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March recovered paper report

Most notably, OCC export prices returned to the highs visited during January this year as China’s leading buyers in the UK market booked more tonnage than had generally been expected during the second month. Having commanded either side of £125 per tonne at the start of last month, export values had climbed to around £135 by the start of March.

However, a senior spokesman for one of these top buyers insisted that the latest gains have been largely trader-driven and that “very few orders are being concluded at these prices in China itself” because the country’s linerboard mills are continuing to struggle with their finished product sales.

OCC stocks in China were described this week as “medium to low”, partly as a result of a lack of heavy purchasing immediately ahead of the Chinese New Year holidays. In the UK, meanwhile, the slowness in recovered paper collections prompted one buyer to comment: “I visited one of our regular suppliers and it’s the first time I’ve seen the concrete in his yard.”

It is interesting to note in this context that, despite reports of widespread weather-related disruption to UK collections and deliveries in December last year, incoming volumes of all grades of recovered paper fell a mere 0.4% from 686,708 tonnes in the final month of 2009 to 683,711 tonnes.

China is scheduled to introduce massive additional linerboard production capacity in the near to medium term - a rising proportion of which will package goods destined to remain within the country rather than for the export channel. At the same time, massive investment is leading to the rapid development of China’s fibre collection infrastructure, leading experts to predict that the country’s domestic recovered paper collection volumes will soar as much as 20 million tonnes over the next five years.

A possible end result, according to a regional expert, is that the UK’s recovered fibre exports to China will continue at around their current levels but that this country’s share of total Chinese consumption will drop significantly. “That will make the UK more of a marginal supplier and the Chinese will perhaps be buying from here more in fits and starts,” he suggested. This “marginalisation” of UK-origin material in the Chinese market could become even greater, several contacts suggested this week, if the UK fails to address the general decline in the quality of its recovered paper exports.

Returning to the present, the domestic old KLS price has edged higher in recent weeks - typically to well above £100 per tonne - but it continues to trail export values by a healthy distance. The same is true of mixed papers, with top-quality exported material said to be fetching £105 per tonne or more whereas domestic consumers are generally paying nearer £85-£95.

The high grades of recovered paper have made minor price progress during recent weeks owing to a combination of consistent demand and tight availability. And similarly for the middle grades, these same trends have led to small price gains during the course of the last month, yielding export and domestic prices for multigrade typically in the £175-£180 per tonne bracket. Having noted “lukewarm” demand from India, one expert said of the overall tissue grades market: “There is no raging demand out there - but there’s not much around either.”

Limited price movements have been reported for the deinking grades in recent weeks. At the time of writing, the domestic and export values of news & pams are keeping close contact with each other in a price range of, typically, £125-£130 per tonne.

From a Continent-wide perspective, the 19 member countries of the Confederation of European Paper Industries (CEPI) - including 17 EU states plus Norway and Switzerland - produced more than 96 million tonnes of paper and board in 2010, or around 8% more than in 2009. However, “overall volumes remain some way below pre-crisis levels”, said the organisation which represents some 700 pulp-, paper- and board-producing companies making up 24% of world production. Paper production had reached 103 million tonnes in 2007 but tumbled 13% over the ensuing two years.

When the final figures for 2010 become available from CEPI, they are expected to show output increases across all product types, including 7.5% for the graphic grades, 4-5% for the uncoated graphic grades, 5% for newsprint, 16% for coated mechanical and 9% for coated woodfree. When comparing 2009 with 2008, coated paper production had slumped 20%.

Meanwhile, CEPI countries’ production of the packaging grades is estimated to have jumped approximately 9% last year whereas output growth among hygienic paper manufacturers was restricted to 2-3% such that volumes returned more or less to their 2008 levels. Production of all other grades of paper and board - which are aimed mainly at industrial and special purposes - increased around 11%.

Based on data for the first three quarters of last year, overall consumption of paper and board among the CEPI countries is believed to have climbed between 5% and 6% when compared to 2009.

Statistical analysis

After a sometimes topsy-turvy 12 months in statistical terms, the final reckonings for 2010 show very few major deviations from the performances of the previous year. The headline figures reveal small declines in domestic recovered paper consumption, exports and collection volumes.

Meanwhile, UK paper and board production edged 0.2% higher last year to within four tonnes of the 4.3 million tonnes threshold, with an 8.3% surge in newsprint output to 1.195 million tonnes helping to offset declines elsewhere. Notably, sanitary & household production slipped 1% lower to 729,118 tonnes in 2010 while output of printings & writings plummeted 12.5% to 442,197 tonnes.

Despite a 0.2% usage increase in December, domestic consumption of recovered fibre slipped 1.5% lower from 3.819 million tonnes in 2009 to 3.763 million tonnes last year. By the same comparison, UK mill intake dipped 0.5% from 3.781 million tonnes to 3.761 million tonnes, partly as a result of a 1.3% decline in the final month of the year, according to latest statistics from the Confederation of Paper Industries and HM Revenue and Customs.

Consumption of Class II corrugated & kraft suffered the sharpest decline in 2010 despite a 5.2% upturn in December; the tally for the year of 1.332 million tonnes trailed 2009 by 3.9%. In contrast, consumption of Class I mixed papers crashed 13.2% in the final month of 2010 to give a total for the whole year of 278,545 tonnes - equivalent to a drop of 2.5% when compared to 2009. Meanwhile, a 1.4% dip in the consumption of Class III newspapers & magazines during December contributed to an annual total of 1.474 million tonnes - just 0.1% down on 2009.

Class IV high grades broke the pattern in recording a domestic mill usage upturn in 2010 of 1% to 678,537 tonnes - a result achieved despite a decline of 0.4% in the December consumption total.

In terms of UK mill intake, mixed papers suffered a 29.7% slump in December to give a total for the year as a whole of 276,200 tonnes - a drop of 1.6% when compared to 2009. December was also a poorer month for high grades intake as the year-on-year comparison revealed a decline of 7.7%; however, for the whole of 2010, intake was 2.4% higher at 682,536 tonnes.

The reverse was true for corrugated & kraft as a 4.2% intake hike in December failed to prevent a fall of 3.1% for the year to 1.324 million tonnes. But it was pluses all the way for newspapers & magazines as a 1.9% increase in December intake contributed to a 0.7% improvement for the year to 1.479 million tonnes.

UK mill stocks concluded 2010 at their lowest end-month level since August last year in shrinking from 86,534 tonnes at the end of November to 82,012 tonnes one month later. However, supply at the prevailing rate of usage remained unchanged at 1.2 weeks.

Among the individual classes of recovered paper, the mixed papers inventory was almost cut in half during the final month of last year, dropping from 6,084 tonnes to 3,170 tonnes to trim supply from 1.3 to just 0.7 weeks. Stocks of newspapers & magazines also took a hammering in December in dropping from 32,068 tonnes or 1.1 weeks’ supply to 24,145 tonnes, which was equivalent to 0.8 weeks’ supply.

In December last year, supply of the high grades actually improved from 1.6 to 1.7 weeks despite UK mill stocks slipping from 20,569 tonnes at the start of the month to 19,191 tonnes at its close. The only upward move in inventory terms was made by corrugated & kraft, with its jump from 27,813 tonnes to 35,506 tonnes during the course of the final month of 2010 propelling supply from 1.1 to 1.4 weeks.

UKcollections of recovered paper fell 3,000 tonnes year-on-year in December to yield an annual total some 1.9% lower than that for 2009 at 8.003 million tonnes. While there were declines in the incoming volumes of mixed papers (-3.8% to 1.229 million tonnes) and corrugated & kraft (-4.4% to 3.515 million tonnes), collections of newspapers & magazines (+1.6% to 2.449 million tonnes) and the high grades (+2.6% to 809,863 tonnes) made up for some of this shortfall.

A busy November for UK exporters certainly boosted the annual statistics. Despite a fall of 0.5% in the final month of last year, overseas shipments of recovered paper amounted to 4.352 million tonnes in 2010 - a total just 1.7% lower than the 4.428 million tonnes recorded in 2009 and the fourth highest annual tally of all time.

Over the course of last year, UK exports of the high grades surged 10.9% to 137,982 tonnes, not least because of a massive 38.5% increase in December shipments when compared to the final month of 2009. Meanwhile, overseas deliveries of newspapers & magazines climbed 4.5% to 1.033 tonnes. On the other side of the balance, overseas shipments of mixed papers fell 3.6% last year to 971,208 tonnes despite a 7.1% jump in December, whereas corrugated & kraft exports dropped 4.2% last year to 2.211 million tonnes but still posted their second-highest annual total of all time.

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