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Market Focus: Recovered paper September 2015

As industry across Europe emerges from its summer holiday ‘bubble’, demand for most grades of recovered fibre is reportedly “quite strong” and there are “no issues with moving material whatsoever”, MRW was assured this week.

Prices have generally held firm at the levels noted in our late-July report and have even posted increases in some instances.

However, the notable exception to this rule has been the lower grades, for which values have shed a few pounds in the midst of well-publicised concerns about the future direction of the Chinese market for recovered fibre, given the country’s current economic challenges.  

“Smaller mills in China are said to be nervous because of the country’s financial problems and prices have come off a bit, but freight has helped out,” commented a leading UK seller.

Indeed, freight rates as low as $550 for a 40ft container have been achieved of late, although the more typical range has been $600-$650. Meanwhile, OCC export values have dipped during the course of last month from just short of £90 per tonne to nearer £85, while mixed paper has dropped to around £70 or just below.

Sounding a brighter note, one of China’s leading recovered paper importers, Lee & Man Paper Manufacturing, insists in its latest financial results that the country’s demand for packaging papers “should continue to rise in the long run”.

China has been promoting the elimination of obsolete production capacity in recent years to address overcapacity and environmental protection issues – a process which, according to Lee & Man’s chairman Raymond Lee, has “improved the supply-over-demand situation in the industry, thereby helping the industry to regain its bargaining power”.

UK mills are generally well-stocked with the lower grades, and spot buying has been at a minimum in recent weeks. Domestic OCC and mixed paper price ranges are put at £70-£73 per tonne and £55-£60, respectively.

Relatively high prices for the middle grades of recovered paper have been fuelled mainly by demand within Europe. But another leading market for UK material, India, was described this week as “not particularly hungry”.

The export price range for multi-grade has been extended at the top end to reach £125-£130 per tonne, while domestic values remain within the £129-£132 bracket reported previously. Sorted office waste has continued to attract £138-£140 per tonne in domestic and export channels alike.

Meanwhile, sellers of best whites “have had the latitude to talk up their prices by a pound or two” in recent weeks because demand has been good at a time when “there is not a great deal of material kicking around”, MRW was informed.

Availability has been a key factor in the deinking market too. The price ranges for news & pams have remained unaltered at their late-July levels of £85-£90 per tonne for export and £80- £85 for the domestic market.

UK RECOVERED PAPER EXPORTS, FIRST HALF OF EACH YEAR

View from the UK

In June, the recovered fibre sales balance tipped increasingly towards buyers beyond these shores, and it proved to be a bumper month not only for UK recovered paper collections but also for exports, with each posting totals last seen some three and a half years ago.

Having spotlighted in our previous report the low level of UK collections during the opening five months of 2015, volumes bounced back to 747,813 tonnes in June – the highest figure reported since the 796,672 tonnes of January 2012.

But collections across the first half of the year were still 2.5% short of the tally for the same period last year at 3.99 million tonnes.

Recovered paper exports also reached their highest level since the 505,539 tonnes shipped abroad in January 2012, according to the Confederation of Paper Industries and HM Revenue & Customs.

The total of 505,116 tonnes for June 2015 represented a year-on-year increase of more than 40% and propelled the half-year export total to 2.491 million tonnes, an increase of almost 8% over the 2.308 million tonnes of January-June 2014 and the highest first-half figure since the 2.536 million tonnes dispatched overseas in 2008 (see table).

To put the figure of 505,116 tonnes into historic context, it is broadly equivalent to UK recovered fibre exports for the whole year around the turn of the millennium.

UK fibre consumption, meanwhile, continued on its downward path in June, falling 12.5% below the level of the same month last year to 254,115 tonnes.

The half-year domestic mill usage total of 1.673 million tonnes was 10.1% lower than that for the corresponding period last year.

The collection/export surge was nowhere more pronounced than in the corrugated & kraft sector. Collected volumes jumped 49.9% year-on-year in June to give a half-year total of 2.072 million tonnes, equivalent to an increase of 6.1% over the 1.952 million tonnes of January-June 2014.

The export gain was even more prodigious: overseas shipments followed up year-on-year losses of 13.7% in April and 10.4% in May with a spectacular 81.5% leap from 182,840 tonnes in June 2014 to 331,836 tonnes in the same month this year. As a result, the volumes shipped from these shores in January- June 2015 were 10.1% higher than in 2014 at 1.390 million tonnes.

For the high grades of recovered paper, domestic mill usage joined collections and exports in making sizeable gains in June.

For the second month in a row, collection volumes recorded a 20%-plus year-on-year increase to yield a half-year total some 8.9% higher than in 2014 at 317,105 tonnes, while exports soared 165% year-on-year to 19,024 tonnes in June to give a first-half tally of 86,922 tonnes – almost 39% ahead of the 62,615 tonnes sent abroad in January- June 2014. A year-on-year gain of 3.9% in June meant that UK mill consumption of the high grades outstripped the total for the same period last year by 10.1% in reach­ing 261,071 tonnes.  

June’s 41-month peak in UK collections was made even more impressive by the fact that volumes of mixed & mechanical slumped 17% to 246,396 tonnes, a figure some 50,000 tonnes lower than that for the same month last year; the running total for the January- June period was down 13.5% at 1.602 million tonnes. Exports of mixed & mechanical followed gains of 33.2% in April and 14.8% in May with a year-on- year drop of 9.5% in June to 154,256 tonnes.

Meanwhile, a decline of 25.7% this June in UK mill consumption of mixed & mechanical contributed to a fall of 24.2% across the first half of this year as a whole to 699,167 tonnes from 921,844 tonnes in the corresponding period of 2014.

UK paper and board production plummeted 18.2% year-on-year in June to just 291,924 tonnes to give a total some 9.4% lower than in 2014 at 1.984 million tonnes.

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