European paper prices are being driven up by new mills situated in Germany, Hungary and Poland buying up large amounts of material at inflated prices, which are too close to US recovered paper prices.
According to industry experts, not enough paper is being collected to feed the mills, therefore they are buying up whatever material they can find and securing it with high prices.
Currently, the MRW/WRAP MPR recovered paper price stands at £120-125 for both OCC and news and pams. Regional differences in the UK means in some parts recovered paper has been trading at £138 per tonne, but dropped by around £5 per tonne recently.
ACN Europe managing director Niels van Binsbergen said: “German paper mills are paying extremely high prices for material to feed their mills. The Hungarian mill, which reprocesses OCC, looks as though it is going to stop production. It has been having trouble for a long time because the collection infrastructure in Hungary is not sufficient to supply the mill, so they have been importing from places like Italy.
“We may see some standstill from European mills because they will want to push the price of finished products up to balance out the high price they are paying for recovered paper.” Van Binsbergen said some European prices are higher than the US price. Van Binsbergen added that if Far East export were to match the current European delivered mill prices for OCC, the costs for EU OCC would be higher than US OCC prices when delivered to China. With better fibre strength and availability of US OCC it would not make sense for China to buy European material.
Mark Lyndon managing director Paul Briggs said the buying drive in Europe has led the UK market to be more cautious and has actually pushed prices down to create more distance from the US recovered paper price. He said: “Most people brought the price down because never before has the European and UK price been so close to the US price. The problem is that for anyone buying recovered paper, if they had a choice, they would buy US paper [because it is considered the best quality in the world]. Those in the UK are pulling back their prices because the high European prices are not sustainable and China cannot afford to pay those prices for our material.”
The concern is that if US paper, which is considered a better quality, is selling at the same price as UK material, China will buy from the US instead of the UK. “The UK paper industry is not comfortable with what’s happening in Japan, and they’re not comfortable with what’s happening in Europe. These situations are indicating there will be a price correction very soon,” Briggs added.