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Market Focus: February 2017 - Recovered paper

A quick glance at the OCC export price graph con­firms that, in terms of recent history, the market has entered rarefied atmosphere thanks to demand variously described as “amazing”, “tremendous” and “desper­ate”. There is a widespread belief that prices could go even higher in the coming weeks.

Having climbed towards £120 per tonne in the early days of the new year, paper export transaction prices are now nearer £125 at the time of writing, with at least one expert claiming to have heard £128 in the marketplace. “Every­body wants it and China is desperate for material,” MRW was assured this week.

China’s board mills are reportedly “booming” in terms of production and, in general, are now seeing their order files extend well beyond the Chinese New Year. One regional specialist sug­gested many mills would be operating “flat out” for at least the next two months based on existing business.

“The UK is benefitting from the weak pound and so its material is very attrac­tive,” he added.

OCC prices on the continent are said to be on a par with those prevailing in the deep-sea market and shortages of material are widely reported. Mean­while, OCC values in the UK have closed the gap to export levels and are now at around £123 per tonne, “a sure sign of the general scrap for volume”, according to one expert.

This battle for material also extends to mixed paper. The domestic price range is currently put at £90-£95 per tonne and some of the leading overseas buyers have been prepared to pay typi­cally £96. That said, there have been reports of three-figure sums being paid by certain customers outside the UK.

The combination of a relatively dry winter and a sharper focus on quality is said to have helped to fuel the Chinese appetite for UK mixed paper.

“The number of claims coming out of China has been massively reduced this winter,” commented one exporter.

The export path has also been smoothed by easier shipping availabil­ity, with the gap between making a booking and the space becoming avail­able now at four to seven days rather than the three to four weeks of the end of last year. But shipping rates remain at an elevated $1,300-$1,400 per 40ft container, with shipping lines expected to use blank sailings after Chinese New Year as an argument for even higher numbers in the next month.

In other segments of the recovered paper market, multigrade is now com­manding £165-£167 per tonne in the UK and up to £170 overseas, with con­tinental Europe, India and China all providing impetus. Among the higher grades, best whites have gained £10- £15 per tonne in value in recent weeks.

One of the few paper grades to have experienced recent downward price pressure is news & pams, with domestic and export values in the £95-£100 per tonne range and therefore similar to mixed paper.

“This means fewer people will have reason to sort it,” said an experienced market observer. “I would expect news & pams prices to go up to get that differ­ential back.”

View from the UK

In November 2016, UK collections of recovered paper slumped to their lowest level in 15 months while export growth also stalled.

Latest figures from the Confederation of Paper Industries and HM Revenue & Customs reveal that collected volumes slid to just 586,641 tonnes in last year’s penultimate month, the smallest tally since the 564,725 tonnes of August 2015. As a result, UK collections were 0.4% lower in January-November last year than in the corresponding period of 2015 at 7.147 million tonnes.

After seven consecutive months of mixed & mechanical collection gains earlier in the year, November marked the third month in a row of decline. The 13.7% year-on-year reverse gave an 11-month running total of 2.855 million tonnes, which was 1.5% shy of the 2.899 million tonnes of mixed & mechanical amassed in January-November 2015.

“China’s board mills are reportedly booming…many will be operating flat out for at least the next two months based on existing business.”

A 10.5% slump in UK collections of corrugated & kraft in November ensured that the running total for the year slipped 0.3% below that for the comparative period in 2015 to 3.656 million tonnes. And even ‘other’ grade collection volumes suffered a year-on-year reverse of 7.1% in November, although the 11-month total remained 4.2% ahead of that for the previous year at 635,936 tonnes.

recovered paper key figs nov 2016

recovered paper key figs nov 2016

Turning to exports of recovered paper, last November’s shipment of 378,063 tonnes was 4.2% down on that for the penultimate month of 2015, whereas the cumulative total of 4.482 million tonnes was still 1.5% higher than the 4.414 million tonnes of Janu­ary-November 2015. That year turned out to be a record one in terms of export performance once the December figures were incorporated.

Overseas deliveries of mixed & mechanical fell 3.1% year-on-year in November but were 1% higher across the opening 11 months of 2016 at 1.836 million tonnes. Similarly with corru­gated & kraft, shipments declined 5.7% in November but gained 1.4% from the year-to-date perspective to 2.461 mil­lion tonnes.

In contrast, exports of ‘other’ grades returned to growth in November after three months of year-on-year declines, contributing to an 11-month total of 184,426 tonnes, which was 9.9% in advance of the 167,830 tonnes shipped abroad in January-November 2015.

While the spotlight usually falls on exports of recovered fibre, the Novem­ber statistics provide an opportune moment to dwell on imports because volumes entering the UK were higher than for any previous month in 2016 at 19,007 tonnes, with corrugated & kraft accounting for the bulk of this total on 15,627 tonnes.

Domestic mills’ usage of all grades of recovered paper fell to its lowest point of the year in November at just 227,585 tonnes, a decline of 17.6% over the penultimate month of 2015.

The 11-month total of 2.784 million tonnes trailed the 3.061 million tonnes recorded in the same period of 2015 by 9%, with mixed & mechanical on 1.065 million tonnes (-13.2% year-on-year), corrugated & kraft on 1.266 million tonnes (-6.1%) and ‘other’ grades on 453,134 tonnes (-6.6%). At 38,786 tonnes, the November 2016 consump­tion total for these ‘other’ grades was the lowest of the year to date.

Also in November, UK paper and board production lagged 9.3% behind that for the same month in 2015, while the 11-month total of 3.387 million tonnes represented a year-on-year decline of 7.6%. Corrugated case materials was again the only product seg­ment to record a running total increase, of 0.6% to 1.342 million tonnes, whereas graphics (including newsprint) tumbled 14.3%.

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