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Recovered paper - 28 September

Against a backdrop of largely unpromising market conditions, OCC export prices have caught many experts by surprise in spiking upwards.

Following their dip into the mid-£60s during August, values have subsequently climbed to £72-£77 per tonne at the time of writing. Old KLS is commanding typically £65 per tonne from domestic buyers.

One expert said: “This upward blip in [export] prices is not due to a huge amount of demand in China or Europe. It is happening because some of the smaller mills in China are chasing tonnes when there is not much out there.”

There were also suggestions this week that rumblings of a port dispute in the US might have induced a bout of panic-buying in the OCC market.

With US prices stabilising at the lower levels mentioned in MRW’s previous report, an unusual situation emerged at one point when UK export prices for OCC actually outstripped those prevailing from the US - even though material from across the pond is generally acknowledged to provide consumers with a higher yield.

At the time of writing, however, these two prices are said to be “roughly on a par”.

As regards mixed papers, it is reported that “hundreds” of containers are still stuck in Chinese ports as a result of the well-publicised quality inspection crackdown.

A Chinese market specialist said: “There is still evidence of payments smoothing entry into the country in some instances but, unlike in the past, it is not an everyday occurrence any more.”

Export prices for mixed papers are down at £40-£45 per tonne while domestic values in the UK are put at a “worrying” £30-£35. “This makes it difficult to cover the cost of collections,” it was pointed out.

In the de-inking sector, news & pams has been attracting £90-£100 per tonne on the domestic market while exports are generally just above the £100 threshold. A slight increase in buying interest from Europe has reportedly helped to underpin multigrade prices, with quoted export values ranging from £100-£112 per tonne and domestic prices trailing a few pounds in their wake.

Among the high grades of recovered paper, prices for white letter and best whites have remained flat in a low-volume market environment.

Conversations at the RWM show in Birmingham earlier this month confirmed that optimism is not an abundant commodity within the UK recovered paper market at present.

One expert provided the following summary: “The market is very flat and business is challenging for everybody. Volumes are down but prices have not increased as a result. Most qualities are moving, but business is only bumping along.”

The overriding sense of uncertainty has been exacer-bated by freight developments. Shipping lines pushed for significant rate increases for September but ultimately settled largely for the status quo, with some exporters even claiming to have booked space at lower levels than in the previous month.

For October, a number of shipping lines are talking in terms of increases of $100-$200 (£62-£144) per 40ft container but again, say experts, market realities may well intervene to force a compromise.

l In June this year, UK mills’ consumption of recovered fibre recorded a year-on-year gain for the fifth consecutive month, according to the latest statistics released by the Confederation of Paper Industries and HM Revenue & Customs.

The increase of 3.6% meant that domestic usage across the first half of 2012 was 1.5% higher than in the corresponding period of last year at 1.918 million tonnes.

Meanwhile, the half-year totals for UK collections and exports showed barely any change. The former fell 1% in June to give a cumulative figure for 2012 of 4.127 million tonnes, equivalent to an increase of just 0.8% over last year. A 4.5% dip in overseas fibre shipments in June left the six-month total at 2.293 million tonnes and just 719 tonnes ahead of the tally for January-June 2011.

Meanwhile, UK mill intake dropped 2.6% in June to give a half-year total some 0.6% lower than last year at 1.922 million tonnes.

Once again, the overall consumption increase in January-June this year was underpinned by the performance of corrugated & kraft, usage of which leapt 16.2% year-on-year to 796,435 tonnes. Conversely, consumption of mixed papers, newspapers & magazines and the high grades slid, 6.4%, 1.3% and 19.2%, respectively.

The same pattern emerged with regard to intake, as corrugated & kraft posted year-on-year increases of 15.4% for June and 18.3% for the year to date. The high grades suffered a whopping 29.5% intake slump in June to give a six-month total of 272,440 tonnes, effectively 21.1% shy of the corres-ponding figure last year.

Newspapers & magazines’ intake slid 7% in June and 6.8% in the first half of the year, while mixed papers registered declines of, respectively, 0.6% and 8.1%.

Mixed papers was the focus of the most eye-catching development in domestic mill stocks in June, as the inventory nosedived from 2,273 tonnes to a mere 972 tonnes, thus slashing supply at the prevailing rate of usage from 0.7 weeks to a fragile 0.2 weeks.

Stocks of newspapers & magazines tumbled more than 10,000 tonnes to 42,237 tonnes during the course of this year’s sixth month to trim supply from 1.9 to 1.3 weeks. Stock coverage for the high grades climbed from 1.4 to 1.6 weeks in June, while supply of corrugated & kraft remained unchanged at 1.3 weeks, despite the inventory growing almost 4,000 tonnes to 41,550 tonnes.

Taking into account an increase of 5.5% in June, collections of corrugated & kraft were up 6.2% in the first half of 2012 at 2.03 million tonnes. Newspapers & magazines also recorded hikes of 2% for June and 3% for the first six months of this year, whereas collections of mixed papers slid 10.3% and 2.5% when making the same comparisons.

The big numbers, however, were registered by the high grades, collections of which plummeted 28% in June and 25.1% across the half-year.

Despite dipping 4.7% in June, UK exports of newspapers & magazines climbed almost 7% to 519,742 tonnes in the first half of 2012. Similarly, overseas shipments of corrugated & kraft edged 0.9% lower in June but gained 0.3% to reach 1.24 million tonnes for the January-June period.

Exports of mixed papers and the high grades fell, in turn, by 2.9% and 20.6% in the first six months of 2012.

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