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Market Focus: Recovered paper March 2015

In a reflection of overcapacity within Europe’s newsprint sector and of the mounting challenge thrown down by digital media, Aylesford Newsprint’s entry into administration will further undermine fibre prices and serve as a financial blow to many suppliers, both large and small, industry sources have confirmed.

“There are a lot of people owed a lot of money in the recovered paper sector,” said one leading supplier. “There will be other casualties as a result of this and it will rattle down through the supply chain.” Some of the smaller supply operations are likely to be particularly badly affected, he added.

All experts contacted by MRW this week described further weakness in de-inking prices as being inevitable, as a result of the move into administration of a business that has been sourcing up to 500,000 tonnes of recovered fibre annually for manufacturing some 400,000 tonnes of 100% recycled newsprint.

At the time of writing, domestic mixed paper values are said to have dipped to either side of £50 per tonne, with export prices a pound or two stronger. News & pams has also slid to £75-£80 per tonne for the home market and to nearer £70 for exports.

OCC prices have also come under pressure in recent weeks, not least because of an appetite in China that had dulled long before the run-up to the Chinese new year holidays. Indeed, the latest Recovered Paper Mirror from the Bureau of International Recycling (BIR) suggested that Chinese OCC imports from all sources declined around 10% or three million tonnes during 2014.

Even slower GDP growth projections for China this year “will mean a further drop in European fibre exports” to this destination in 2015, it was suggested by the BIR paper division’s honorary president Ranjit Baxi of Wanstead-based J&H Sales International.

OCC has been trading either side of £75 per tonne for domestic and overseas business. According to a leading UK-based buyer for the Chinese market, the price of UK material is still around £5 per tonne higher than that from mainland Europe – a differential that has already led to a shift in tonnage allocations.

Among the middle grades of recovered paper, multigrade has been attracting £127-£130 per tonne from buyers in the UK and abroad, with SOW fetching typically a couple of pounds more on the back of “very robust” demand. As for the high grades, demand is healthy for the limited volumes available.

UK RECOVERED PAPER COLLECTIONS

View from the UK

The sector’s headlines for 2014 are that UK consumption of recovered paper fell more than 3% whereas exports and collections recorded increases of more than 4% and 1%, respectively. Figures from the Confederation of Paper Industries (CPI) and HM Revenue & Customs also reveal that UK imports of recovered fibre tumbled by more than a quarter last year while the country’s production of paper and board dropped almost 4%.

To clothe these bare highlights with more detail, domestic usage of recovered paper suffered a year-on-year fall of 7.8% in December, to give the lowest monthly total for the whole of 2014 of 284,363 tonnes. As a result, consumption for the entire year was 3.2% lower than in 2013 at 3.714 million tonnes.

With fibre collections nudging up 1.4% to 8.014 million tonnes in 2014, exports took up the slack in rising 4.4% to 4.436 million tonnes while imports plummeted 26% to 136,176 tonnes.

In December, UK overseas shipments of recovered paper ended three months of year-on-year declines by rising 4.5% to 353,235 tonnes. Meanwhile, domestic mill stocks ended the month below 100,000 tonnes for the first time since August – equivalent to 1.5 weeks’ supply at the prevailing rate of usage.

Among the various grades, last year’s UK collections of corrugated & kraft were almost unchanged from 2013. After three months of decline, exports of the same grade responded with a 10.1% hike in December to yield a full-year total some 2.1% higher than that for 2013 at 2.458 million tonnes.

But December brought the biggest domestic consumption drop of last year’s second half, with the 9.3% reverse contributing to a fall of 4.4% for 2014 as a whole to 1.377 million tonnes. Mills’ stock coverage ended the year on 2.4 weeks, higher than at any previous month-end during 2014.

In contrast, mixed paper rounded off a year of spectacular domestic usage growth with a 17.3% increase in December, resulting in a gain for the whole year of 22.6% to 416,059 tonnes. Mills’ stock coverage ended every month from August onwards at less than one week.

Collections were 30.7% higher in 2014 at 1.747 million tonnes, but exports increased almost as rapidly, bettering 2013 by 29.2% to reach 1.414 million tonnes. A 1.4% drop in mixed paper exports in November was more than compensated by a year-on-year surge of 8.1% in December.

UK paper and board production

UK consumption of the high grades also progressed in 2014 (up 1.2% to 495,161 tonnes) despite an 8.5% decline in December, which halted a run of six consecutive months of year-on-year growth. Collections were down 5.4% to 587,924 tonnes last year compared with 2013, while exports nosedived 34.5% from 158,384 tonnes to 103,802 tonnes.

The 2014 end-year stats for newspapers & magazines offered no positives at all: collections tumbled almost 12% to 1.870 million tonnes while domestic mill usage was 9.1% lower than in 2013 at 1.426 million tonnes, with only February and April recording higher totals than in the corresponding months of the previous year.

Exports in December were a thumping 30.3% lower than in the final month of 2013, while the shipment total for 2014 showed a decline of 21.6% from 586,953 tonnes to 460,199 tonnes.

Every month last year, UK paper and board production fell short of the tally for the same period in 2013. Overall, output in 2014 amounted to 4.393 million tonnes for a 3.7% drop-off from the previous year; production fell 6% for newsprint, 4.5% for printings & writings and 5.3% for corrugated case materials.  

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