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Market Focus: Recovered paper

58 recovered paper

After a summer dominated by price gains, the bulk grades of recovered fibre have been undergoing a correction in more recent weeks.

OCC export values have fallen from around £124 per tonne in mid-August to occupy a fairly wide range of £110- £115 at the time of writing. For ship­ments to the key Chinese market, domestic and continental prices for OCC are broadly on a par with each other, according to most reports.

The export price of mixed paper has fallen even more sharply than that for OCC, from around £105 per tonne at the time of our previous report to nearer the £90 mark.

For the lower grades of recovered fibre, most mills at home and abroad appear to be generally well stocked. Export prices are tracking closer to “where the Chinese want them to be”, according to a leading purchaser this week. Buyers there can be expected to be “very hungry” for material once this desired level has been reached, he added, even though the country’s own collections have improved substantially since the end of the heavy rains noted in MRW’s last report.

In Europe, by contrast, there has been no significant upturn in the vol­umes of recovered fibre coming for­ward, despite the summer holiday season coming to a close.

“We are not seeing a collection increase – it’s still very sluggish and we are as low on volumes as we have been for many years,” one prominent UK player confirmed, ascribing the decline to generally lower levels of economic activity. Another expert reported some small signs of a pick-up in volumes during the early days of September but agreed this was proving slow to gather pace.

Backing up these comments, figures from the Confederation of Paper Industries (CPI) reveal that it was a game of two quarters in the first half of 2016. UK recovered paper collec­tions exceeded 700,000 tonnes in January, February and March, but the monthly average for the April-June period was approaching 115,000 tonnes lower at around 611,000 tonnes – a downwards trend that con­tinued into July (see table).

Recov paper collections 2016

Recov paper collections 2016

In other developments, the news & pams price has retreated slightly in the UK to around £110 per tonne whereas export values have continued to push towards £125, mainly on the back of solid demand from the continent.

Orders from mainland Europe and also parts of Asia, including notably India and China, have also helped to maintain the heat in the middle grades market, with export prices of both mul­tigrade and sorted office waste said to be around £150 per tonne. UK buyers of multigrade have also been paying £145- £150 per tonne of late.

The high grades of recovered paper are continuing to experience firm mar­ket conditions, again not least because of limited collection volumes.

News of the collapse of South Korean giant Hanjin Shipping undoubtedly destabilised the freight market in late August and early September. But, despite some ‘speculative’ rate increases being sought, vessel space is still being obtained generally in the range of $429- $450 per 40ft container.

“Hanjin has not been a big Europe- China operator, and there is still so much shipping overcapacity and choice out there,” a prominent UK recovered paper industry figure pointed out.

View from the UK

Having set a scorching pace in the first quarter of this year, the UK’s collections and exports of recovered paper were back in line with 2015 levels by the end of July, according to the latest statistics supplied by the CPI and HM Revenue & Customs.

For the fourth month in a row, July collection volumes struggled to exceed 600,000 tonnes, with the total of 607,749 tonnes representing a drop of 9.7% compared with the same period last year. Across the first seven months of the year as a whole, collections were just 0.6% ahead of the corresponding figure for 2015 at 4.624 million tonnes.

The differential was even smaller for exports, as this year’s January-July total of 2.894 million tonnes bettered that for the opening seven months of 2015 by just 0.2%. Overseas shipments followed up a year-on-year slump of almost 30% in June with a further 6.7% dip in July to 371,883 tonnes.

The key to the loss of collection and export momentum lies with four months of solid declines for corrugated & kraft. Compared with 2015, overseas ship­ments tumbled 47.5% in June and a further 15.8% in July, to give a year-to-date tally of 1.521 million tonnes, a 6.2% drop from the 1.621 million tonnes of January-July last year.

Collection stats followed a similar pattern, with decreases of 34.5% in June and 18.8% in July contributing to a run­ning total for 2016 of 2.281 million tonnes, some 3.6% down on 2015 at the same stage.

In contrast, mixed & mechanical and the high grades of recovered paper posted collection and export increases in the opening seven months of the year.

For the former, overseas shipments climbed 7.1% in January-July 2016 to 1.249 million tonnes while collection volumes advanced by 4% to 1.930 mil­lion tonnes. The high grades recorded a 16.2% upturn in exports in July to pro­pel the running total for 2016 to 124,727 tonnes (+20.8% year-on-year), while collections edged 1.9% higher in July to yield a seven-month total of 412,463 tonnes (+9.4%).

There was no comfort to be drawn from the CPI figures covering UK mills’ consumption of recovered paper. Overall usage began Q3 with a bump as the total of 247,266 tonnes con-stituted a drop of almost 14% when compared with July last year. The January-July tally of 1.798 million tonnes, meanwhile, was 8.2% shy of the 1.959 million tonnes consumed domes­tically in the first seven months of 2015.

In July itself, corrugated & kraft suffered its largest consumption drop of the year to date (-20.8% to 105,360 tonnes), to give a running total that was some 5.3% lower at 800,367 tonnes. The high grades chalked up their fourth consecutive month of reduced domestic mill usage in July, with a year-on-year decline of 8.1% to 41,668 tonnes. For the opening seven months of the year as a whole, consumption was down 5.8% at 289,071 tonnes.

As for mixed & mechanical, usage in June registered its first monthly gain of 2016 (+6.6%) but then reverted to type in July with a year-on-year drop of 7.6%, for a running total some 12.3% lower than last year at 708,172 tonnes. Domestic mill stocks of mixed & mechanical stood at a fragile 0.6 weeks at the end of July compared with 1.3 weeks at the same time last year.

Compared with January-July 2015, UK paper and board production was down 7.8% at 2.151 million tonnes for the first seven months of 2016, with cor­rugated case materials the only segment to record an increase (+1.8%).

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