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Recovered paper report

At the time of writing, concerted demand from China has helped to push prices into the £116-£120 per tonne bracket compared to nearer £110-£115 at the start of November. Indeed, it is understood that some recent export deals have been concluded at prices well beyond the £120 threshold. By comparison, prices paid for old KLS on the home market have remained stable at between £80 and £90 per tonne.

Mills in China tend to buy strongly in November and December to ensure that supplies of OCC reach their destination well ahead of Chinese New Year. “If demand is going to ease, it could well ease in January,” ventured a UK-based expert.

This year has been characterised by rapid and significant price movements for OCC. According to the figures of one leading buying company, the average monthly export price recorded its 2010 low in June at below £80 per tonne but has spent the final few months of the year at well above £100. “But there has been plenty of volatility even during the course of some months,” said a senior spokesman.

The same contact also maintained that OCC export prices in mainland Europe are generally £10 per tonne lower than those available from the UK. As a result, he said, some of the focus of Chinese buying activity has switched from this country to the Continent.

The mixed papers market has also witnessed sustained price strength over recent weeks. Top-quality “soft” mixed is reportedly attracting between £98 and £102 per tonne on the export market, with China again prominent at the head of the queue. Domestic prices are understood to have been relatively static in recent weeks.

Turning to deinking material, news & pams appears to be mirroring OCC at present in attracting around £120 per tonne on the export front; similar price levels are also reported for the domestic market. Conversely, the middle grade market has lost some of its strength of late as significant orders from France and Germany have failed to offset the impact of low demand from India. At around £165-£170 per tonne, the export price of multigrade is now below the UK range of £170-£175. 

Low levels of supply continue to dominate the market for the high grades of recovered paper. Nevertheless, prices have been reasonably stable of late.

On the theme of supply, latest figures show that UK collections were 2.7% lower in the first three quarters of 2010, adding to a drop of 7% for the whole of 2009 when compared to the previous year. And so with supply already a concern, an early cold snap would not have been on most people’s pre-Christmas wish-list. The significant snowfalls have reportedly slowed up collections as well as deliveries to processing facilities in several parts of the UK.

Movements of material to the UK’s ports have also been hampered by the early snowfalls. On a positive note, however, freight rates for shipments between the UK and Asia have continued to soften while container availability is no longer a pressing problem for exporters.

“Don’t expect recovered paper ever to be cheap again,” asserted Per Ove Nordstrom, a global materials analyst at McKinsey & Company, at last month’s European Paper Recycling Conference in Frankfurt. He insisted that recovered fibre has become a “strategic asset” which will be subject to rising prices against a backdrop of tight availability.

Nordstrom also predicted that, between 2008 and 2020, newsprint demand in Europe will slide from 12.5 million tonnes to 9.8 million tonnes per annum while uncoated woodfree requirements will fall from 11.1 million tonnes to 10.3 million tonnes. Over the same 12-year period, he anticipates that magazine paper demand will edge up from 13.5 million tonnes to 13.6 million tonnes while the coated woodfree total is expected to climb from 8 million tonnes to 9 million tonnes.

Between 2007 and 2009, recovered paper collection volumes slumped around 10-15% in many European countries, noted European Recovered Paper Association president Merja Helander of Finland-basedLassila & Tikanoja. Collected tonnages “are likely to stay flat or even decrease - especially the deinking grades”, she contended. The same speaker also expressed the concern that machine closures in Scandinavia will reduce the input of virgin fibre into the system and could impact adversely on recovered paper quality.

Among other conference highlights, Kimberly-Clark’s global recovered fibre director Tony Waring noted that tissue-makers are generally restricted to using grades of recovered fibre whose availability is being impaired by declining consumption. But looking to the future, he predicted that “additional deinking plant capabilities will enable alternative fibre consumption”.

As regards the outlook for exporters, GP Harmon’s director of international trading in the US, Michael J. Belus, estimated that India’s annual consumption of all grades of recovered paper will leap from around 5 million tonnes this year to 6.5 million tonnes in 2014. Over the same four-year period, volumes recovered domestically are expected to climb from some 3.2 million tonnes to nearer 4.5 million tonnes.

In September this year, UK exports of recovered paper hit their highest monthly level since March - but the total of 368,963 tonnes was still 2.2% short of the 377,318 tonnes shipped overseas in the ninth month of 2009. This also means that exports in the first three quarters of 2010 were 4.6% lower than in the corresponding period of 2009 at 3.201 million tonnes.

Despite a five-month period during 2010 when Class I mixed papers enjoyed substantial year-on-year export growth, total shipments across the first three quarters of this year were down 3.8% at 740,650 tonnes - thanks in no small part to a slump of 34.5% in September to 82,681 tonnes. HM Revenue and Customs’ figures reveal that the same month also produced a 0.2% decline in shipments of Class III newspapers & magazines to 78,162 tonnes, although the nine-month total showed an increase of almost 8% to 810,337 tonnes.

Conversely, UK exports of Class II corrugated & kraft jumped 20.9% higher in September to 193,273 tonnes but showed a decline of 10.7% to 1.558 million tonnes across this year’s January-September period. As for the Class IV high grades, a 16.5% surge in exports during September to 14,848 tonnes carried the year-to-date total to 92,595 tonnes - 1.5% ahead of the 91,258 tonnes dispatched abroad in the corresponding period of 2009.

The first and second quarters of 2010 had ended with year-on-year increases in UK recovered paper collections but this pattern was broken in the third quarter when volumes dropped 1.3% in September to 673,595 tonnes, according to latest statistics from the Confederation of Paper Industries (CPI). UK collections amounted to 5.963 million tonnes in the first nine months of this year - a drop-off of 2.7% compared to the 6.131 million tonnes of January-September 2009. Increases for newspapers & magazines (+4%) and the high grades (+2%) were more than offset by the lower collection volumes for mixed papers (-3.3%) and corrugated & kraft (-7.9%).

In overall terms, UK mill consumption of recovered paper has experienced a relatively stable 2010. An increase of 0.8% to 314,192 tonnes in September resulted in a running total of 2.848 million tonnes for the first three quarters of the year - a slender 0.6% improvement over the 2.833 million tonnes of January-September 2009.

From the nine-month perspective, corrugated & kraft stands alone in recording a reduced consumption, with the total dropping 2.1% from 1.024 million tonnes to 1.003 million tonnes. The high grades registered a gain of 2.2% to 512,438 tonnes while consumption of newspapers & magazines performed slightly better in climbing 2.3% to 1.115 million tonnes. Usage of mixed papers edged 0.2% higher to 218,248 tonnes.

Looking at September in isolation, consumption of newspapers & magazines dipped 3.6% to 119,719 tonnes and mixed papers 0.7% to 22,237 tonnes. Moving in the opposite direction were corrugated & kraft (+5.6% to 112,229 tonnes) and the high grades (+1.8% to 60,007 tonnes).

September statistics for UK mill intake reveal a 10.8% increase for the high grades to 62,948 tonnes versus the 56,808 tonnes of the corresponding month last year. By the same comparison, intake of mixed papers grew by 8.8% to 23,300 tonnes, corrugated & kraft by 3.3% to 112,630 tonnes and newspapers & magazines by 4.1% to 136,204 tonnes.

Rolling together the CPI figures for the first three quarters of the year, UK mill intake was higher across all four classes of recovered paper: mixed papers +5.1% to 221,259 tonnes; corrugated & kraft +0.3% to 989,727 tonnes; newspapers & magazines +3% to 1.131 million tonnes; and the high grades +4.3% to 512,430 tonnes.

UK mill stocks of recovered paper have spent most of the year hovering between 80,000 and 90,000 tonnes. Having dropped to 73,551 tonnes at the end of August, the total had returned to its comfort zone one month later in reaching 87,928 tonnes, thereby increasing supply at the prevailing rate of usage from one week to 1.2 weeks. The vast majority of this inventory gain was recorded by newspapers & magazines, stocks of which rocketed from 19,770 tonnes at the start of September to 31,738 tonnes by the close of the month to boost supply from 0.7 to 1.1 weeks.

Stocks of the high grades climbed 2,431 tonnes to 16,880 tonnes but supply was left unaltered at 1.2 weeks, whereas an increase in the mixed papers inventory from 6,639 tonnes to 8,526 tonnes during the course of September extended supply from 1.4 to 1.6 weeks. In the same month, the only faller in inventory terms was corrugated & kraft, stocks of which slid from 32,693 tonnes to 30,784 tonnes to trim supply from 1.3 to 1.2 weeks.

The positive run enjoyed by UK paper and board production came to a halt in September: after five months of year-on-year growth, output was 2.3% lower than in the same month last year at 353,646 tonnes. However, the 2010 cumulative total of 3.26 million tonnes was still 1.4% higher than the 3.216 million tonnes produced in the first three quarters of 2009 - thanks in part to an increase of 10.1% in newsprint production to 898,616 tonnes.

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