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MARKETS: Paper - 15 June 2013

In a Chinese market described variously as “weak” and “fragile”, there has been an absence of finished product price increases and even fears of the traditional linerboard hike in July failing to materialise this year, not least because of existing high stock levels.

But back in the UK, OCC export values have climbed back towards £100 per tonne in recent weeks owing to the activities of a handful of purchasers, it is claimed. At the time of writing, export levels are around £95-£97 per tonne compared to £80-£85 in early May.

Old KLS has been attracting higher values too, typically £85-£90 per tonne, while mixed papers have been commanding either side of £65 in the home market and £70-£75 for shipments overseas.

Business with China has been aided by favourable currency exchange conditions and a further reduction in freight rates of around US$ 100 to below US$ 1000 per 40-foot container. Nevertheless, a number of UK suppliers are understood to be steering clear of dealing directly with China owing to concerns over possible further rejections for what one leading figure described as “often spurious reasons”. He added: “We daredn’t expose ourselves to the ‘Green Fence’ regime.”

News & pams prices have held relatively steady in recent weeks at £95-£100 per tonne for both UK and export business. But while multigrade prices have firmed domestically to £120-£125 per tonne, a decline in buying interest from India has pushed export values into a generally lower bracket. As regards the high grades of recovered paper, prices have undergone few fluctuations despite “pretty flat” demand.

Attending his final BIR Convention as Paper Division president in Shanghai late last month, Ranjit S. Baxi of Wanstead-based J & H Sales International confirmed that the outlook for exporters remained “quite good” but also emphasised the need for foreign suppliers to the Asian market to meet the specific quality requirements of each individual receiving country, pointing by way of example to the prohibitive materials list stipulated by NEPA Authorities China since 2008.

According to Mr Baxi’s figures, China smashed all previous records last year by importing 30.08 million tonnes of recovered fibre compared to the previous all-time high of 27.64 million tonnes in 2009. But as a result of ever-growing domestic collections within China, net imports satisfied only around 40% of the country’s recovered fibre requirements last year versus more than 48% as recently as 2005, according to Minnie Kong, an associate economist at RISI. However, imports will remain important to Asia, she added, as growth in demand for recovered fibre is expected to outstrip domestic collection gains.

Chinese fibre imports actually slid 0.68% in the first quarter of 2013, falling to 7.19 million tonnes from 7.24 million tonnes in January-March last year. The year-on-year decline was a far steeper 11.5% for Europe, whereas shipments to China from America and Japan increased, respectively, 5.8% and 7.7%. All the major European exporters to China recorded lower sales in the opening three-month period of this year - with the exception of the UK whose shipments to the world’s leading buyer were approaching 10,000 tonnes higher than in first-quarter 2012 at 788,124 tonnes.

In March this year, monthly UK paper and board production exceeded 400,000 tonnes for the first time since October 2008. The total of 402,320 tonnes represented an increase of 5.1% over the corresponding month last year, helped hugely by the 19.7% year-on-year surge in output of packaging papers and boards. For the first quarter as a whole, UK production across all segments was 4.3% higher than in January-March 2012 at 1.141 million tonnes, thanks in large part to increases of 13% for packaging, 3.5% for newsprint and 2.4% for sanitary & household.

For the recovered paper industry, however, the latest statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs make somewhat less uplifting reading. Compared to March last year, domestic consumption dropped 0.7% while collection volumes slid 1.9%. Furthermore, UK fibre exports suffered a year-on-year decline of 3.7% to 331,352 tonnes in March.

The UK’s overseas shipments in the first quarter as a whole amounted to 1.072 million tonnes, which is more than 14% shy of the export tally for January-March 2012. Exports of corrugated & kraft, newspapers & magazines and the high grades fell, respectively, 10.5%, 38.1% and 30.2%; conversely, overseas shipments of mixed papers climbed 8.6% to 242,869 tonnes in this year’s first quarter despite a 6.6% setback in March itself.

Domestic usage of mixed papers soared 37.3% year on year in March to 23,420 tonnes to yield a first-quarter tally of 65,794 tonnes, which was 23.2% higher than in the same month last year. Newspapers & magazines also recorded a consumption increase of 3.5% for March and of 4.9% for the first quarter as a whole. For corrugated & kraft, however, a usage drop of 5.8% in March resulted in a first-quarter total which was 0.1% lower than that for the same period last year at 384,079 tonnes. UK mill consumption of the high grades tumbled 11% in March and 15.2% across the first three months of the year.

As regards domestic mill intake of all forms of recovered paper, the 8.8% decline in March yielded a first-quarter total of 914,157 tonnes (-2.8% year on year): in effect, an intake increase of 17.9% for mixed papers during the January-March period was more than offset by reductions for corrugated & kraft (-5%), newspapers & magazines (-1.4%) and the high grades (-9.5%).

Along with CPI’s latest statistics package came confirmation that the organisation has been striving to rectify a problem with one company’s data which has affected stock level readings for mixed papers and corrugated & kraft. The most recent figures suggest that, during the course of March, supply of mixed papers fell from 0.9 to 0.8 weeks while the decline for corrugated & kraft was from 1.9 to 1.4 weeks. Supply of the high grades held firm at 1.2 weeks whereas newspapers & magazines slid from 1.4 to 0.9 weeks.

The March decline in domestic recovered paper collections led to a volume total of 1.982 million tonnes for the first quarter - a drop of 7.6% from last year. Mixed paper collections jumped 8.7% to 292,872 tonnes whereas corrugated & kraft (-7% to 1.001 million tonnes), newspapers & magazines (-13.8% to 550,078 tonnes) and the high grades (-14.1% to 138,612 tonnes) all suffered significant reverses.

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