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Market Focus: Recovered paper December 2015

This time last year, a leading exporter of recovered paper was predicting 2015 would be a relatively “boring” year in terms of price developments.

His prophecy has proved to be largely accurate, especially compared with the havoc visited on most other commodity markets during the course of the year.

Values for the brown grades have been particularly stable, most notably in the second half of 2015. The OCC export price remains around the £85 per tonne mark reported in our October analysis, while mixed paper is selling abroad for typically £66-£68 compared with the £65-£70 noted previously.

On the domestic market, OCC is understood to be attracting £80 per tonne and above, with “some good spot prices available for strategic tonnage”.

OCC prices continue to be lower on mainland Europe although the average differential to UK levels is claimed to have closed from £4-£5 per tonne in November to nearer £2 at the time of writing.

The OCC price has been generally “very static – and I don’t see there being much change through January either”, one expert told MRW. The same cannot be said, however, for freight rates which were still around $1,000 per 40ft container in early June but which have slumped to $450-$500 – with deals concluded at levels as low as $400 in some isolated instances, according to observers.

In our October report, it was noted that news & pams prices were higher in the export channel than in the domestic domain. The opposite now applies, with the home market paying £80+ per tonne and overseas customers £75+.

An overtaking manoeuvre has also been performed in the multigrade market, with export values (£110-£116 per tonne) now ahead of prices in the UK (£110-£112) when the reverse had been true in October. But it should be added that both price ranges for multigrade are lower than they were in the previous report despite a recent improvement in buying interest from India.

The high grades market has been stable, with experts reporting decent demand for the limited volumes available.

The UK has spearheaded a European fightback in terms of total recovered fibre volumes shipped to the leading overseas market of China. Whereas North America had been experiencing the strongest growth in Chinese fibre orders in recent years, Europe has reversed the trend in 2015, according to BIR world president Ranjit Baxi of Wanstead-based J&H Sales International at the body’s recent gathering in Prague.

Europe shipped 5.923 million tonnes of recovered fibre to China in the opening eight months of this year versus 5.136 million tonnes in January-August 2014 – an increase of 787,000 tonnes. UK shipments into this market climbed 10.4% from 2.260 million tonnes to 2.495 million tonnes while three of Europe’s other leading exporting nations recorded even higher percentage increases when comparing the same periods: Italy (+22% to 743,480 tonnes); Spain (+44% to 479,870 tonnes); and France (+25% to 361,923 tonnes).

Conversely, North America’s exports to China actually slid from 9.753 million tonnes in January-August 2014 to 9.626 million tonnes in the corresponding period of this year, a development Baxi believed could be due in part to very strong domestic demand in the US. He concluded that recovered paper demand in China was likely to remain “sustained” in the years to come.



Also in Prague, European Recovered Paper Association president Merja Helander congratulated Europe on achieving a paper recycling rate of almost 72% last year. But she went on to warn that fibres were becoming weaker and that “the limit of recycling is getting closer”, going as far as to put the figure at 78%.

View from the UK

Domestic collections of recovered paper plumbed a now-revised multi-year low of 564,431 tonnes in August. But the following month saw some of the lost ground regained when incoming volumes climbed 6.4% year on year to 679,399 tonnes – the third highest monthly total to date in 2015, according to figures from the Confederation of Paper Industries and HM Revenue & Customs. As a result, collections across the first three quarters of 2015 were just 2.4% short of last year’s corresponding period at 5.907 million tonnes.

UK exports traced a similar course. Having dropped to a year low 312,175 tonnes in August, overseas shipments leapt to 422,691 tonnes in the subsequent month for a year-on-year gain of almost 23%. Compared with January-September 2014, outbound volumes were 7.8% higher this year at 3.625 million tonnes.

Recovered paper consumption by domestic mills was 11.4% lower in September at 270,240 tonnes, which is broadly in line with the average monthly decline of 10.6% for the year to date.



The mixed & mechanical segment has been particularly hard hit by this usage decline, with the year-on-year drop of 29.2% in September contributing to a 25.9% slump for the opening three quarters of 2015 to 1.014 million tonnes. Collections were down 10.5% in September while the January-September period as a whole witnessed a 13.9% reversal to 2.351 million tonnes.

But when making the same year-onyear comparison, mixed & mechanical exports were 9% higher in September at 164,674 tonnes and 2.2% ahead from the nine-month perspective at 1.471 million tonnes.

Domestic usage of corrugated & kraft has been far more solid: a gain of 10.6% to 123,513 tonnes in September contributed to a year-to-date total of 1.089 million tonnes (+3.7%). September also produced the second biggest spike of the year to date in corrugated & kraft exports, with a gain of 31% to 242,070 tonnes further underpinning the almost 10% growth over the first three quarters of 2015 to 2.021 million tonnes.

Collections recovered from a 12.2% setback in August to record a gain of approaching 24% the following month, giving a nine-month total for 2015 that was 6.8% higher than that for the corresponding period of last year at 3.067 million tonnes.

The latest stats for the high grades confirm six consecutive months of yearon- year collection gains, with the 1.9% increase for September contributing to a 9.4% hike across the opening three quarters of 2015 to 488,760 tonnes.

And exports continued their midyear surge. For the sixth month running, the year-on-year increase in overseas shipments of the high grades exceeded 70%, soaring almost 97% in September itself to 15,947 tonnes. For January-September as a whole, exports were 58.6% higher than in 2014 at 132,762 tonnes versus 83,694 tonnes.

In terms of UK mill usage of the high grades, however, eight straight months of year-on-year gains this year came to an end in September as consumption fell 8.5% to 42,915 tonnes. The year-to-date total was still 5.7% ahead of January- September 2014 at 393,343 tonnes.

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