Following the recent upward price spiral which saw OCC climb beyond £140 per tonne in the first quarter, bulk grade export values have fallen to earth with a resounding thud, as Chinese mills adopted an ‘anti-buying’ stance in response to thinning order books as well as sufficient stocks of both finished product and recovered paper.
Demand from continental Europe has remained strong but, as one contact expressed it, “Europe can be as busy as it wants but if China isn’t buying there will be a glut”.
“A $50 (£40) per tonne drop in the domestic containerboard price got the Chinese mills’ attention,” explained one industry expert. Another pointed to the strong increase in material and freight costs in recent months, and added: “China has taken the opportunity to press the reset button. Prices had simply gone too high.”
OCC export prices have plummeted as low as £75 per tonne at the time of writing, but some major suppliers are understood still to be receiving up to £90 for their material. From above £110 per tonne in the first quarter, mixed paper export prices have dwindled to below £40 in some instances, although £42-£45 appears to be nearer the average for both overseas and domestic business.
A leading purchaser for the Chinese market said of the lower grades: “We are buying some tonnes to maintain relationships for when the market turns around.” But he did not anticipate a quick price improvement as “we and others have still got a lot of recovered paper in stock and a lot of tonnes on the water”.
Shipping lines had succeeded in pushing up their rates to around $2,000 per 40ft container but were reportedly “shocked” by the sudden evaporation of business. “They are now offering discounts for May,” MRW was informed.
“Europe can be as busy as it wants but if China isn’t buying there will be a glut.”
The twitchiness evident throughout the marketplace has been exacerbated by persistent rumblings that, in the near to medium term, China’s National Sword regime could entail far stricter inspection criteria and even minimum size requirements on mills allowed to import fibre.
Prices in other key segments of the recovered paper market have remained broadly unchanged since last month’s report. Among the middle qualities, for example, multigrade is continuing to attract upwards of £170 per tonne from domestic and overseas buyers. News & pams is still commanding £95-£100 per tonne at the time of writing, although these prices are expected to come under severe pressure as a result of the above-mentioned nosedive in mixed paper values.
View from the UK
Having exceeded 700,000 tonnes in the opening month of 2016, UK collections of recovered paper were 7.6% lower in January this year at 650,235 tonnes. Exports fell by an even steeper 9.1%, although the total of 402,593 tonnes was higher than for seven of the months of 2016 – a record year for overseas shipments.
According to new-format statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs, UK exports of mixed paper jumped 19.3% year-on-year to 146,661 tonnes this January whereas OCC deliveries to customers abroad slid 17.5% to 213,297 tonnes.
Overseas shipments of wood-free fell 14.7% to 18,683 tonnes but the sharpest decline of 39.2% was recorded by ‘other’ grades (new KLS and newspapers & magazines), giving a total for the month of 23,952 tonnes versus the 39,375 tonnes of January last year.
As a result of the new format, specific comparisons with 2016 collection and domestic usage stats are possible only for wood-free, for which the January 2017 collection total of 57,840 tonnes represented a decline of 10% from the 64,291 tonnes of the first month of last year. Meanwhile, consumption of woodfree by UK mills dropped 8.2% year-on-year to 39,204 tonnes this January.
Domestic consumption of all grades of recovered paper amounted to 252,544 tonnes in January this year for a decline of 5.4% from the 267,076 tonnes consumed in the opening month of 2016. Also in January, UK paper and board production climbed 1.2% year-on-year to 319,745 tonnes, the highest total for five months. Increases of 6.2% and 3% were recorded for, respectively, corrugated case materials and parent reels of tissue.
Revised reporting methodology
The CPI has adopted a new reporting approach for recovered paper, with the statistics divided according to the following categories: mixed papers; old corrugated cardboard; wood-free (consisting of Class IV high grades); and other grades (consisting of Class IIb new KLS + Class III newspapers & magazines). The previous methodology, adopted to avoid commercial confidentiality issues, combined mixed and graphic papers, thus obscuring the true volumes of each.
A CPI official says of the new approach: “We are trying to re-expose the amount of mixed papers being collected because this is of interest to a wider number of stakeholders and our members.”
This still prevents retrospective calculation of Class III newspapers & magazines volumes in order to safeguard commercial confidentiality.
Ian Martin is an industry journalist