BIR world mirror on recovered paper October 2011

BIR – The following article is based on the latest Paper World Mirror produced by the BIR world recycling body for the benefit of its members. Visit www.bir.org to read the entire analysis.

The challenges facing the European recovered fibre sector are unlikely to diminish in the fourth quarter as prices seem set to weaken even further.

As an overview, OCC prices began the third quarter of this year at US$ 240-245 per tonne and reached US$ 250-255 in early August before sliding to nearer US$ 240 by the end of the quarter. Starting the same quarter at around US$ 235 per tonne, a move for mixed papers above US$ 240 in August proved to be short-lived as prices of this grade ended September nearer US$ 230.

However, the figures quoted by some countries describe even more dramatic price fluctuations. From Spain, for example, it has been reported that OCC values were trimmed by some Euro 10 per tonne in September and by at least a further Euro 15 in early October, while deinking prices fell Euro 20-25 per tonne at the start of the fourth quarter. The country’s white grade prices in early October were Euro 30-40 per tonne below their levels of three months earlier, it has also been suggested.

In Italy, the lower and middle grades of recovered paper have suffered recent falls of Euro 10-20 per tonne while the high grades have slumped nearer Euro 30-40; faced with a severe lack of orders, many domestic mills are understood to be contemplating significant machine downtime. And according to feedback from the Czech Republic, OCC prices were approaching 30% lower in early September than they had been at the start of April this year – even though sales had not proved difficult to conclude in the interim.

The difficult conditions in the European recovered paper market have been exacerbated by developments in Asia where new paper prices have weakened significantly and stocks of finished goods are at elevated levels. Secondary fibre demand from a host of major consuming countries in Asia – including China, India, Indonesia, Thailand, Vietnam, Taiwan and South Korea – had declined significantly by the close of the third quarter.

While the developed world wrestles with debt, sluggish economies and the risk of a return to recession, these emerging nations have problems of their own – including an increased risk of inflation owing to rising interest rates and/or credit tightening. To a growing extent, overseas buyers of recovered fibre now appear prepared to await price developments before signing on the dotted line. From the UK, for example, it is reported that strong domestic demand for the middle grades is contrasting with a weak export market where Indian buyers in particular are claiming fibre values have reached unsustainably high levels.

When compared to most of its fellow EU countries, Finland appears to be experiencing more even market conditions. Recovered fibre supply and demand are reportedly in kilter, while prices – which “never reached the same heights as in Central Europe” – have been reasonably stable of late. In Sweden, however, weak order books for the packaging sector among others is expected to lead to price reductions for all recovered fibre grades in the coming months ‘as merchants want to move tonnage quickly to resolve cash-flow issues’.

The erstwhile stability in many markets has been rocked in the post-summer period. In France, for instance, the corrugated board price fell Euro 10 per tonne in September as paper manufacturers were worried by a significant trimming of their order books. In common with several other markets, French mills’ high grade stocks have continued to grow as prices generally weaken.

The first half of the year in Germany was certainly characterised by healthy domestic and wider European demand for its recovered paper, with Asian demand also improving at the very start of the third quarter against a backdrop of continuing low shipping freight rates. However, the worsening macro-economic picture brought repercussions for the recovered paper market as the third quarter progressed: prices of almost all grades have fallen – and by a considerable margin in some cases. The talk is now of implementing price reductions on finished paper goods that have already been produced, and of the possibility of capacity utilisation cuts in, notably, the deinking sector.

Since July, exporters in Turkey have been complying with new export regulations, and holders of the necessary permits recommenced overseas shipments in August. In addition, the final version has been published of the country’s new packaging waste regulations in which the ministry gives more responsibility to municipalities and a diminished role to licensed collectors.