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Markets: Paper - 17 August 2013

Having scaled a peak of £105 per tonne in recent weeks, OCC export values were still around the £100 mark in the first week of the month.

The UK is generally finding outlets for its recovered fibre, helped by currency developments and freight rates of $800 (£516) per 40-foot container or thereabouts. However, “there are very few Chinese buyers in the market,” MRW was told by a local expert, with orders being placed largely by those big players “who still need to buy even in the bad times”.

For Chinese linerboard producers, order files are currently thin and “there is no confidence for the next three or four months”, he said. “OCC prices have gone up in the UK, but they haven’t in China.”

Although many UK exporters have made adjustments to quality procedures in light of China’s Green Fence controls, some large suppliers into the export channel are still “focusing on achieving the barest minimum requirements at the lowest possible cost”, it was alleged by one prominent buyer who described the practice as “quality brinkmanship”. As reported previously, a significant proportion of the UK’s surplus MRF mixed has been snapped up by domestic mills at lower prices in order to be “re-worked”.

In general, the UK’s mixed paper has been commanding around £67-£72 per tonne for the export market; by comparison, US mixed is “very competitive” in the international marketplace, a leading trader pointed out. In the UK, meanwhile, old KLS has been attracting £85-£90 per tonne and mixed papers £60-£65.

Export values of de-inking material have gained ground in recent weeks, with news & pams climbing into the £100-£110 per tonne bracket whereas domestic prices have remained at typically £95-£100. There has been some softness among the middle grades, with the domestic price of multigrade slipping to either side of £120 per tonne while export orders have been difficult to obtain, not least because of the absence of Indian buyers from the marketplace. It was “almost impossible” to give an export valuation for multigrade at present because “it’s a case of the customer names a price and the seller takes it or leaves it”, MRW was told. Some softening has also been witnessed among the high grades of recovered paper as mills appear to be generally well stocked.

The importance of a healthy Asian market to the UK and other European fibre exporters is underlined in “Key statistics: European Pulp and Paper Industry 2012” from the Confederation of European Paper Industries (CEPI). The organisation’s 18 member countries, including all of Europe’s major exporting nations, shipped 10.919 million tonnes of recovered fibre to all destinations in 2012 for an increase of 3.2% over 2011; of the total, 10.252 million tonnes, or around 94%, went to Asia.

The document also reveals that utilisation of paper for recycling in the CEPI region was 46.808 million tonnes last year - 1.1% less than the 47.316 million tonnes of 2011. The total equates to 44.7% of the raw materials used for paper and board production in the region.

UK exports of recovered fibre appeared to hit a ‘Green Wall’ rather than a Green Fence in May, falling more than 116,000 tonnes from the previous month to 305,394 tonnes - easily their lowest year-to-date level. The shipment total was also 18.6% shy of that for May 2012 and left cumulative exports at 1.798 million tonnes, or 8% short of the 1.954 million tonnes recorded in the first five months of last year.

Latest figures from the Confederation of Paper Industries and HM Revenue & Customs have confirmed that, year on year, UK exports of mixed papers jumped 13.1% in May and 9.4% in the January-May period. In contrast, all other classes of recovered paper recorded substantial declines in May compared to the same month last year, with corrugated & kraft slumping 25.4%, newspapers & magazines 33.5% and the high grades 12.2%. From the five-month perspective, the export drops for these three classes were 2.4%, 33.6% and 23.5%, respectively.

UK collections of recovered fibre followed a similar pattern, with an overall fall of 8.2% in May producing a year-to-date total of 3.327 million tonnes - some 4.2% below the level of January-May 2012. Over this year’s first five months, collected volumes of mixed papers climbed 11.5% to 506,384 tonnes whereas newspapers & magazines declined by exactly the same percentage to 917,056 tonnes. Meanwhile, corrugated & kraft and the high grades registered drops of, respectively, 2.5% to 1.665 million tonnes and 12.4% to 238,457 tonnes.

May brought a 5% increase in UK mill consumption of recovered fibre, with year-on-year gains of 81.8% and 11.8% for, in turn, mixed papers and newspapers & magazines more than compensating for falls of 0.4% for corrugated & kraft and 21.7% for the high grades. And so after the first five months of this year, overall domestic usage was 0.4% higher than in the same period last year at 1.591 million tonnes - with mixed papers (+41.3%) and newspapers & magazines (+4.5%) again offsetting declines for corrugated & kraft (-2.2%) and the high grades (-17.4%).

Despite a 3.1% increase in UK mill intake of recovered fibre in the fifth month of 2013, the January-May total was still 1.5% lower than in the corresponding period last year at 1.574 million tonnes. Mixed papers witnessed an intake surge of 45.2% over the opening five months of 2013 to 121,636 tonnes while newspapers & magazines gained 1.3% to 625,903 tonnes. Once again, corrugated & kraft (-5.4% to 631,425 tonnes) and the high grades (-15.1% to 194,540 tonnes) tipped the balance into negative territory.

In May, UK mill stocks of recovered fibre fell from 104,960 tonnes to 99,792 tonnes to trim supply at the prevailing rate of usage from 1.4 to 1.3 weeks. Supply of mixed papers remained at 1.2 weeks despite an inventory decline of approaching 400 tonnes, while an increase of around 600 tonnes in high grade stocks advanced supply from one week to 1.2 weeks. With the corrugated & kraft inventory climbing more than 2,000 tonnes to 50,666 tonnes, supply was extended from 1.6 to 1.8 weeks, whereas newspapers & magazines saw its supply slashed from 1.5 weeks to one week on the back of stocks tumbling from 39,700 tonnes at the end of April to 32,136 tonnes one month later.

UK paper and board production recorded a year-on-year jump of 11% in May to reach a high for 2013 of 402,487 tonnes. After five months of this year, output was 5.4% higher than in 2012 at 1.924 million tonnes.

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