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Recovered paper - 15 June 2012

OCC export prices have entered a more stable phase after the steep decline seen earlier in the second quarter. But experts insist the position remains precarious given that most mills in China and Europe are carrying high stocks of finished products and raw material.

High container shipment rates have also dampened the interest of Asian fibre buyers.

At the time of writing, OCC exports are attracting £82-£88 per tonne, whereas old KLS for the UK market is priced by most contacts at either side of £80. Mixed paper prices are harder to call, with the export range at £65-£78 per tonne.

Depressed orders from India - not least because of the depreciation of the rupee - has contributed to the undermining of the middle grades market, with prices typically £95-£105 per tonne for multigrade export business, while UK price levels for the same grade have been generally slightly stronger. High grades have remained under severe price pressure owing to low demand.

The de-ink market has held up relatively well: news & pams is said to be attracting £100-£105 per tonne both at home and overseas.

It was a case of good news/bad news for delegates attending the paper division meeting of the Bureau of International Recycling (BIR) world recycling body in Rome at the start of this month.

First the bad news. Divisional president Ranjit Baxi, of Wanstead-based J&H Sales International, listed a wide range of pressures currently being faced by the international fibre exporting community, including a “seriously threatening” eurozone crisis, currency volatility and regular hikes in sea freight rates, as well as difficulties in obtaining shipping space.

Asian customers, in particular, are bringing their concerns over quality “more and more to centre stage”, he commented.

On the issue of freight rates, reports have suggested further increases of at least $50 per 40ft box for June - and far more in some cases.

So what was the good news from Rome? Perhaps the most crucial was Baxi’s assertion that China “will remain a growth market for us in the years to come”, despite the likelihood of “ups and downs” along the way.

According to his latest figures, Chinese imports surged to 7.24 million tonnes in the first quarter of 2012 from 6.57 million tonnes in January-March 2011 and 6.37 million tonnes in the corresponding period of 2010.

UK fibre exports to China jumped from 735,719 tonnes in the first quarter of 2011 to 778,323 tonnes in January-March 2012, well ahead of second-placed Holland on 495,716 tonnes.

More cheer was provided by paper division guest speaker Jogarao Bhamidipati, senior vice-president of Indian-based ITC.

He predicted that his country would step up its annual recovered fibre imports from 3.8 million tonnes at present to beyond 10 million tonnes by 2025, as growth in the domestic paper industry would propel overall recovered fibre requirements from less than eight million tonnes per year to around 16 million tonnes.

Despite some sizeable swings from one month to the next, first-quarter totals for domestic recovered paper consumption and intake, as well as for collection and exports, were all virtually unchanged from those recorded in the first three months of 2011, according to the latest statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs.

In January, overseas shipments of recovered paper achieved their highest monthly tally since February 2008. But year-on-year declines of 15.9% in February and 13.8% in March meant that the first quarter export total of 1.247 million tonnes was a mere 0.2% ahead of the 1.245 million tonnes shipped in the same period last year.

Some 344,213 tonnes were dispatched abroad in March this year against 399,512 tonnes 12 months earlier.

While comparison of the figures for Class I mixed papers showed almost no change in exports, overseas shipments of Class II corrugated & kraft (-18.2% to 173,789 tonnes), Class III newspapers & magazines (-12.4% to 79,946 tonnes) and Class IV high grades (-26.6% to 14,463 tonnes) were all substantially lower when comparing March 2012 with the same month last year.

Exports of corrugated & kraft and newspapers & magazines were higher across the first quarter as a whole. The former posted an increase of 2% to 694,870 tonnes while the latter recorded a 10.8% improve-ment on its January-March 2011 performance in reaching 283,585 tonnes. Conversely, overseas shipments of mixed papers fell 10.3% to 223,702 tonnes while the high grades total plummeted 22.6% to 45,187 tonnes.

UK collections of recovered paper made a similarly vibrant start to 2012, with January volumes bettering those of the opening month of 2011 by more than 18%.

But a year-on-year decline of 10.2% in February was followed by a further 5.5% fall in March to 662,377 tonnes, to yield a first-quarter total of 2.146 million tonnes - just 0.4% up on the 2.138 million tonnes collected in January-March 2011.

As for UK mill consumption of recovered paper, the 2% year-on-year increase for March to 332,263 tonnes meant that the first-quarter total of 937,429 tonnes fell 0.1% short of the 938,462 tonnes of January-March 2011.

Corrugated & kraft underpinned this performance, with its usage soaring 23.1% to 141,320 tonnes in March and 15.4% across the first quarter to 384,442 tonnes.

Corrugated & kraft was also the star performer in terms of UK mill intakes, recording increases of 33.2% in March and 20.6% for the first quarter for totals of, respectively, 143,954 tonnes and 381,758 tonnes.

Total UK intake of recovered paper was 3.7% higher year-on-year in March at 330,958 tonnes, whereas the January-March total revealed a drop of 0.3% to 940,814 tonnes.

Overall, UK mill stocks of recovered paper edged 0.4% lower to 97,303 tonnes in March to leave supply at the prevailing rate of usage unchanged from the previous month at 1.3 weeks.

UK paper and board production edged 0.2% higher in the first quarter to 1.094 million tonnes.

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