In the latest chapter of a tumultuous year for lower grade paper prices, most of the swingeing losses incurred around the turn of the first quarter have now been recovered. From a low point of around £75 per tonne, buyers for the Chinese market are once again paying £120 for UK-sourced OCC.
But one of them adds: “At this price, we are still not getting all the tonnages we need.”
But mixed paper bound for the same destination has failed to keep pace with OCC’s gains and is valued at £70-£75 per tonne at the time of writing, although experts believe the differential is unsustainable and will narrow in due course. “China has to up its price on mixed,” insisted one industry expert.
Another pointed out to MRW: “China took advantage of a range of factors to push prices lower but they have bounced back almost immediately. This demonstrates that the low price was artificial, not based on supply and demand, and that there is a shortage of fibre.”
In this context, there are reports of sellers holding back some of their lower grade volumes in the expectation of further price increases.
Throughout the hiatus in orders from China, domestic and European consumers of OCC and mixed paper have “filled up on cheap tonnes”, with the former grade said to be fetching upwards of £115 per tonne at present in the UK market.
Prices of UK-origin bulk grades into mainland Europe have held up well during the recent period of upheaval against a backdrop of healthy demand. Indeed, consumers on the continent are understood to be paying typically £10 per tonne more for mixed paper than the Chinese at present.
“The continent is an appealing market for UK bulk grades, especially with the nervousness over the National Sword [import inspection] regime in China,” one contact argued this week. Another agreed: “Suppliers of mixed to China need to have total confidence in the quality of what they’re sending.”
occ export price trends
Following the country’s decision to slash its recovered fibre orders towards the end of the first quarter, the subsequent reduction in activity has forced a rethink among shipping lines. Discounted freight rates have been offered by some, “but not all – yet”, according to one contact.
The top end of the range remains at $2,000 per 40ft container but the lower limit has dipped to around $1,600. In MRW’s February issue, we showed the rising trend in freight costs to China during 2016; an update for early 2017 reveals the acuteness of the recent spike and the subsequent softening of charges.
Owing to the fireworks in the lower grades market, all other areas of the recovered paper trade have become back-page news. News & pams is continuing to attract £95-£100 per tonne in the domestic and overseas markets, with Europe said to be “screaming” for material.
In terms of prices, the high and middle grade markets have also been stable in recent weeks, with multigrade still commanding upwards of £170 per tonne on the back of lacklustre supply and “lively” demand, notably from the continental and Indian markets.
View from the UK
A mammoth 529,993 tonnes of recovered paper was dispatched to customers overseas in February last year, which was always going to be a tough act to follow in the second month of 2017. In the event, UK exports fell almost 30% year-on-year to 372,229 tonnes, according to latest statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs.
Overseas shipments were down more than 20%, or by almost 200,000 tonnes, across the first two months of this year at 774,822 tonnes against the 972,893 tonnes of January-February 2016.
Exports of mixed paper followed up a 19.3% increase in the opening month of this year with a decline of 26.6% in February to 117,387 tonnes, giving a two-month cumulative total of 264,049 tonnes for a year-on-year drop of 6.7%.
Having tumbled 17.5% in January, OCC exports took an even bigger hit in the next month of 32.3% to 210,120 tonnes, equivalent to a slump of more than 100,000 tonnes from the 310,484 tonnes of February 2016. The year-to-date shipment total was 25.6% lower at 423,417 tonnes.
For the wood-free grades of recovered paper – consisting of Class IV high grades – exports followed the same downward pattern: outbound shipments in February were 28.7% short of those for the corresponding month of 2016 at 18,001 tonnes, while the running total of 36,684 tonnes was 22.2% shy of the 47,146 tonnes of January-February last year.
As for the ‘other’ grades covered by the statistics – consisting of Class IIb new KLS and Class III newspapers & magazines – exports plummeted almost 40% year-on-year in January and then by a further 21.9% in February to 26,721 tonnes, making the cumulative total 31.2% lower at 50,672 tonnes compared with 73,610 tonnes at the same stage of last year.
As with exports, it was in February 2016 that UK recovered paper collections achieved their 2016 peak of 770,104 tonnes. But in this year’s second month, volumes were a full 21% lower at 608,427 tonnes, while the year-to-date figure of 1.259 million tonnes trailed the 1.474 million tonnes of January-February 2016 by 14.6%.
paper freight rates
As explained last month, the CPI is presenting its statistics in a new way this year so as to ‘re-expose’ mixed paper numbers. As a result, collection comparisons with 2016 can be made only for the wood-free grades, for which a February decline of 15.7% to 53,995 tonnes gave a two-month running total of 111,835 tonnes (-12.8% year-on-year).
Elsewhere, January-February 2017 collection volumes amounted to 321,382 tonnes for mixed paper, 612,792 tonnes for OCC and 212,654 tonnes for ‘other’ grades. By edging 0.6% lower in February, UK mill consumption of recovered paper dropped 3.1% across the first two months of this year to 497,637 tonnes from 513,603 tonnes in last year’s corresponding period.
Under the new CPI format, the same limitations for year-on-year comparisons also apply to domestic usage. The January-February wood-free total slid 5,000 tonnes or 6.1% year-on-year to 77,047 tonnes, while the other UK mill consumption totals for the opening two months of this year were 64,904 tonnes for mixed paper, 192,380 tonnes for OCC and 163,306 tonnes for ‘other’ grades.
UK paper and board production slipped 0.6% in February to 307,309 tonnes but the running total for the year remained up (+0.6% to 628,553 tonnes), thanks largely to respective year-on-year gains of 4.6% and 2.7%, respectively, for parent reels of tissue and corrugated case materials.