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Market Focus: Recovered paper March 2014

The threat of substantial shipping freight increases was finally realised in early March when lines hiked their rates by typically US$ 200-350 (£120 -210) per box.

But according to one leading exporter of recovered fibre from the UK to Asia, it is the lack of available vessel space and containers that has had a profoundly negative effect on business. It was “insane”, he said, for the shipping companies to increase their freight rates and then to furnish established customers with so little availability. In the week beginning 10 March, he complained, “90% of my UK suppliers won’t be getting a collection from me because the shipping lines can’t offer me anything”. His aim, he added, would be to minimise the impact on his regular fibre providers.

Another leading UK-based exporter talked of “a container crisis”, the like of which had not been seen for several years. There were widespread examples, he added, of orders being taken but then postponed owing to a lack of available containers. He went on to allege “an element of manipulation” by the shipping lines to underpin the rate increases.

The availability issue appears to be significantly less acute for continental Europe. It should also be noted that this is a relatively quiet period for linerboard producers in China and so their stocks of finished product and recovered paper are generally more than adequate. “So my contacts in China are not too worried about the shipping issues over here,” a major exporter confirmed. Another added: “Chinese buyers aren’t very hungry at the moment.”

The vessel/box availability problem was expected to persist throughout the remainder of the month and to create a backlog heading into April. Having ended February at around £90-£91 per tonne, the OCC export price edged below £90 in early March and has lost a pound or two more over the ensuing days. Domestic prices have eased to £75-£80 per tonne at best.

Among the other grades, mixed paper has been attracting upwards of £68-£69 per tonne for overseas business while the wide range of prices paid domestically has recorded a top end recently of around £65. In a generally flat market, news & pams has declined from around £90 per tonne and above at the start of February to £85-£90 at the time of writing for both domestic and export sales. Middle grade prices have remained largely unchanged since our previous report, not least because of continued buying interest from India, while the high grades of recovered paper are continuing to enjoy stable market conditions characterised by low volumes and decent demand.

Despite a year-on-year leap of almost 10% in December, the UK’s annual exports of recovered paper fell to their lowest level last year since 2006, according to the Confederation of Paper Industries and HM Revenue & Customs. However, gains in each month of last year’s final quarter meant that domestic mill consumption of recovered fibre was slightly higher in 2013 than in 2012.

UK recovered fibre exports fell 5.4% to 4.248 million tonnes in 2013 despite year-on-year gains of 18.4% for mixed papers to 1.094 million tonnes and 1.3% for corrugated & kraft to 2.408 million tonnes. By contrast, overseas shipments of the high grades slid 5.1% to 158,384 tonnes while exports of newspapers & magazines plummeted 42.6% from 1.022 million tonnes in 2012 to 586,953 tonnes.

The final month of 2013 produced year-on-year export increases of 19.7% for mixed papers, 21.5% for corrugated & kraft and 7.7% for the high grades while newspapers & magazines suffered a decline of almost 36% when compared to December 2012. Combining these figures, recovered paper exports in December last year were 9.6% higher than in the corresponding month of 2012 at 337,990 tonnes.

The same comparison reveals that UK mill consumption of recovered fibre jumped 8.5% in the closing month of last year - a contribution which ensured that usage was higher for the whole of 2013 than it was for 2012 (+1% to 3.806 million tonnes). Year-on-year consumption declines of 9.4% and 3.3% for, respectively, corrugated & kraft and the high grades were more than offset by gains of 70.6% for mixed papers and 4% for newspapers & magazines.

The reverse proved to be true for UK mill intake: a 4.2% year-on-year decline in December last year nudged the total for the whole of the year into the red (-0.1% to 3.774 million tonnes). Once again, annual intake increases for mixed papers (+69.6% to 343,962 tonnes) and for newspapers & magazines (+4% to 1.563 million tonnes) were countered by declines for corrugated & kraft (-11.9% to 1.418 million tonnes) and the high grades (-2.8% to 449,263 tonnes).

Domestic mills’ total recovered paper stocks fell from 132,523 tonnes at the end of November last year to 116,344 tonnes a month later, thus clipping supply at the prevailing rate of usage from 1.8 to 1.7 weeks. The most eye-catching development during the final month of last year was the reduction in the newspapers & magazines inventory from well over 51,000 tonnes to less than 40,000 tonnes, or from 1.6 weeks’ supply to 1.3 weeks.

In common with exports, UK collection volumes showed an increase when comparing the final month of 2013 with that of 2012 (+9.1% to 630,164 tonnes) but the annual total edged 2.8% lower from 8.099 million tonnes to 7.869 million tonnes. Collections of mixed papers and the high grades climbed, respectively, 24.3% and 3.2% last year whereas corrugated & kraft (-3.3% to 3.821 million tonnes) and newspapers & magazines (-15.2% to 2.121 million tonnes) headed in the opposite direction.

Also in 2013, UK paper and board production reached its highest level since 2008, with the total of 4.561 million tonnes beating the previous year’s figure by 1.8%. Printings & writings output was alone in recording a backward step (-6.7%) whereas newsprint (+4.2%) and packaging papers and boards (+3%) were among those making healthy gains.

 

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