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Material Focus - Recovered paper

With no prospect of China revisiting its mixed paper import ban any time soon, many experts had been anticipating a nosedive in values for this grade.

In the event, however, the price of mixed paper has remained around £60 per tonne across the spectrum of domestic, mainland European and Asian buyers.

The major differential to OCC prices is providing support to the mixed paper market. OCC is commanding from £135-£148 per tonne in the export domain, with the bulk of transactions reportedly taking place between £140 and £145.

“The lower end of the range is a reflection of lower prices and adequate supply in China,” said one local expert. Having enjoyed particularly high product prices for some time, Chinese linerboard mills were now witnessing a slight softening, he added.

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At least one major mill group in China has put additional inspection resources in place for imported fibre. With customs officials on high alert, mills are “terrified” at the risk of losing their import licences, a spokesman explained.

In other market developments, news & pams has been attracting £100-£105 per tonne within the UK and £105- £110 for overseas shipments in a mar­ket described as “very lukewarm”, especially given the large volumes of mixed paper available.

Among the middle grades, multi­grade is fetching typically £160 per tonne in the domestic arena while export values have shown “signs of com­ing off a little” to £165-£170 amid softer demand.

Freight rates for shipments to the Far East remain at $650-$700 (£440- £520) for a 40ft container, with spot prices heard as low as $600.

View from the UK

The impact of National Sword, China’s new import restrictions regime, was strikingly evident in September, with UK exports of mixed paper plummet­ing to a 2017 low whereas outbound shipments of OCC set a new monthly peak for the year to date, according to latest statistics from the Confederation of Paper Industries and HM Revenue & Customs.

Reflecting China’s block on mixed paper imports effective from the end of August, shipments of the grade to all overseas destinations amounted to just 100,423 tonnes in the ensuing month. Although 14.2% higher than the meagre 87,948 tonnes exported in the same month of 2016, this year’s September total was nevertheless the lowest thus far in 2017, exceeding the previous nadir of 107,117 tonnes in April.

In contrast, OCC exports from the UK soared 37.8% year-on-year in Sep­tember to 279,957 tonnes to outstrip this year’s previous monthly high of 269,910 tonnes in March. In the first nine months of 2017, overseas ship­ments of OCC climbed 4.5% year-on-year to 2.056 million tonnes while mixed paper saw a decline of 8.7% to 1.090 million tonnes.

Having sky-rocketed 110.8% year-on-year in August, September’s wood-free exports were 20.7% higher than in the same month last year at 17,381 tonnes, to give a running total for 2017 of 174,932 tonnes, bettering the 149,919 tonnes of 2016’s opening three quarters by 16.7%.

Also in September, the UK dis­patched abroad a combined total of 26,104 tonnes of Class IIb new KLS and Class III newspapers & magazines (+6.7% year-on-year), although the cumulative total for the first quarters of 2017 was 16% lower at 263,135 tonnes as a result of sharp declines in H1.

For all grades of recovered fibre, therefore, UK exports followed up year-on-year reverses of 7.8% in July and 10.1% in August with a 28.5% surge in September to 423,866 tonnes, the third-highest monthly total to date in 2017. But overseas shipments across the first nine months of 2017 trailed last year’s tally by 1.1% at 3.583 million tonnes. Domestic recovered fibre collec­tions jumped to 696,203 tonnes in Sep­tember – equivalent to a year-on-year increase of 17.4% or more than 100,000 tonnes – to give a nine-month total that was almost identical to that for the cor­responding period of last year at 5.863 million tonnes.

After stuttering in August, UK mills’ usage of recovered fibre resumed its general uptrend in September, with a 5.1% year-on-year increase to 280,086 tonnes, contributing to a nine-month total that, at 2.360 million tonnes, was 1.5% ahead of that for the same period in 2016.

UK paper and board production, meanwhile, was not far short of its 2017 peak in September at 328,279 million tonnes (+5.2% year-on-year), while the January-September total was 4% higher than in last year’s corresponding period at 2.896 million tonnes.

Corrugated case materials (+7.7%) and parent reels of tissue (+4.3%) were among those recording strong gains whereas the graphics segment (includ­ing newsprint) registered a decline (-4.3%).

Chinese moves will change the game

China’s decision to impose a 0.5% impurity threshold on imports of recovered fibre is “unrealistic” and will prove “difficult to achieve without monumental investment”, according to the Recycling Association’s chief executive Simon Ellin.

This move by the Chinese government will be a “game-changer”, he said, given that the UK’s infrastructure has been built on the assumption of a 1.5% threshold for many years. “This will impact all along the supply chain, with a need now to look at recyclability all the way from the design stage. Also, suppliers in, say, the retail sector will need to be more stringent in what they supply.”

According to Ellin, vital clarification was still required regarding what constitutes an impurity and how the impurity level is to be calculated: “There needs to be a consistency of measurement.”

A senior UK-based representative for a major Chinese fibre consumer argued that 0.5% could be achieved given a return to more stringent visual checking of material prior to entering a baler. While this was likely to entail additional manpower and safety expenditure, there was the very real prospect, he suggested, that higher prices could help compensate for the extra investment.

This is Ian’s final report for MRW and ends a lengthy association with the magazine. We thank him for his sterling efforts.

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