For the UK’s recovered paper sector, recent four weeks have again been dominated by what one long-suffering trader has described as “shipping shenanigans”, with the lack of available container space for exporters resulting in a supply chain logjam.
“Material is moving but it is moving very slowly and, in most cases, it is moving very late,” a leading industry figure confirmed.
Shipping lines have raised their freight rates from typically $800 (£636) per 40ft container in November to $1,000-$1,200 at the time of writing; this range compares with $400-$450 as recently as the late summer.
“The high-end rates will get your cargo moved a little quicker, but still not necessarily as fast as you would like,” the contact noted. “You are having to wait two to three weeks at best if you want space.” Shipping space issues are also affecting mainland Europe but are reportedly less acute than in the UK.
One of the most visible effects of this logistics squeeze is that yards are generally holding more stock than they would want to and, in many cases, cash flows are coming under severe pressure. One merchant reported that yards were “bulging” with material that was proving almost impossible to shift, before adding: “This is absolutely killing us.”
Clients with contracts, such as supermarket chains and other businesses, still expect material to be collected. And with the Christmas-related surge in volumes lying ahead, an industry expert pointed out that “the situation is only going to get more desperate”.
UK paper mills have been picking up some of the material that would otherwise have been destined for customers overseas, but “switched” volumes have been relatively small because domestic consumers are reasonably well stocked at this point.
The difficulties associated with moving material have also created what one expert described this week as “a false market”. Once major exporters had satisfied their tonnage needs in early December, there was an immediate decline in OCC export values from £114-£118 per tonne to £107-£110, while £5-£6 has been shaved off mixed paper prices to give a range of £88-£90 for material heading overseas.
Meanwhile, OCC prices paid by UK mills have become subject to huge variations, with the lower end said to be in double rather than triple figures.
Buyers of news & pams are also said to be well stocked both domestically and abroad, “but not enough for prices to have come off”. This grade is still attracting £100-£105 per tonne although “a little more trading is now being done towards the bottom end of the range” when compared to a month ago, according to experts.
For the middle grades of recovered paper, export values of multigrade “have moved upwards to meet domestic levels” in recent weeks, such that the common range at the time of writing is £157-£160 per tonne. “The market is firm but everybody is largely getting what they need,” MRW was told.
The high grades market, meanwhile, has remained largely stable as customers are readily snapping up the limited volumes available.
View from the UK
The substantial August gains in UK recovered paper exports were all but wiped away the following month as overseas shipments sank to their lowest level in more than a year.
Latest figures from the Confederation of Paper Industries and HM Revenue & Customs confirm that UK exports fell to 329,966 tonnes in September, which is the smallest amount since the 312,175 tonnes of August 2015 and almost 22% lower than the 422,691 tonnes of September last year.
Likewise, it is necessary to go all the way back to August 2015 for the previous occasion on which UK collections were lower than the 592,875 tonnes recorded this September – a totalwhich trailed the 676,177 tonnes for the same month last year by 12.3%.
Drilling down into the export statistics, year-on-year comparisons show that mixed & mechanical shipments crashed 31.7% to just 112,417 tonnes in September while corrugated & kraft tumbled 16.1% to 203,149 tonnes, resulting in nine-month cumulative totals of, respectively, 1.506 million tonnes (+2.4% compared with January-September 2015) and 1.968 million tonnes (-2.6%). Overseas deliveries of all other grades were also lower in September (-9.7% to 14,400 tonnes) but higher from the year-to-date perspective (+12.9% to 149,919 tonnes) on the back of a supercharged start to 2016.
As a result of these developments, 2016 exports of all forms of recovered paper are no longer on record-breaking pace despite their early-year surge. Across the first nine months, just under 3.624 million tonnes of paper was shipped abroad, some 701 tonnes short of the total recorded for the same period last year.
“Yards are generally holding more stock than they would want to and, in many cases, cash flows are coming under severe pressure”
Turning to collections, mixed & mechanical broke a seven-month run ofgains with a drop of 15.7%, or almost 40,000 tonnes, to 215,455 tonnes in September, but the January-September running total was still 1.6% higher than that for last year at 2.386 million tonnes.
Similarly with the ‘other’ grades, collection volumes fell 4.7% in September to 53,525 tonnes but remained 6% ahead of the 2015 pace at 519,242 tonnes. But for corrugated & kraft, collections dropped not only by 11.2% in September to 323,895 tonnes but also by 1.5% across the first three quarters of the year to 2.958 million tonnes.
For all grades of recovered paper, the domestic usage needle barely flickered in September as mills consumed 266,419 tonnes for a year-on-year drop of just 0.2%, with the nine-month total down 6.7% at 2.326 million tonnes.
UK mills’ stocks jumped upwards of 13,000 tonnes in September to propel coverage at the prevailing rate of usage from one week at the end of August to 1.2 weeks a month later.
September produced the second-highest total of the year to date for UK consumption of mixed & mechanical, with the 105,982 tonnes representing an increase over the same month last year of 5.7%. However, the January- September total showed a decline of 9.6% to 913,600 tonnes.
For corrugated & kraft, UK mill consumption was lower in September (-1.9% at 121,245 tonnes) and also across the opening three quarters of the year (-4.3% at 1.042 million tonnes). And making the same respective comparisons, ‘other’ grades also recorded declines of, respectively, 9.3% to 39,192 tonnes and 6.1% to 370,750 tonnes.
UK paper and board production was down 5.4% year-on-year in September at 309,662 tonnes, while the year-to-date total of 2.781 million tonnes reflected a decline of 7% from the 2.992 million tonnes of January-September 2015.