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Recovered paper - 19 October

OCC prices have continued to move higher in recent weeks and, in contrast to the situation prevailing in the late summer, mixed papers have now followed suit.

This upward price progress among the lower grades of recovered fibre is attributed to improved demand from Europe as well as reasonable business from China, despite its mills’ generally high stocks of linerboard and disappointing order files.

Volumes of recovered fibre entering UK merchant processors’ yards are widely claimed to be 20% below the norm. One major buyer in the UK market commented: “The tonnes just aren’t there.”

Another leading player said: “Not many grades are hanging around - most are moving.”

Export-wise, OCC is attracting £84-£87 per tonne at the time of writing, while overseas buyers of mixed papers are paying typically £50-£55 compared with

£40-£45 at the time of MRW’s previous report. On the home market, old KLS is priced at £75-£80 per tonne and mixed papers are £45-£50.

A recent hike in US OCC prices of $15-$20 (£9-£12) per tonne has helped to restore some of the traditional differential with European fibre values.

Latest figures reveal that this year China has become even more of a mainstay for UK exporters. Shipments to the Asian giant soared from just under 1.6 million tonnes in the first seven months of 2011 to a fraction over 1.9 million tonnes in the corresponding period this year, with corrugated & kraft contributing 1.271 million tonnes to the latter total.

At the same time, there was a significant decline in UK recovered fibre exports to other established outlets across Asia.

Indonesia’s purchases tumbled from 211,956 tonnes in January-July last year to 165,213 tonnes in the first seven months of 2012, with less than 30,000 tonnes recorded for June and July combined.

Using the same January-July comparison, shipments to India sank from 162,009 tonnes to 109,202 tonnes.

Freight rates to Asia have held relatively steady in October, despite attempts by shippers to push them some $100-$200 higher for a 40ft container. But given the recent significant inbound freight increases, higher outbound rates are widely anticipated by the trade for November.

A few pounds have been trimmed off the value of news & pams in recent weeks, with the domestic and export levels both said to be around £90-£95 per tonne.

Meanwhile, a “frisson” is said to have been produced in the recovered paper sector with the announcement that Aylesford Newsprint of Kent, which has the capacity to produce around 400,000 tonnes of newsprint a year from 100% recycled fibre, has been sold by Mondi and SCA to US investment company Martland Holdings.

Several experts have expressed the hope that the move will bring greater stability to an operation which, according to SCA, has been “loss-making for the past years”.

India remains a sluggish buyer of the middle grades of recovered paper, not least because of the recent depreciation of the rupee.

With demand quite weak, export and domestic prices for multigrade are in the £100-£110 per tonne bracket. Meanwhile, the high grades have maintained their existing price levels despite the low volumes changing hands.

l UK exports of all forms of recovered paper climbed 3% to 353,358 tonnes when comparing July this year with the same month in 2011.

Buried within this statistic from the Confederation of Paper Industries and HM Revenue & Customs is the fact that overseas shipments of mixed papers surged 9.8% year on year to 70,525 tonnes in July, while high-grade exports sky-rocketed 56.9% to 12,198 tonnes from their very low level of 7,774 tonnes in the same month last year.

After the first seven months of 2012, UK recovered paper exports were running 0.4% ahead of the volumes shipped in January-July 2011, at 2.647 million tonnes, with mixed papers suffering a decline of 1.3% to 515,427 tonnes and the corrugated & kraft total edging 306 tonnes lower to 1.424 million tonnes.

Overseas shipments of the high grades plummeted 15.6% to 100,997 tonnes despite the July increase, whereas newspapers & magazines recorded a hike of 6.5% to 605,952 tonnes.

UK collections of recovered fibre mirrored exports in following a decline in June with an increase in July. The 2% upturn to 664,500 tonnes took the year-to-date total to 4.791 million tonnes, which bettered the 4.746 million tonnes of January-July 2011 by 1%.

During the seven-month period, collections of corrugated & kraft and newspapers & magazines recorded improvements of, respectively, 6.1% to 2.348 million tonnes and 2.4% to 1.459 million tonnes. Conversely, collected volumes of mixed papers and high grades fell, in turn, 2% to 608,794 tonnes and 22.9% to 374,859 tonnes.

For the sixth consecutive month, UK mills’ recovered fibre consumption in July surpassed its total for the corresponding month last year. And, in keeping with the trend apparent for most of this year, the improvement is due to corrugated & kraft, usage of which soared 19% year on year in July for a seven-month total some 16.6% higher than in 2011 at 931,371 tonnes.

Domestic consumption of mixed papers dropped 5.1% in July and 6.2% across the January-July period, while newspapers & magazines sustained declines of, respectively, 5.5% and 2%.

Given that high-grade usage has recorded double-digit declines every month so far in 2012, it was no surprise to see a drop of 10.8% for July. This contributed to an 18.1% slump for the first seven months of the year as a whole.

The UK recovered paper intake totals for January-July 2011 and 2012 showed a variation of only 73 tonnes. Here, too, corrugated & kraft was alone in posting a year-on-year increase, up 18% to 937,729 tonnes.

The seven-month tallies for the other grades were as follows: mixed papers 117,838 tonnes (-8.2% compared with January-July 2011), newspapers & magazines 877,279 tonnes (-5.5%) and high grades 319,116 tonnes (-20.3%).

Overall, mill stocks of recovered fibre edged almost 2,000 tonnes higher during the course of July to 102,910 tonnes. This extended supply at the prevailing rate of usage from 1.3 weeks at the close of June to 1.4 weeks.

The mixed papers’ inventory was nearing extinction at the end of July, dropping to just 519 tonnes or 0.1 weeks’ supply, while stocks of corrugated & kraft fell more than 4,000 tonnes to trim supply from 1.3 to 1.2 weeks.

Inventories for newspapers & magazines and high grade actually expanded, with supply of the former growing from 1.3 to 1.7 weeks whereas the latter held steady on 1.6 weeks.

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