“March came in like a hurricane but the winds have dropped very quickly,” is how one industry veteran relayed recent events in the recovered paper bulk grades market. “Mad March” and “mayhem” were two other descriptions.
Having hovered around £125 per tonne at the time of MRW’s previous report, OCC prices climbed as high as £147 on the back of supercharged demand, with some of the highest sums being paid by domestic mills. Mixed paper values caught the same up-draught and peaked at around £112 per tonne.
But in more recent days, the lower grades market has cooled considerably and the mood has completely changed amid clear signs that some leading buyers, most notably for the Chinese market, have reined in their purchasing ambitions.
This has led to a softening of prices. By late March, OCC export and mixed paper prices were typically down by £20 per tonne.
Following a strong period for Chinese containerboard mills, their order books have thinned of late and, as one regional expert told MRW, “they are not expected to improve until May, especially with the high shipping costs and with a lot of material on the water”.
In little more than a month, freight rates have soared from $1,300-$1,400 (£1,063-£1,145) per 40ft container to $1,600-$1,800, with shipping lines said to be warning of a push for further increases in the near term to perhaps $2,000. At the same time, vessel space is still difficult to obtain, and the time gap between making a booking and availability has edged out to around a week on average.
Several contacts offered examples of shipping lines looking to increase agreed rates even once purchase orders had been signed.
occ export prices
In addition to rising freight costs, the Chinese government’s announcement of its National Sword clampdown on smuggling has cranked up the nervousness within the recovered paper sector.
While experts are urging exporters to take particular care over quality, they also recognise that “a bad container-load from any origin could trigger an over-reaction and lead to delays at best”.
One leading industry figure said: “If I were a broker, I would be very selective about the MRF mixed I was collecting at the moment. We are certainly seeing premiums emerge for higher-quality MRF mixed.”
Mixed paper’s elevated price level is one of the factors behind low availability of news & pams, the value of which has remained typically in the £95-£100 per tonne range for both domestic and export sales. But it has been suggested that individual buyers with a greater need have been prepared to pay significantly more.
The heat has remained within the pressure-cooker middle grades market, with domestic prices for multigrade coming into line with export values at up to £170 per tonne.
“Demand is coming from everywhere, particularly for Europe and India,” MRW was told. Meanwhile, China has played a key role in maintaining sorted office white in the £160-£170 per tonne bracket.
Since MRW’s previous report, there has been some firming in prices among the high grades of recovered paper, with experts chorusing the familiar summary of “healthy demand for whatever is availableView from the UK
Despite the well-publicised container and shipping space shortages of late 2016, sufficient quantities of recovered paper escaped UK shores in December to seal another record year for exports, the second in succession.
Outgoing volumes of 449,993 tonnes in the final month nudged the full-year total to 4.932 million tonnes, for a 1% increase over the tonnage shipped abroad in 2015.
The overall increase was underpinned by a 1.4% gain in overseas shipments of mixed & mechanical, to 2.010 million tonnes from 1.983 million tonnes in 2015. Following three months of year-on-year declines, exports climbed almost 6% in December to 174,561 tonnes, according to the latest statistics released by the Confederation of Paper Industries and HM Revenue & Customs.
UK corrugated & kraft exports swung to the negative in late 2016 as overseas deliveries dived 14.9% year-on-year in December, resulting in a 12-month total that was 0.4% lower than in 2015 at 2.707 million tonnes. In contrast, outward shipments of ‘other’ grades of recovered fibre racked up their highest monthly total of the year in December, with the 29,313 tonnes easily outstripping the previous best of 25,240 tonnes set in February.
Thanks to a strong start and finish to the year, exports of ‘other’ grades jumped 18.8% to 213,739 tonnes across 2016 as a whole from 179,905 tonnes in 2015.
As for recovered paper imports, the final figure for 2016 of 124,784 tonnes was almost 60% down on the 304,730 tonnes of 2015.
Last year’s increase in exports was achieved on lower UK collections of recovered paper, with the grand total slipping 1.1% to 7.825 million tonnes from 7.912 million tonnes in the previous year. But despite declining 8% year-on-year in December to 677,906 tonnes, the total for the month represented an improvement of more than 90,000 tonnes over the 586,641 tonnes of November.
Following seven consecutive months of collection gains, mixed & mechanical volumes ended last year with four months of year-on-year decline, culminating in a 5.9% reverse in December to 254,810 tonnes. For 2016 as a whole, collections of mixed & mechanical fell 1.9% to 3.110 million tonnes from 3.170 million tonnes in 2015.
UK collections of corrugated & kraft tumbled 15.3% in December to 355,177 tonnes, while the full-year total of 4.011 million tonnes was 1.8% short of the 4.085 million tonnes amassed in 2015.
In contrast, December’s collections of ‘other’ fibre grades were the largest of the year at 67,919 tonnes, beating the 64,291 tonnes of January 2016 into second second place and helping to ensure the grand total for last year was 7.1% higher than in 2015 at 703,855 tonnes.
Domestic mills’ consumption of recovered paper slumped 9.5% to 3.018 million tonnes last year, with mixed & mechanical (-14% to 1.149 million tonnes) and corrugated & kraft (-6.9% to 1.377 million tonnes) leading the charge south. Usage of ‘other’ grades jumped 11.7% in December, but the full-year total of 491,979 tonnes was still 5.4% adrift of the 519,964 tonnes consumed during 2015.
This volume of recovered fibre contributed to the domestic production of 3.676 million tonnes of paper and board last year, a total 7.4% below the 3.970 million tonnes of 2015. Only corrugated case materials posted an increase in 2016, albeit just 0.9%, while graphics including newsprint and parent reels of tissue suffered declines of, respectively, 14.8% and 5.7%.