More from: Pressure piles on paper exporters
With collection volumes particularly low because of the impact of summer holidays in key regions, the bulk grades market “looks to be close to its lower limits”, a number of recovered paper experts have suggested to MRW this week.
But according to one major buyer in the UK, there is still “a big black cloud” hovering over near-term prospects in the form of declining US prices.
“Their quality is better than over here and so, with US prices still falling, that is where the Chinese mills are looking,” he said.
At the time of writing, the OCC export price is £65-£70 per tonne compared with £77-£81 at the time of our previous report in early July.
In the UK, old KLS is attracting £55-£60 per tonne, while domestic buyers of mixed papers are paying typically £50-£55 per tonne. Meanwhile, news & pams has been fetching £90-£95 per tonne, both at home and abroad, while multigrade export prices have remained largely within the £100-£110 band quoted previously.
In recent weeks, the media spotlight has been trained on Chinese customs’ quality inspection crackdowns which have resulted in the rejection of a significant number of mixed paper consignments from the UK.
A leading international trader argued that Chinese mills’ finished product prices have continued to fall, and so incoming fibre volumes have been viewed with a more critical eye than ever before. He added that this level of scrutiny is unlikely to abate any time soon, adding: “The risk of cargoes being rejected at the port of arrival in Asia, and not just in China, is quite high”.
A key factor, he contended, is that locally sourced fibre has become more widely available to Chinese mills than in the past, allowing them to make the quality comparison with higher-priced imports.
“In many cases, they believe they are not getting the difference in quality they are paying extra for,” he said.
The quality crackdown and resultant increase in rejections has been regarded in some quarters of the recovered paper trade as an attempt to stem the flow of fibre into already overstocked Chinese mills.
“But quality is still an issue and it won’t be going away,” insisted one international trader. And another expert pointed out: “It is different this time. It’s not the mills or their representatives who are rejecting the loads - it is the Chinese customs.”
Pressure on exporters has also come from rising sea freight rates, with shipping lines looking to hike prices by a further $150 (£96) per 40ft container from the start of September - equivalent to around $6 per tonne.
“The increases might get delayed in some instances, but I would expect to see these kind of numbers by the middle of next month,” MRW was told.
According to shipping database Alphaliner, the idle fleet has been growing since the beginning of July, reaching an aggregate of 467,000 twenty-foot equivalent units (TEU) at the end of the month compared with 115,000 TEU 12 months earlier. Carriers have been cutting capacity much earlier than last year owing to weak cargo demand, especially from the crisis-hit eurozone.
> Overall, May proved to be a more positive month for collections, domestic consumption and exports of recovered paper. But the devil was in the detail, as the latest statistics from the Confederation of Paper Industries (CPI) and HM Revenue & Customs confirmed that some grades performed significantly worse than others in the three sectors mentioned above.
At 675,788 tonnes, total UK collections of recovered fibre were 5.7% higher in May than in the corresponding month of 2011. But year-on-year increases of 8.3%, 9.1% and 4.2% for, respectively, mixed papers, corrugated & kraft and newspapers & magazines were mitigated to some extent by a decline of 9.4% for the high grades.
When combining figures for the first five months of the year, overall collections were 1.2% higher in 2012 at 3.471 million tonnes, despite declines of 1.1% for mixed papers and of a huge 24.5% for the high grades. But lost ground was more than made up by corrugated & kraft (+6.3% to 1.708 million tonnes) and newspapers & magazine (+3.2% to 1.036 million tonnes).
UK mill consumption of recovered fibre climbed 3.7% year-on-year in May to 314,686 tonnes to give a running total for 2012 of 1.584 million tonnes, equivalent to an increase of 1.1% over 2011.
But usage of mixed papers slumped 10.8% in May, while significant declines of 4% and 5.6% were also recorded by, in turn, newspapers & magazines and the high grades. Overall consumption growth in May was under-pinned by a 19.8% increase for corrugated & kraft.
Across the January-May period, domestic consumption of corrugated & kraft was actually 16.3% higher year-on-year at 658,823 tonnes but usage elsewhere charted a downward course: mixed papers (-8.3% to 84,013 tonnes); newspapers & magazines (-2.6% to 609,250 tonnes); and the high grades (-18.2% to 232,169 tonnes).
Mill intake dipped 1.9% in May to leave the running total for the year at 1.598 million tonnes, some 0.2% below the figure for January-May 2011.
Once again, corrugated & kraft was the stand-out grade, with its intake leaping 18.9% in the first five months of this year to 667,409 tonnes. The corresponding numbers for mixed papers, newspapers& magazines and the high grades of recovered paper revealed declines of 9.6%, 6.8% and 19.2% respectively.
In May, stocks of recovered fibre at UK mills climbed around 2,000 tonnes to reach 107,985 tonnes by the end of the month, nudging supply at the prevailing rate of usage from 1.4 to 1.5 weeks.
But the mixed papers inventory was more than halved to 2,273 tonnes, such that supply nosedived from 1.3 to 0.7 weeks. Relatively small declines in stocks of the high grades and corrugated & kraft saw supply of the former remain unchanged at 1.4 weeks while the latter’s was actually extended from 1.2 to 1.3 weeks. And the newspapers & magazines inventory soared 8,525 tonnes to 52,734 tonnes, to push supply from 1.6 to 1.9 weeks.
Turning finally to UK exports of recovered fibre, the May total of 375,156 tonnes represented an increase of 7.8% over the same month last year, leaving the cumulative total 0.9% higher at 1.954 million tonnes.
The star turn was news-papers & magazines, exports of which jumped 9.3% to 440,981 tonnes in January-May this year. In comparison, corrugated & kraft recorded an increase of 0.5%, while mixed papers and the high grades suffered export declines of, respectively, 1.5% and 21%.
Recovered paper - 24 August 2012