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Recovered paper - 15 March

In late February, export prices for OCC broke through the £100 per tonne barrier for the first time this year, on the back of decent demand from the Far East in particular and “a general lack of volume in the marketplace”. At the time of writing, the upper values paid for this grade had been holding for a number of days at around £105 per tonne.

The move to higher OCC prices appears to have teased more material into the open. According to a leading buyer for Chinese mill interests, his company secured almost 50,000 tonnes of recovered fibre in the space of two days, and went a long way towards achieving its UK tonnage target for March as a whole.

With collections likely to be adversely affected when Easter arrives at the end of March, he explained, the motivation had been to fill this month’s buying quota as early as possible.

Old KLS prices have also improved to £85-£90 per tonne, while returns on mixed papers have climbed as high as £80 on the export front, whereas the typical price in the UK has been nearer £65.

“A wide range is opening up between the higher and lower qualities of mixed,” MRW was told this week.

Firmness has also been witnessed among the middle grades of recovered paper, with domestic buyers of multigrade upping their prices to come almost into line with export rates of typically £115-£120 per tonne. Again, the combination of a lack of material and of increased demand was said to be behind these prices.

And with China and India continuing to join domestic buyers in the sorted office waste market, values have climbed to, typically, £120-£125 per tonne.

A leading industry figure has reiterated his belief that the middle grades are going to provide the recovered paper ‘battleground’ this year, not least because of the ever-stronger interest shown by Chinese buyers at a time of tight supply in the UK.

Also for the higher grades, availability issues have supported fairly stable prices.

Meanwhile, there has been little movement in de-inking values, with news & pams continuing to command around £90 per tonne in the export and domestic markets.

The next week or so could prove to be revealing about the freight market. With new capacity coming on-stream, shipping lines have been keen to stop the downward rates spiral, and will be seeking increases with effect from 18 March.

A leading international recovered fibre trader expects upward moves to average perhaps $125 (£84) per 40ft container while others believe resistance will limit hikes to $100 or less. Several contacts argued that increases towards the higher end would impinge on their ability to do business along the Chinese route.

But even as the shipping lines struggle to impose freight increases, there is already talk within the recovered paper trade that any gains might be wiped out early in the second quarter.

Annual UK paper and board production

Last year saw the greatest annual exodus of recovered paper from the UK since all previous records were broken in 2008 (see table left). The final figure for 2012 of 4.491 million tonnes was 1.1% higher than that for 2011 but 8% below the all-time high of 4.847 million tonnes.

This result was achieved despite exports in December dipping to their lowest monthly level since November 2009, falling 8.5% year-on-year to just 308,488 tonnes.

Last year’s increases in overseas shipments of mixed papers (+4.8% to 924,045 tonnes) and newspapers & magazines (+2.4% to 1.022 million tonnes) served to offset declines of 0.1% for corrugated & kraft and 8.4% for the high grades, according to statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs.

Domestic collections of recovered fibre followed a similar pattern, with volumes suffering a year-on-year decline of 6.6% in December but registering a 1.5% upturn for 2012 as a whole to 8.154 million tonnes.

Across the 12-month period, there were increases in collections of mixed papers (+2.6% to 1.081 million tonnes), corrugated & kraft (+6.2% to 3.952 million tonnes) and newspapers & magazines (+0.9% to 2.501 million tonnes), whereas incoming volumes of the high grades were 20.9% lower than in 2011 at 620,251 tonnes.

Within the UK, consump-tion of recovered fibre fell 2.9% in December but climbed 1.7% in 2012 as a whole to 3.822 million tonnes. A 17.1% surge in corrugated & kraft usage to 1.59 million tonnes more than compensated for declines of 5.4%, 1.6% and 20.2% for, in turn, mixed papers, newspapers & magazines and high grades.

Total domestic mill intake in 2012 was unchanged from the previous year at 3.834 million tonnes. But, once again, parity relied on an 18% increase for corrugated & kraft to 1.61 million tonnes given that the totals for mixed papers (-6.9% to 202,767 tonnes), newspapers & magazines (-5.9% to 1.503 million tonnes) and the high grades (-21% to 517 578 tonnes) all lurched decisively in the opposite direction, the CPI statistics reveal.

Mill stocks ended 2012 at one of their highest levels for some time, with the 146,213 tonnes held in inventories across the UK equating to 2.2 weeks’ supply at the prevailing rate of usage.

Stocks of corrugated & kraft climbed particularly strongly towards the end of last year, reaching almost 90,000 tonnes at its close and thus pushing supply to an abnormally extended 3.7 weeks.

After hitting two weeks at the end of November, supply of newspapers & magazines had declined to 1.4 weeks a month later, with coverage of the high grades dipping from 1.8 to 1.4 weeks during the same period. UK stocks of mixed papers ended last year on 2,994 tonnes or 0.9 weeks’ supply.

As noted in MRW’s two previous recovered paper reports, UK production of paper and board made healthy year-on-year gains in both October and November 2012. This positive momentum was carried into the final month of the year with an increase of 5.6% against December 2011.

For last year as a whole, UK output of paper and board climbed 1.6% to 4.412 million tonnes, with the packaging papers and boards total leaping 8.4% and sanitary & household 2.1%. Conversely, UK production of newsprint and printings & writings slid, respectively, 3.5% and 2.1%.

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