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Market Focus: Recovered paper

OCC export prices have held firm in recent weeks, despite collection volumes returning to more normal levels in the post-holiday season. Although some business has reportedly been transacted at around £110 per tonne, some players are claiming £115 has been paid.

In effect, the average price at the time of writing appears to be broadly similar to the £113 per tonne quoted in our last report.

Mixed paper has also remained largely true to last month’s levels, with the export price range at £86-£93 per tonne.

While the pound has been suffering well-documented weakness on the cur­rency exchanges, a key support for these recovered fibre price levels has come in the form of freight rate increases. Hanjin Shipping’s filing for bankruptcy in early September has led to reduced container availability and gave renewed impetus to the shipping industry’s wider push to raise rates.

Whereas quoted rates were typically around the $450 mark (£370) for a 40ft box before the Hanjin collapse, freight is now pitched in the $575-$600 range. “Containers are available but you have to pay [what the shippers ask] if you want to be sure of getting what you want when you want them,” confirmed a leading recovered fibre buyer for the Chinese market.

However, the freight effect does not end there. With shipping lines touting a further general rate increase (GRI) of $200 per 40ft container for November, major UK-based buyers for the Chinese market have been looking to purchase substantial quantities of OCC and mixed paper in a bid to get ahead of the proposed rate hike.

According to a senior buyer, UK and European prices are roughly on a par but this balance may shift if the GRI is not applied evenly: “Shipping is having a massive effect on the market and how the GRI is introduced will be crucial.”

Domestically, OCC prices have been occupying a somewhat wider range of £107-£115 per tonne of late. One expert observed: “Mills are happy to take their regular tonnages but they are not look­ing for any more at the moment.”

In other parts of the recovered paper market, UK mills have been paying either side of £105 per tonne for news & pams whereas export values have been trimmed from around £125 in mid- September to nearer £115-£120.

Middle grade prices have remained firm on the back of solid buying interest. Multigrade has been attracting typically £140-£145 per tonne in the export arena, although India is said to be “not overly desperate” for additional vol­umes.

In a generally stable high grades mar­ket, there are ready outlets for the vol­umes becoming available.

Paper and board production

Paper and board production

The view from the UK

A sharp increase in corrugated & kraft exports in August helped to kick-start UK overseas shipments of recovered fibre after a four-month malaise.

Having dropped more than 47% in June and approaching 16% in July, exports of corrugated & kraft soared 54.4% year-on-year in August to 243,474 tonnes, the highest monthly total since February this year, according to latest figures from the Confederation of Paper Industries (CPI) and HM Rev­enue & Customs.

As a result, total shipments of all forms of recovered fibre from the UK jumped 28% in August to 399,527 tonnes to record the first year-on-year increase since March. Rolling together the statistics for the first eight months of 2016, exports were 2.9% higher than last year at 3.294 million tonnes.

The eight-month export total for corrugated & kraft was down 0.8% to 1.764 million tonnes, despite the strong August performance mentioned above, whereas the running totals for mixed & mechanical and the high grades showed increases of, respectively, 6.7% to 1.394 million tonnes and 16% to 135,519 tonnes.

During August itself, overseas ship­ments of mixed & mechanical climbed 3.1% year-on-year to 145,261 tonnes but high grades suffered a drop of 20.3% to 10,792 tonnes, the lowest monthly total of the year to date.

UK collections of recovered fibre followed the same general pattern, given that a four-month run of declines was conclusively snapped in August by a year-on-year surge of 14.5% to 646,490 tonnes. But the total was still well short of the 700,000 tonnes-plus recorded in each of the first three months of this year. Collections of mixed & mechanical extended their run of year-on-year gains to seven months with an increase of 1.6% in August to 240,753 tonnes, while corru­gated & kraft volumes leapt to 352,502 tonnes for a gain of just over 30% when compared with the same month in 2015.

Despite dipping 6.3% in August to 53,226 tonnes, high grade collections in the UK were still 7.3% ahead of 2015, with an eight-month total of 465,718 tonnes. Making the same comparison, mixed & mechanical collections were 3.7% higher than in January-August 2015 at 2.171 million tonnes, whereas corrugated & kraft registered a slight drop of 0.1% to 2.634 million tonnes.

In August, UK paper and board pro­duction achieved its highest monthly level for the year to date of 321,086 tonnes, but the January-August total was still 7.2% down on 2015 at 2.472 million tonnes. Only corrugated case materials were produced in greater quantities when compared with the first eight months of last year (see table p55).

UK mill usage of recovered fibre fell 2.2% year-on-year in August to 262,088 tonnes to give a running total that was 7.5% lower than in 2015 at 2.060 mil­lion tonnes. Corrugated & kraft con­sumption edged up 0.3% in August but was down 4.6% from the eight-month perspective at 920,522 tonnes.

August represented the fifth consec­utive month of year-on-year domestic consumption declines for the high grades, with the 4.8% reverse to 42,468 tonnes yielding a running total of 331,558 tonnes - a drop of 5.7% from last year.

As for mixed & mechanical, June has been the only month so far this year in which domestic mill usage improved when compared with the same period in 2015. An August decline of 4% contrib­uted to a year-to-date total that was 11.3% lower than that recorded in 2015 at 807,618 tonnes.

UK mill stocks of mixed & mechani­cal expanded from 0.6 weeks’ supply at the end of July to one week a month later.

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