappling with unforeseen challenges" as a result. The crisis in the Red Sea is threatening recovered paper exports, warned the European Recycling Industries' Confederation (EuRIC) at the end of last week. In the UK, Europe's largest export market, substantial price reductions for the raw material had already been observed.
In its statement, the umbrella organisation stressed the need to enhance supply chain resilience against disruptions and boost European end markets. In light of the crucial role which unrestricted material flow plays in the circular economy, it was essential to ensure "that international maritime transport supports and does not hamper free and fair trade", said the organisation. EuRIC also underlined the importance of undistorted competition.
The decision by shipping companies to divert ships around the Cape of Good Hope rather than face the risks of sailing between the Indian Ocean and the Mediterranean Sea via the Suez Canal, has raised "a myriad of issues for the recovered paper sector", according to Euric. In addition to rising transport costs, market participants were facing order cancellations, delays in the transport movement and overall uncertainty regarding the market. The situation requires recovered paper companies to engage with shipping companies, freight forwarders and logistics service "to understand the actual impact on freight", EuRIC said.
Current shipping prices "unacceptable"
Hans van de Nes, the president of EuRIC's recovered paper branch (ERPA), explained that recycling companies are grappling with the unexplained price hikes for shipments to Asia. "We are willing to cover the real extra costs, but the current rates are unacceptable. No one should take advantage of the current geopolitical situation," said the ERPA president.
EuRIC explained that the recovered paper sector would closely monitor the geopolitical situation in the Red Sea in the coming weeks, with the hope that the market would stabilise and that there would be fewer shipping disruptions. However, the association also planned to observe to ensure that there were "no unjustified charges".
According to an EuRIC representative, the umbrella organisation is not planning to submit a formal complaint to the EU Commission's Competition Directorate, or to any other competition authority, but is monitoring the situation. If the market disturbances persisted and appeared unjustified, the organisation would assess the available options.