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Markets - Paper; December 2013

Despite a $20 (£12) per tonne slide in US OCC prices in early December, UK export values have edged only a few pounds lower at the time of writing to £89-£90 per tonne; this compares to £91-£93 a month earlier.

“There is still good competition for volumes and for container space,” MRW was told by a leading trader. Another expert acknowledged the continuing downward pressure but insisted OCC prices “won’t collapse”.

Now in the range of £72 to £74 per tonne, a handful of pounds have also been trimmed from mixed paper export prices since our previous report - a dip attributed in part to reduced Chinese buying activity owing to the import licence renewals process. In the UK market, mixed paper is continuing to fetch either side of £70 per tonne while old KLS has still been attracting upwards of £85 of late.

Despite announcing sharp freight rate increases on routes to Asia, shipping lines are continuing to meet strong resistance when it comes to implementation. Indeed, some experts in the recovered paper business pointed to examples of further rate softness over recent weeks. “I don’t see a major increase in freight for the near term,” commented a leading international recovered fibre trader.

Downward pressure from newsprint mills has clipped news & pams prices from £100 and above to around £95 per tonne for both domestic and overseas business. In contrast, prices of the middle grades of recovered paper have been supported by “hand-to-mouth” availability, with multigrade continuing to command in the region of £115-£120 per tonne at home and abroad. Limits on supply and decent demand have also continued to bolster values of the high grades.

On the issue of shipments to China, last month’s CMRA Annual Convention in the Chinese city of Chongqing focused largely on the non-ferrous scrap trade but one of its key presentations was also germane to those other recycling sectors, including recovered paper, affected by the Asian giant’s “Green Fence” import quality controls. Cao Dayou, formerly of the Supervision Department of China’s General Administration of Customs and now a member of the Department of Legal Affairs, confirmed that the “Green Fence” programme was to end - as widely expected - in late November. However, he also emphasised that Chinese Customs and the Ministry of Environmental Protection would be continuing with their efforts to clamp down on illegal imports and other transgressions. He also made clear that the priority of Customs officials was to encourage “good” imports of recyclables rather than to impede the import trade.

The speaker stressed that all the enforcement tools employed as part of the highly-effective “Green Fence” programme had been available under Chinese law for some time but had become part of a co-ordinated action only as a result of an order given at the highest echelons of central government.

In detail

September was a decent month for UK recovered paper exports while collection volumes also edged higher - but domestic consumption suffered yet another decline, according to the Confederation of Paper Industries and HM Revenue & Customs.

Some 358,412 tonnes of fibre was shipped overseas during the month for a year-on-year increase of 7.3%. But steep gains for mixed paper (+31.2%), corrugated & kraft (+19.7%) and the high grades (+129.4%) were contrasted by a fall of almost 51% for newspapers & magazines from 89,388 tonnes in September 2012 to 43,931 tonnes in the same month this year.

Customers abroad ordered 462,363 tonnes or 40.2% less newspapers & magazines across the first nine months of 2013. Making the same comparison, higher export totals were posted by mixed papers (+16.4%) and the high grades (+1.5%) whereas corrugated & kraft witnessed a decline of just 322 tonnes to 1.767 million tonnes. Combining all four classes of recovered fibre, this year’s January-September export total was 5.9% below that for the same period in 2012 at 3.152 million tonnes.

While foreign buyers increased their diet of UK fibre in September, domestic mills cut consumption by 2.6%. Year-on-year increases of 73% for mixed papers and 16.1% for newspapers & magazines were cancelled out by drops of 4.2% for the high grades and of 25.5% for corrugated & kraft - the eighth consecutive month of decline for this latter class.

Total UK mill usage across the opening three quarters of 2013 was 1.6% lower than last year at 2.846 million tonnes. There were increases of 55.9% for mixed papers to 242,524 tonnes and of 3.8% for newspapers & magazines to 1.154 million tonnes whereas consumption of the high grades slid 16.5% to 339,251 tonnes and the corrugated & kraft total was 8.9% lower at 1.11 million tonnes.

As regards UK mill intake, the overall decline of 2% for January-September this year owed much to the 10.1% drop for corrugated & kraft to 1.103 million tonnes. The high grades also suffered a sharp decline of 16% to 337,987 tonnes whereas the reverse applied to mixed papers and newspapers & magazines, with the former showing an increase of 56.7% to 242,647 tonnes and the latter a gain of 3.8% to 1.161 million tonnes. Total intake in September was 0.8% lower as year-on-year gains of 59.5% for mixed papers and 22.1% for newspapers & magazines were wiped out by losses of 23.7% for corrugated & kraft and 8.4% for the high grades.

Total UK mill stocks jumped 6,626 tonnes in September to 117,103 tonnes. The newspaper & magazines inventory soared 8,748 tonnes to 49,063 tonnes to boost supply from 1.3 to 1.6 weeks. Supply of mixed papers dropped from 1.2 to 0.9 weeks while the high grades also saw a decline from 1.1 to 0.8 weeks. And following a 3% increase in stocks to 54,666 tonnes, supply of corrugated & kraft climbed from 2.1 to 2.2 weeks.

Compared to September 2012, UK recovered paper collections edged 0.5% higher in the same month this year on increases of almost 30% for mixed papers and 34% for the high grades. In the January-September period, total fibre collections were down 4.2% at 5.865 million tonnes with a 19.6% increase for mixed papers offset by declines of 14.8% for newspapers & magazines, 5.2% for the high grades and 3.9% for corrugated & kraft.

Compared to 2012, UK paper and board production climbed 5.3% in September and 4.3% (to 3.455 million tonnes) across the first three quarters of the year.

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