Supplier concerns over potentially costly rejections of paper loads by Chinese authorities have been the main reason behind a drop-off in overseas shipments of UK mixed paper in recent months, experts maintain.
But according to one major buyer for the Chinese market, there are now signs that the ‘fear factor’ surrounding China’s National Sword clampdown has diminished, even if only temporarily.
“Not so long ago, suppliers would not sell mixed paper to us because they were terrified of National Sword,” he said. “But now that Chinese prices have moved ahead of mainland European prices, the fear factor seems to have dimmed.”
He went on to emphasise that suppliers who adhere to the required quality standards should have no reason to fear shipping mixed paper to China.
Another contact acknowledged evidence during recent months of suppliers cherry-picking their mixed paper for the export market in order to minimise the risk of having loads rejected: “This shows that quality is slap bang at the top of the agenda.”
The value of mixed paper for shipment to China has surged from well below £90 per tonne a month ago to around £110 at the time of writing, whereas sales to mainland Europe have stalled at around £105. But a huge differential still exists with OCC, export prices of which have leapt beyond £160 per tonne in many instances while UK buyers are said to be paying either side of £150.
“Not so long ago, suppliers would not sell mixed paper to us because they were terrified of [China’s] national sword. But now that Chinese prices have moved ahead of mainland Europe, the fear factor seems to have dimmed.”
The gap between OCC and mixed paper values in the US market is put as high as $100 (£76.50) per tonne.
“There is no sign of these OCC prices dropping off, but the differential to mixed paper is unrealistic and so probably temporary,” one expert told MRW. Another described the gap as “huge” and “illogical in paper-making terms”.
For producers in many countries, including China, rising containerboard prices have softened the blow of higher fibre costs, while shipping freight rates have continued their slide from above $2,000 per 40ft container earlier in the year to, typically, $950-$1,000 and even below $900 for spot business.
A sizeable differential is also apparent in the news & pams market, in this instance between domestic and export prices. While UK sales are said to be at around £100-£110 per tonne, feedback suggests that “fantastic” orders are being placed by mills in continental Europe at prices of £125 or even higher in some cases.
The market for high grades of recovered paper remains firm.
View from the UK
paper april figs
Reflecting concerns about China’s stricter inspection regime, UK exports of mixed paper have suffered 20%-plus year-on-year declines in each of the last three months covered by the statistics emanating from the Confederation of Paper Industries and HM Revenue & Customs.
In April, the latest month to be reviewed, overseas shipments of mixed paper to all destinations amounted to 107,117 tonnes – a drop of 21.3% from the 136,174 tonnes shipped abroad in the corresponding month of 2016. Across the first four months of 2017, UK mixed paper exports were 14.6% lower than last year at 493,122 tonnes.
OCC went some way towards taking up this export slack. Having surged 22.8% year-on-year in March, shipments in the subsequent month beat the April 2016 total of 169,848 tonnes by a whopping 45.7% in reaching 247,467 tonnes.
Across the opening four months of the year, however, UK exports of OCC were 1.9% lower than in the same period last year at 940,794 tonnes.
Wood-free exports also posted year-on-year gains in March (+27% to 21,704 tonnes) and April (+5.2% to 18,570 tonnes), although the steep declines of January and February relegated the year-to-date total to 76,959 tonnes – a drop of 6% from the 81,888 tonnes shipped out in the first four months of 2016.
As for the ‘other grades’ of recovered fibre (Class IIb new KLS + Class III newspapers & magazines), a 7.9% export recovery in March proved only a brief respite as the following month brought a 40.9% slump from 42,764 tonnes in April 2016 to 25,257 tonnes, leaving the year-to-date total 25% lower at 113,294 tonnes.
Overall, UK exports of recovered paper climbed 8.7% from 366,440 tonnes in April 2016 to 398,411 tonnes in the same month this year, whereas the year-to-date total of 1.624 million tonnes trailed the January-April 2016 tally of 1.769 million tonnes by 8.2%.
Collections of all grades were 6.9% higher year on year in April at 644,575 tonnes and yet more than 80,000 tonnes down on March 2017; year-to-date collection volumes were 5.5% lower in January-April 2017 at 2.63 million tonnes.
There was less movement in UK mill usage of recovered fibre. A year-on-year increase of 3.8% to 254,570 tonnes in April contributed to a four-month total that was 0.3% lower than in the same period of 2016 at 1.036 million tonnes.
Under the CPI’s new statistics format, year-on-year consumption and collection comparisons can be made only for the wood-free grades, for which mill usage was 0.7% lower in April at 39,945 tonnes while the cumulative total of 161,547 tonnes confirmed a decline of 3.6% from the January-April 2016 level. Wood-free collections edged 0.5% lower in April to 57,570 tonnes and fell 5.5% across the opening four months of this year to 235,005 tonnes.
MULTIGRADE IN FOCUS
Multigrade prices had been trending steadily upwards before meeting greater resistance in recent weeks. Demand is still evident in the UK and Indian markets, despite many consumers being well-stocked. However, the strongest interest is continuing to come from continental Europe where, at the time of writing, buyers are prepared to pay as much as £175 per tonne.