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Market Focus: Recovered paper January 2015

Although OCC export values have barely advanced beyond the £80 per tonne recorded in MRW’s December market summary, a leading buyer for the Chinese market reckons UK material is around £5 a tonne more expensive than that available from the Continent. As a result, he told MRW this week, some tonnage allocation has been switched from the UK to mainland Europe.

Nevertheless, decent UK volumes continued to be booked for Chinese mills during December and early January. “Everything is moving,” confirmed another leading industry figure.

But despite this continuity of fibre purchasing activity in the UK, containerboard producers in China are still battling relatively poor market con­ditions for their final product, leaving mill operators “thoroughly depressed”, according to a regional expert.

Much has been said about the decline in European recovered fibre sales into China in recent times, but it is also worth noting a drop-off in flows from the US to the world’s leading importer (see table below). US exports are regarded as a particularly accurate reflection of the fundamental recovered paper demand in China because such cargoes constitute a key source of the highest-quality fibre needed by the country’s mills.

US Exports Recovered paper

Shipping issues have further complicated the trading picture. For UK exporters, space was more difficult to obtain in December because certain sailings were cut from the roster, while EU Sulphur Directive requirements have reportedly led to charges of $30-$80 per container being added to freight costs.

And on the US west coast, movements have been hampered by congestion following a dispute between dock worker members of the International Longshore & Warehouse Union and port managers within the Pacific Maritime Association. The US Federal Mediation and Conciliation Service has now been asked to intervene.

OCC values in the UK market are difficult to call owing to a general lack of spot buying activity. Mixed papers, meanwhile, have been fetching £52-£57 per tonne domestically and perhaps slightly more for export, with quality said to be “right at the top of the buying and pricing agenda”.

The news grades remain under pressure, with news & pams attracting £85-£90 per tonne on the domestic market and £87-£92 for overseas shipments. News of the decommissioning of UPM’s line at Shotton has been coupled with capacity reduction measures elsewhere in Europe. From Finland, for example, it has been reported that UPM will be stopping two magazine paper machines with a combined annual capacity of 460,000 tonnes during the first quarter of 2015 (MRW.co.uk/8672646.article).

Among the middle grades of recovered paper, an increased requirement for white-top production in China has led to “some very healthy spot prices” in the market for sorted office waste, with a figure as high as £137 per tonne reported to MRW this week. Meanwhile, multigrade prices have held station in their December range of £127-£130 per tonne for both UK and overseas sales.

Prices for the high grades have also remained firm as good demand has persisted for the limited volumes available.

View from the UK (see pdf attached, right, for latest UK figures)

UK mill consumption of recovered paper recorded its third largest decline of the year to date in October (-5.2%) and suffered another 4.3% reverse in November. This means that, across the first 11 months of 2014, domestic usage was 3.6% lower than in the same period a year ago at 3.403 million tonnes, according to latest statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs.

But UK exports of recovered paper managed to remain in positive territory despite a year-on-year slump of 10% to 347,592 tonnes in November. For the first 11 months of the year as a whole, overseas shipments were 4.4% ahead of the corresponding 2013 period at 4.082 million tonnes.

Similarly, UK collections were lower in September, October and November last year but remained 1.2% higher for the January-November period at 7.360 million tonnes against 7.271 million tonnes in the first 11 months of 2013.

Among the individual grades, November 2014 signalled the first year-to-date decline in both exports and collections of mixed paper. Compared with the penultimate month of 2013, the former slipped 1.4% to 111,045 tonnes while the latter edged 1.1% lower to 137,178 tonnes.

But from the wider January-November perspective, overseas shipments of this grade were still a prodigious 31.1% higher in 2014 at 1.315 million tonnes against 1.003 million tonnes in the same period of 2013. Meanwhile, collections climbed almost 32% from 1.227 million tonnes to 1.618 million tonnes.

UK exports of corrugated & kraft tumbled 7.1% in October and 12.4% in November, the second biggest monthly decline of the year to date. But for the first 11 months of last year as a whole, overseas shipments were 1.3% higher at 2.237 million tonnes despite a 1.1% drop-off in collections to 3.482 million tonnes from 3.520 million tonnes in the corresponding period of 2013.

Following on from three months of domestic consumption increases, corrugated & kraft suffered a usage setback of 7% in October last year before climbing 1.2% in November. Across the first 11 months of 2014, UK mill consumption of this grade trailed the January-November 2013 total by 5.1% in reaching 1.269 million tonnes.

Meanwhile, the UK’s usage of newspapers & magazines clocked up its seventh consecutive month of decline in November, with the total of 119,974 tonnes falling 12.1% short of the 136,461 tonnes recorded by the CPI for the penultimate month of 2013. The January-November 2014 figure of 1.296 million tonnes lagged its 2013 counterpart by 9.3%.

UK exports and collections of newspapers & magazines were both lower in every one of the first 11 months of last year, giving respective totals of 433,405 tonnes (-21% year on year) and 1.714 million tonnes (-11.9%).

Domestic collections of the high grades showed an increase last October for the first time in seven months, although the 6.4% gain was quickly wiped out by a 6.7% reverse in November.

Having declined across each of the first five months of 2014, UK mill consumption of the high grades followed up with six consecutive months of year-on-year growth, such that the January-November total of 460,327 tonnes was 1.9% higher than the 451,547 tonnes for the same period in 2013.

After starting 2014 with 10 months of year-on-year losses, UK paper and board production in November was almost identical to that for the corresponding month in 2013. But the running total for the year of 4.049 million tonnes was 3.7% shy of the 4.203 million tonnes of paper and board output in January-November 2013.

Ian Martin, industry journalist

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