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Market Focus: Recovered paper December 2014

It had been hoped that events on both sides of the US would push more recovered paper export orders towards Europe. But despite a longshoremen dispute on the west coast and difficult weather conditions on the east coast, no dramatic increase in Asian buying in Europe has been reported.

“Chinese demand is not so strong and new import licences in the country have been a little delayed,” said a leading international fibre trader. And having pointed to adequate fibre stocks at continental mills, another player described the overall situation for the lower grades as “more of a buyer’s market than a seller’s market”.

A major recovered paper buyer for Chinese production said: “Mills there are making the tonnages but not the margins, so that will tend to keep downward pressure on prices.” In the fourth quarter, he added, his company had noticed a “dramatic increase” in non-paper components within its MRFsourced supplies.  

Stastics Table 1

The OCC export price dropped to around £75 per tonne in November but has since recovered to £78-£80, partly on fears of a prolonged longshoremen standoff in the US. However, resolution of the dispute is likely to release a flood of pent-up US supply to China and thus reduce demand for European fibre.

In the UK, the price range for OCC extends from below £60 per tonne to upwards of £70, while mixed paper has been attracting £50-£57 domestically and £55-£63 for export.

News & pams has been commanding typically £82-£90 per tonne at home and £87-£92 for export business. Multigrade has been fetching £127-£130 per tonne from UK and overseas buyers ,while higher yields have tempted them into paying a pound or two more for sorted office waste. For the high grades, demand has remained decent and prices are said to have been “robust”.

At both the BIR World Convention in Paris and the subsequent Paper Recycling Conference Europe in Milan, Ranjit Baxi of Wanstead-based J&H Sales International wondered how shipping lines could justify projected freight rate increases of up to $300 per 40ft container at a time of falling oil prices. But in the ensuing weeks, rates have risen on average by “only” $100 per container.

MRW was told: “Some deals are being done by the shipping lines because the volumes just aren’t there.” Meanwhile, there have been complaints of a lack of shipping space and a container imbalance ahead of major capacity coming on-stream next year.

Another topic of conversation in Paris and Milan was China’s push to create its own standard to boost the quality derived from domestic fibre collections and sorting systems. Said by one international expert to be likely to come into force “by the end of the first quarter” of 2015, he added that quality improvements in China could reduce the country’s requirements for higher- cost imports from Europe, although higher-quality supplies out of the US would still be needed.

UK recovered fibre exports were 6.7% higher in the first nine months of 2014 than in January-September 2013, but most other leading European exporter countries have been struggling to maintain their volumes to Asia. Figures presented at the BIR Convention of deliveries to China reveal the extent to which the UK has been bucking the general trend, with Spain the other notable exception (see table left).  

Across the UK

After the UK’s first increase in recovered paper consumption for six months in August, normal downward service was resumed in September, with usage of 303,886 tonnes representing a year-onyear decline of 2.2%. As a result, fibre consumption across the first three quarters of 2014 was 3.2% lower than in January- September 2013 at 2.793 million tonnes, according to latest statistics from the Confederation of Paper Industries and HM Revenue & Customs.

Meanwhile, a run of four months of UK fibre export gains ended in September, when overseas shipments slid 4% to 343,941 tonnes from 358,412 tonnes in the same month last year. But for the year to date, deliveries to customers abroad were still 6.7% ahead of January-September 2013 at 3.363 million tonnes.

It was a similar story for UK collections: year-on-year increases were recorded from May through to August, whereas the September total edged 1.3% lower to 637,043 tonnes. But as with exports, collection volumes across the first nine months of 2014 were greater than the same period last year (+2.5% to 6.052 million tonnes).

Looking at the stats for individual grades, mixed paper bounced back strongly from its only consumption blip of the year to date in July (-1.8%) with major gains of 36.7% in August and 12.6% in September to give a ninemonth running total of 309,441 tonnes – equivalent to an increase of 27.6% in the first three quarters of 2013. Mill stocks dwindled from a 2014 peak of 2.1 weeks’ coverage at the end of July to just 0.9 weeks at September’s close.

Double-digit gains in UK mixed paper exports were maintained throughout the opening nine months of the year to give a total some 36.7% higher than for January-September 2013. Domestic collections were equally strong, surging 38.2%.

UK consumption of the high grades of recovered paper improved, with gains of around 10% in both August and September resulting in a three-quarter total of 372,142 tonnes, an upturn of 1.2% from last year. Mill stocks dropped below one week’s supply at the end of September, the first time this threshold had been breached in four months.

In parallel, exports have been a narrowing outlet for UK high grades. Since year-on-year increases of 26.4% in February and 34.1% in March, there has been an unbroken run of hefty declines – including 61% in July, 52.3% in August and 70% to just 8,106 tonnes in September. Across the first nine months, exports of the high grades fell 34.4% to 83,694 tonnes while collections were 6.7% lower at 446,918 tonnes.

For corrugated & kraft, the three months of the third quarter brought year-on-year consumption gains of 5.5%, 6.6% and 2.4% but this boost failed to overturn a year-to-date deficit compared with January-September 2013 of 5.2%. Compared with the same month last year, UK exports were 0.9% lower this September while collections were 0.6% higher; however, from the nine-month perspective, overseas shipments climbed 4.1% to 1.84 million tonnes while collection volumes edged 0.4% higher to 2.873 million tonnes.

All main indicators for newspapers & magazines have been heading south. September was the fifth consecutive month in which UK consumption failed to match its previous year level, with a fall of 13.7%; there was a year-to-date usage decline of 9%. UK exports and collections of newspapers & magazines suffered respective falls of 23.4% and 12.5% in this year’s January-September period to, in turn, 354,066 tonnes and 1.399 million tonnes.

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