Rally across key grades

The European fibre sector is enjoying higher prices for mixed, cardboard, and deinking paper while US mills are re-building stocks.

In February, a subtle uptick in prices unfolded in Europe across three key grades of recovered paper – mixed, cardboard, and deinking paper. This trend gained momentum as the weeks progressed. Prices rose by approximately 20% in March and April, marking an unprecedented surge. Some are dubbing it a ‘price rally’.

At least five factors seem to be driving the price hikes:

• The value of the Euro is remarkably low
• Customers of mills are placing more orders, possibly due to lower stocks
• Not all mills have sufficient stocks of old paper
• Several buyers temporarily absent from the market are reportedly coming back
• Uncertainty – perhaps the most significant factor

On the final point, adequate old paper inventory is crucial for keeping production running smoothly. Mills prefer certainty and are purchasing more old paper, even though it comes with a higher price tag.

However, some mills view the situation as somewhat exaggerated, spurred on by mild panic among a few buyers. Whether these higher prices will endure remains an unanswerable question. As one old paper entrepreneur remarked, ‘We’ll cross that bridge when we come to it. For now, our motto is to sell as much volume as possible at good prices.’

GERMAN POLKA

Europe, particularly Germany, is taking the lead. ‘The German polka has everyone dancing,’ remarked a seasoned trader. Currently, export activity pales in comparison to the strong European demand. Very little is heading towards the Far East and what is available for export is moving sluggishly. Southern European countries are still exporting, albeit at lower prices.

Many buyers in the Far East are closely monitoring price developments in Europe. Several Asian paper mills are struggling to purchase at the current price levels, primarily because the margins between procurement and sales are often too narrow. In such cases, it’s better to hold back for a while.

Additionally, reports indicate that Chinese producers have once again lowered their selling prices for rolls of new paper and cardboard. India appears to be sourcing mixed paper cheaply from recycling facilities in the UK and Ireland.

BUILDING STOCKS

Likewise, the United States is feeling the impact of restrained demand from the Far East. In the US, much of the old paper goes to domestic consumers, who are busy expanding their capacities. While some of this expansion involves replacing old factories, the net effect is an increase in the overall capacity of paper and cardboard production. Traditionally, this is the time for building up stocks of old paper.

Producers of new paper and/or cardboard looking to secure sufficient material now place orders with ample volumes of old paper.

BRIDGE COLLAPSE

While this report is usually about supply and demand, and whether prices of recovered fibre are going up or down, the big news on the Eastern seaboard of the US has been the collapse of the Baltimore bridge. Temporarily at least, some havoc in both imports and exports is to be expected. But how significant?

Megan Workman from Fastmarkers/Risi posted on LinkedIn: ‘The Baltimore port is the second largest port in the east for exporting OCC tons, behind the New York/New Jersey port, and the fourth largest in the US.’ She notes Baltimore shipped out over 600 000 tonnes of recovered fibre in 2023, an increase on 2022. Problematic logistics at such a port will certainly cause ripple effects in the short term at least. 

While the supply of recovered fibre is growing slowly, and generation remains lower than usual, supply and demand may finally be reaching equilibrium. The net result is that US domestic mills are not scrambling for tons as they were a few months ago when they were bidding upwards.

Even though prices are flattening, they are double or triple what they were a year ago, especially for the bulk grades of OCC and mixed paper.

Price changes in recent weeks have been only minor. For grades such as DLK and SOP, there are regional differences. In some select cases, DLK is in short supply and trending up in price, while some areas are seeing falls for higher grades.

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