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Recovered paper - 15 February

OCC export prices were at £90 per tonne or just above on the eve of the Chinese New Year holidays, following a period of “very competitive” market conditions.

Relatively low stocks at some Chinese mills and an attractive exchange rate were two of the factors cited as being behind decent buying activity in the UK during January and early February. In contrast, some of the smaller mill operations in China are thought to have postponed further fibre purchases until after the new year celebrations.

Old KLS has been sold recently into UK mills for as much as £80-£85 per tonne, although quantities “are available at lower prices”, one leading buyer maintained.

Good-quality mixed has continued to attract upwards of £70 per tonne in the export channel, whereas prices paid in the UK have been significantly lower on average. “And we are being very selective,” a domestic mill purchaser insisted.

According to the Bureau of International Recycling’s (BIR) latest World Mirror on Recovered Paper, quality is still top of the agenda in all markets and “significant claims are arriving in the UK from most export outlets”.

China’s enforcement activities are expected to become even more pronounced in the coming months. This follows reports about the formation of a joint inspection team set up by government departments including Customs, CIQ, the Anti-Smuggling Bureau and the Health Bureau, with operatives working at several unspecified ports. Such inter-departmental co-ordination is rare in China, and reflects the emphasis now being placed on the quality issue across the authority spectrum, commented a buyer for a leading Chinese mill group.

The same contact also agreed with the claim in the World Mirror, ascribed to most UK exporters, that the quality of material shipped overseas “has, if anything, improved as the focus of reprocessors on quality remains high”.

He acknowledged: “Some have improved their quality considerably and others have showed that they are prepared to make positive changes.”

But it was also alleged in the World Mirror that, given the focus on quality, “many brokers are avoiding the lower grades at present”.

In recent weeks, export values of news & pams have dropped to £90 per tonne and less, with domestic business for this grade conducted typically at £80-£85.

Meanwhile, more interest from India has boosted the export price of multigrade to £115-120 per tonne, with domestic sales trailing typically £5-£10 behind.

Decent sales into Europe, China and India have continued to galvanise the sorted office waste market such that prices have hardened to beyond £120 per tonne in some instances. And values of the high grades have drifted slightly higher in recent weeks although volumes and demand remain low.

A leading shipping line has already alerted the market of its intention to raise freight rates by $200 (£127) per 40ft container with effect from 1 March. But as earlier attempts to hike prices were successfully resisted, this latest proposal “is far from being a done deal”, MRW was assured this week.

> As reported last month, there was a strong start to the fourth quarter in terms of UK paper and board production, as well as recovered paper collections, consumption and exports. And the momentum developed in October was maintained into November, according to latest feedback from the Confederation of Paper Industries and HM Revenue & Customs.

Compared with the penultimate month of 2011, domestic mill consumption of recovered paper climbed 4.6% in November last year to 310,053 tonnes, to produce an 11-month running total some 2% higher at 3.53 million tonnes.

Collections surged 6.8% in November to 710,963 tonnes and by 2.1% across the first 11 months to 7.568 million tonnes. When making the same comparisons, UK recovered fibre exports jumped 6.6% to 414,615 tonnes and 1.9% to 4.183 million tonnes.

The January-November export charge was led by mixed papers, with a year-on-year increase of 5.3%, followed by newspapers & magazines on 4.3%.

Having jumped 8% in October, UK paper and board production registered a further 4.4% gain in November to 367,865 tonnes, helped by a 21.2% leap for packaging papers and boards.

Looking at January-November as a whole, domestic paper and board production was 1.3% higher than in 2011 at 4.064 million tonnes.

In the same time frame, corrugated & kraft was entirely responsible for the year-on-year growth in mills’ fibre consumption, with a total some 17.9% higher than in the previous year at 1.476 million tonnes.

Usage of newspapers & magazines dipped 1.4% to 1.38 million tonnes, while mixed papers (-6.1%) and the high grades (-20%) suffered significantly steeper declines.

Mill usage in November itself was underpinned by a year-on-year gain of 17.1% for corrugated & kraft, with support from a 5.9% increase for newspapers & magazines. But consumption of mixed papers and the high grades fell, respectively, 13.4% and 19.5%.

Despite 2.7% growth in November, UK mills’ recovered paper intake actually fell in the first 11 months of last year, albeit by just 0.3% to 3.544 million tonnes.

An increase of 17.2% for corrugated & kraft was more than offset by declines of 7%, 5.5% and 21.2% for mixed papers, newspapers & magazines and the high grades, respectively.

The same pattern applied in November itself, with mixed papers (-16.6%), newspapers & magazines (-3.4%) and the high grades (-14%) combining to limit the overall 2.7% intake increase fuelled by corrugated & kraft (up 22% to 130,559 tonnes).

UK mill stocks climbed from 93,148 tonnes to 114,499 tonnes during November, thus advancing supply from 1.3 to 1.6 weeks.

The mixed paper inventory almost tripled in size to boost supply from 0.3 to 0.7 weeks, while stocks of corrugated & kraft and newspapers & magazines both gained almost 10,000 tonnes, increasing supply of the former from 0.8 to 1.2 weeks and of the latter from 1.7 to two weeks.

The recovered paper collection boost in November was driven mainly by corrugated & kraft and newspapers & magazines, with the former posting year-on-year growth of 13.3% to 345,288 tonnes and the latter recording an increase of 9.9% to 223,684 tonnes.

In contrast, collection volumes for mixed papers and the high grades were lower than in the same month of 2011 by, in turn, 7.6% and 14.3%.

Thus, after 11 months of 2012, collections of corrugated & kraft were 6.7% higher than in January-November 2011 at 3.675 million tonnes, with corrugated & kraft (+2%) and mixed papers (+3.3%) also securing growth. The odd man out was high grades, with a 20.6% drop-off in collections to 581,169 tonnes.

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