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Market Focus: Recovered paper October 2014

Experts have confirmed that the onset of autumn has brought no change to fundamentally flat and “insipid” market conditions for the lower grades of recovered paper.

Chinese mills’ demand for UK material has been inconsistent at best, given that they are experiencing low levels of orders for their finished products at a time of increased availability of recovered fibre from domestic sources. Trade between the UK and China has also been affected by the renewed strength of sterling in the aftermath of the ‘no’ vote on Scottish independence.

Three months have passed since Mark Lyndon Paper Enterprises (UK) (MLUK), the procurement division of China’s Lee & Man Paper, instructed almost 200 of its recovered fibre suppliers that it was immediately implementing a new system in a bid to combat excessive moisture. This included thresholds for claims and maximums which, if exceeded, would result in the cancellation of the load.

The response to date has been generally supportive, especially among larger suppliers, which recognise the need to differentiate product if it is to secure regular, long-term business with Chinese mills, said the company. Indeed, some suppliers have signalled their intention to take further practical steps at their sites to keep moisture levels to a minimum.

The true test of the new moisture system will come with the traditionally wetter autumn and winter periods, MLUK’s managing director Paul Briggs told MRW this week. “What would make a massive difference and help ensure the future of our recycling markets is if local authorities were to supply receptacles so that material could be kept dry before collection,” he added.

Having peaked at around the mid- £80s per tonne in September, the following month began with OCC export prices at nearer £80. Domestic OCC sales have been concluded on average at £5 per tonne lower, although the actual figure depends on location. Meanwhile, mixed papers have been attracting £52-£57 per tonne in the UK and £58-£64 for business overseas.  

Despite good container availability and deals from some shippers, there is concern within the recovered paper export community that inland logistics issues could fuel a push for higher freight rates in the coming weeks. At the time of writing, some exporters are still obtaining their freight at significantly below $1,000 (£619) per 40ft container.

Among the other grades of recovered paper, pressure from mills has resulted in news & pam s values sliding to £75- £85 per tonne on the domestic and overseas markets, while high-grade prices have remained static against a backdrop of reasonable demand for the low volumes becoming available.

Among the middle grades, the price range for multigrade has remained unchanged since MRW’s previous report in August at £123-£130 per tonne for business in the UK and abroad, whereas export values for sorted office waste have stretched out to £132-£135, not least because of “Chinese demand for white top production”, it is claimed.

In July, for the fifth consecutive Market Focus Recovered paper analysis month, UK mill consumption of recovered paper was lower than a year earlier, down 2.2% at 301,012 tonnes. The cumulative usage total of 2.162 million tonnes for this year trailed the Jan-July 2013 figure of 2.255 million tonnes by 4.1%, confirms the Confederation of Paper Industries (CPI) and HM Revenue & Customs.

Recovered paper

Also in July, exports and collections of recovered fibre recorded their third successive month of year-on-year gains. Following upturns of 27.8% in May and 20.8% in June, overseas shipments were 1.9% higher in July at 369,004 tonnes, while collections climbed 0.8% to 660,644 tonnes after having posted year-on-year gains in May and June of, respectively, 11.7% and 4.4%.

Across the first seven months of 2014, UK exports bettered last year’s Jan-July performance by 8.8% to hit 2.677 million tonnes, while collections were 3% higher at 4.756 million tonnes.

Across the UK

Across the UK Among the individual grades of paper, July saw a year-on-year decline in UK mill consumption of mixed papers for the first time since the latter part of 2012. But despite the drop of 1.8% to 31,021 tonnes, usage in the first seven months of the year as a whole was 28.6% higher than in the corresponding period of 2013 at 233,135 tonnes.

Meanwhile, UK exports of mixed papers were well above 120,000 tonnes for the third month in a row, soaring almost 30% year-on-year to 127,977 tonnes, to give a seven-month total some 42.4% ahead of last year at 856,106 tonnes. Similarly with mixed paper collections, July marked the third consecutive month in which the total consecutive month in which the total easily exceeded 150,000 tonnes. The Jan-July tally was 1.041 million tonnes, a massive 42.3% ahead of the 731,375 tonnes for the same period last year.

While mixed papers’ positive consumption run was coming to an end in July, corrugated & kraft was breaking a four-month sequence of usage declines in posting a year-on-year increase of 5.5% to 118,060 tonnes. But the sevenmonth total of 820,364 tonnes was 7.6% short of the 888,100 tonnes for the same period last year.

Conversely, UK corrugated & kraft exports followed stellar gains of 50.9% in May and 14.1% in June with a 3.1% dip to 200,169 tonnes in July, although the seven-month total of 1.463 million tonnes was 4.8% higher than that for Jan-July 2013. Domestic collections of the same grade fell 0.2% in July and across the first seven months of the year.

The high grades of recovered paper kicked off 2014 with five consecutive months of year-on-year consumption declines. But following a small gain in June, usage blossomed the following month to 44,934 tonnes – a statistical high point for the year and equivalent to an increase of 16.2% over July 2013. Nevertheless, UK consumption of the high grades was 1.4% lower in the first seven months as a whole at 282,104 tonnes.

Having tumbled 46.2% in June, UK exports of the high grades nosedived 61% the following month to 6,222 tonnes from 15,937 tonnes in July last year. The year-to-date comparison shows a decline in overseas shipments of 20.4% to 68,837 tonnes. Meanwhile,  collections of the high grades fell in July for the sixth month out of seven to give a running total for 2014 of 342,269 tonnes, a drop of 4.6% from last year.

For newspapers & magazines, July provided a third straight month of nothing but red figures. Intake fell 15.7% in its biggest monthly decline of the year to date, while consumption dropped 14.8% to give a seven-month total some 8.1% lower than last year at 826,727 tonnes. The July decline in exports of 14.7% was below the seven-month average of 23%, whereas collections slid more sharply in July (-14.8% to 140,074 tonnes) than in the first seven months of the year combined (-12.1% to 1.105 million tonnes).

In July, UK paper and board production recorded its seventh consecutive month of year-on-year decline with a drop of 2.9%, giving a cumulative total some 4.6% down on 2013 at 2.562 million tonnes.

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