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Market Focus: Recovered paper

At the bulk end of the recovered paper spectrum, mixed paper is proving to be the ‘hot grade’ at present, as it attracts not only decent demand from UK mills but also significantly higher prices from buyers overseas.

Domestic values have improved from £60-£65 per tonne at the time of our April report to £63-£67 at the time of writing, while some sellers have report­edly achieved more than £80 on the export front. By comparison, OCC prices have remained largely static at £95-£96 per tonne for export and a wider-ranging £90-£96 for the local market. The relative lack of price movement is ascribed to the fact that satisfactory but unspectacular demand has been coun­terbalanced by very low arisings.

Indeed, incoming volumes are said by many experts to have fallen perhaps 15-20% when comparing year on year, with some reckoning the drop-off to be as steep as 30%. General economic uncertainty and nervousness surround­ing the outcome of the EU membership referendum in June are given as two major reasons for this decline in ton­nages coming forward.

Meanwhile, some of the leading Chinese containerboard mills are now describing their own market conditions as being quite stable, with margins termed “not bad” and order books “acceptable”. While clearly some way short of expressing euphoria, such com­ments reflect a significant change of mood among these producers when compared with a year ago, for example.



In recent weeks, shipping freight rates have remained broadly un-changed, with most players said to be paying around $500-$525 (£340- £360) for a 40ft container. But the con­tinuing availability of spot rates in the very low $400s has been blamed in some quarters for destabilising the mar­ket because those securing such deals often choose to pass on the benefit when purchasing material.

“I wish the shipping lines would hold their nerve at the lower end,” lamented a leading exporter. News & pams has joined mixed paper in experiencing a price lift in recent weeks, commanding typically £85-£90 per tonne in the domestic market and £95-£100 in the export channel, with the latter range inflated by shortages in some European outlets. “Germany seems to be particularly short,” MRW was told.

The increases are also said to relate to what is happening in the mixed paper market.

The middle and high grades of recov­ered paper have also recorded further price progression since MRW’s previous report. From a level of £115-£123 per tonne, multigrade has been attracting £125 and above in both the domestic and export markets, with some overseas bookings said to have been concluded north of £130.

The sorted office waste (SOW) mar­ket is still “very buoyant”, with domestic and export business both typically con­ducted in the £138-£140 per tonne range, compared with £134-£139 in late April. Healthy interest is continuing to be shown in SOW by buyers in India and China.

A combination of material shortages and concerted demand has been driving increases among the best whites, it was also noted.

View from the UK

UK recovered paper exports remain on course to smash the whole-year record established in 2015, with the first quar­ter total of 1.403 million tonnes easily outstripping corresponding figures for last year (by 21.3%) and for 2008, the year in which the previous Janu­ary-March high was established (see table).



Exports in March, the latest month for which figures have been issued by the Confederation of Paper Industries and HM Revenue & Customs, were 15.3% higher year-on-year at 429,949 tonnes.

The spike in overseas shipments has been more pronounced than the decline in domestic mill usage of recovered fibre. After nosediving 15.8% in January and 18.2% in February, consumption rallied to 282,813 tonnes in March for a year-on-year increase of 8.6%. For the first quarter as a whole, however, mill usage was 9.4% lower than in the same period last year at 796,272 tonnes.

Mills’ average stock coverage ended March at exactly one week, the lowest for some time.

The greater pace of exports was underpinned by a strong increase in UK recovered paper collections in the open­ing quarter of 2016. Volumes exceeded 700,000 tonnes in each of the first three months of the year, equalling the total number of months this threshold wasbreached in 2015. A year-on-year collec­tion surge of more than 18% in March to 708,283 tonnes contributed to a first quarter total that was 11.6% higher than in 2015 at 2.182 million tonnes.

Collections of corrugated & kraft saw particularly healthy growth, with an almost 14% jump in March adding to the 29.7% leap in February to give a first quarter tally of 1.142 million tonnes, a 15.4% increase over the 989,884 tonnes of January-March 2015. Collections of high grades were 31.7% higher in this year’s first quarter at 192,711 tonnes, whereas the increase for mixed & mechanical was a more muted 3.5% to 846,881 tonnes owing to a 17.2% decline in January.

Regarding exports of the specific grades of recovered paper, mixed & mechanical saw an 8.1% reverse in Jan­uary but increases of 38.9% in February and 26.7% in March, such that overseas shipments across the entire first quarter were 17.2% higher than last year’s 469,015 tonnes at 549,755 tonnes.

In contrast, exports of corrugated & kraft have been strong from the verystart of 2016, climbing 20.4% from 655,295 tonnes in January-March 2015 to 788,854 tonnes in the corresponding period of this year.

But this performance was eclipsed by the high grades, even though the triple-digit-percentage increases of Jan­uary and February were not matched in March, when exports increased by 28.9% to 17,088 tonnes. Nevertheless, overseas deliveries across Q1 were still 102% higher at 64,234 tonnes against31,799 tonnes in the same period last year.

Following year-on-year slumps of 30.2% in January and 28.5% in Febru­ary, UK mill consumption of mixed & mechanical fared less badly in March with a 4.1% reverse. The first quarter total of 307,230 tonnes was 22.5% short of the 396,598 tonnes consumed in January-March last year.

UK mill consumption of corrugated & kraft and the high grades had also suffered setbacks in January and Febru­ary. In both cases, however, the scale of the recovery in March was sufficient to more than offset the earlier declines. For corrugated & kraft, usage jumped 19.4% year-on-year in March to 132,387 tonnes to give a first quarter increase of 1.6% to 359,662 tonnes. For the high grades, a 12.7% consumption surge in the final month of Q1 meant that the January-March total climbed 1% to 129,300 tonnes.

UK mill stocks of the high grades closed out March on 0.9 weeks’ supply, their lowest end-month level since the 0.7 weeks of June 2015.

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