Sea freight rates sent into a steep upward spiral

Global – The Hanjin Shipping bankruptcy, the realigning of shipping alliances and the possibility of mergers impacted container and shipping space availability in the fourth quarter of last year, sending sea freight rates into a steep upward spiral. Furthermore, exporters ‘are likely to be faced with increasing freight rates going into 2017’.

As for fibre prices, OCC strengthened from US$ 170-plus per tonne at the start of October to end the year at US$ 180-plus whereas mixed paper climbed from US$ 143-plus to US$ 158-plus over the same period.

‘Possibly the biggest shipping container crisis the UK has ever witnessed’ is how one expert described recent events, with shipping and container shortages described as ‘acute’ despite the well-documented overcapacity in deep-sea shipping supply. So while recovered paper was enjoying relative price stability, freight costs more than doubled and several large export players ‘struggled to move material’ even if they had paid the higher rates.

Meanwhile, UK news grade prices dropped by £10-12 per tonne in the fourth quarter and ‘further reductions have been notified for the opening quarter of 2017’. The impact of the shipping squeeze was widely felt. In Spain, for example, the lack of available containers restricted export volumes to the extent that stock levels at domestic paper mills remained ‘medium to high’.

Feedback from Indonesia, meanwhile, suggests the first effects of the Hanjin Shipping bankruptcy were becoming apparent in last year’s final quarter, with sea freight rates, shipping space and container availability coming under significant pressure.

While Chinese buyers had quickly accepted higher rates, buyers in other Asian countries initially adopted a wait-and-see approach to rising freight costs and elevated material prices, but ultimately had ‘no choice other than to step into the market with competitive offers’.

In Vietnam, the response by some mills to the higher price levels coming out of Europe and the USA was to seek out new supplier regions capable of delivering the required quality at an affordable price. ‘They seem to have satisfied these requirements in the Mediterranean and North Africa,’ it is observed. ‘One advantage of the material from this area is that the moisture content is much lower than that from, for example, sources in Northern Europe.’

A report from France suggests 2016 will be remembered as a satisfactory year for recovered paper activity, culminating in healthy collections and demand in the final quarter. However, it is also noted that the reduction in the number of plants consuming deinking grades has meant that ‘quality controls are becoming ever stricter’.

In terms of latest statistics, the Czech Republic witnessed a 15% surge in recovered paper collections to 1.1 million tons last year, with most of the increase consumed by domestic paper mills whose overall usage jumped by 120 000 tons. The country’s exports of recovered paper climbed 5% to 830 000 tons.

In contrast, paper mills’ consumption of recovered paper in Sweden fell by 5% in the first nine months of 2016 to 866 000 tons, with OCC suffering the biggest drop.

This article is based on the latest World Mirror on Recovered Paper produced by the BIR world recycling organisation for the benefit of its members.