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Market Focus: Recovered paper June 2015

Sustained purchasing activity by Chinese mill representatives in the UK and by brokers has helped to nudge OCC export prices to £90 per tonne and beyond at the time of writing.

But while these values remain higher than those prevailing on mainland Europe, the differential is understood to have closed from £6 per tonne to nearer £3. On the domestic market, the spot price for OCC is around £85 per tonne.

Values have also improved for mixed paper, with top-quality material said to be commanding £70 per tonne or even slightly more on the export front against a backdrop of reasonably solid freight rates of typically $950-$1,000 (£616- £648) per 40ft container. But mixed paper prices down to £60 per tonne have also been reported, depending on quality and location.

Chinese mills are said to have been showing a little more interest in recovered fibre purchasing following a small improvement in their linerboard sales. “But nobody over there is confident it will last,” MRW was told by the UKbased representative of a major Chinese mill group.  

The same contact also expressed con­cern about what he saw as an upward creep in non-paper components (con­tamination) in supplies of MRF mixed. “Our average is 6-7%,” he complained.  

Quality has “gone backwards by a long way” since China’s Green Fence import controls drifted out of the head­lines. And while moisture has not been a major issue of late owing to the largely dry weather, he added: “but ask me again in November”.  

The representative went on to warn that some UK suppliers risked losing business from customers in China if they failed to maintain their quality, given the ever-widening options open to the country’s mills, including from increasing domestic collections.

“You will never have any trouble selling clean, dry material,” he insisted. “And it’s simple to achieve.”

European exports of recovered fibre to China actually showed an improvement when comparing the opening quarter of 2015 (2.061 million tonnes) with the same period last year (1.898 million tonnes), with the UK upping its shipments by nearly 7% to 885,973 tonnes. But end-year stats reveal that flows from Europe to China tumbled 17% from 8.972 million tonnes in 2013 to 7.615 million tonnes in 2014.

These figures were presented to last month’s Bureau of International Recycling’s paper division meeting in Dubai by the association’s new president Ranjit Baxi, of Wanstead-based J&H Sales International.

China table - Q1 imports

In noting that China’s recovered fibre imports from all sources worldwide plummeted from 31.649 million tonnes in 2013 to 27.362 million tonnes last year, he projected an even lower total for 2015 of perhaps 26 million tonnes. This was based in part on China’s Q1 imports of 6.363 million tonnes, which was 436,000 tonnes lower than that for the same period last year.

Following the price slide in the immediate aftermath of the Aylesford Newsprint closure, prices of news & pams have rallied faster than many experts had anticipated, and are not far short of pre-announcement levels at £74-£77 per tonne for export bales and £65-£68 for loose into the domestic market.  

Multigrade remains “in very short supply”, according to traders, and prices are firm at £125-£128 per tonne for both India and the domestic market. The influence of Chinese buying and “a lack of paper in the market per se” have promoted sorted office waste grade values to £133-£135 per tonne for both home and export sales. Short supply and firm pricing are also reported for the high grades of recovered paper.

View from the UK

With the demise of Aylesford Newsprint grabbing many of the headlines at the start of the year, it proved to be a particularly dramatic first quarter for the UK paper recycling sector.

And latest statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs (HMRC) reflect the upheaval, revealing not only far lower recovered fibre usage in some sectors but also a substantial fall in overall collection rates. Indeed, UK recovered paper collection volumes amounted to just 599,615 tonnes in March this year – the first time that a monthly total has dropped below 600,000 tonnes since the 577,759 tonnes registered in December 2012. (see the table attached)

Combining figures for all the grades, UK collections slid 4.8% from 2.052 million tonnes in January-March 2014 to 1.954 million tonnes in the opening quarter of this year, with a year-on-year decline of 9.5% recorded in March itself.

UK mill consumption fell even more steeply from the year-on-year perspective, down 12.6% in March to 260,305 tonnes and 6.3% across Q1 to 878,608 tonnes. Indeed, one of the few positives when comparing Q1 of 2015 with the same period last year was a 0.3% increase in UK recovered paper exports from 1.153 million tonnes to 1.156 million tonnes, achieved despite a 0.7% year-on-year decline during March itself.

Now combined in the CPI and HMRC statistical review, mixed and mechanical were primarily responsible for the overall drop in UK mill consumption of recovered fibre. Usage of these grades tumbled 14.2% from 462,188 tonnes in the opening three months of 2014 to 396,598 tonnes in the same period this year.

And developments in the marketplace were clearly reflected in the March consumption total of 107,302 tonnes, which was 27.8% down on the 148,588 tonnes of the same month last year.

UK collections of mixed and mechanical amounted to 818,301 tonnes in January- March this year, a fall of 12.3% from the 933,017 tonnes of Q1 2014. The same comparison for exports revealed a drop of 5.7%, from 497,310 tonnes in the opening quarter of last year to 469,015 tonnes this time round.

Corrugated & kraft provided the engine room for growth in UK overseas shipments of recovered paper in the first quarter of 2015, registering a year-on-year increase of 5.5%, from 621,043 tonnes to 655,295 tonnes. The upturn was particularly pronounced in February as exports bettered the figure for last year’s corresponding month by 16%.

UK collections of corrugated & kraft were also higher in the opening three months of this year, improving on the total for the same period of 2014 by 1.5% to 989,884 tonnes. But despite a year-on-year gain of 2.5% in March, UK mill usage of corrugated & kraft was 1.9% lower across this year’s Q1 at 353,932 tonnes.

In contrast, the high grades of recovered paper posted strong usage growth in the first quarter, although year-onyear gains declined with every month (January +24.4%, February +9% and March +2.6%) to give an overall increase of 11.6% to 128,078 tonnes. Exports across the three months dropped 8.2% year-on-year to 31,799 tonnes whereas collection volumes edged 1.6% higher to 146,314 tonnes.

Despite year-on-year gains for corrugated case materials (+7.7%) and other packaging papers and boards (+1.8%), the UK’s total paper and board output slid 4.1% from 1.081 million tonnes in January-March 2014 to 1.037 million tonnes in the same period this year. Graphics production (including newsprint) tumbled 15.2% year-on-year in the first quarter to 322,773 tonnes.  

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