Page 44 from: January / February 2016

42 January/February 2016

M A R K E T A N A L Y S I S

Paper
Closed: January 18, 2016

America kicks off 2016 with
‘bargain-basement’ prices
Despite relatively minor movements in some
areas of the market, recovered paper prices in
Europe have begun 2016 in much the same
vein of stability as they concluded 2015.
Although the build-up to the Chinese
New Year holidays impacted order levels
in December and the opening weeks of
January, significant volumes of recovered
paper have still been heading into the
Asian market as a whole. The American
market, meanwhile, has been character-
ised by low prices.

Europe
Shipping rates weaker
For the lower grades of recovered paper,
healthy volumes have been feeding into
merchant processors’ facilities over the
early weeks of the new year. Demand is
very good not only for Europe but also
for most Far Eastern destinations. As
a result, stocks of OCC remain under
pressure in Europe.
The majority of European mills have
kept their lower grade prices stable
in January on the back of this gener-
ally robust demand. OCC values have
largely stabilised for the Far East mar-
ket, with the US dollar and freight rates
even making small price increases pos-
sible. Shipping rates have weakened
once again over recent times.
Indonesia has returned to the market-
place but is not yet purchasing large
volumes, whereas the tonnages ordered
by China have been relatively stable.
Collection volumes of household mixed
have been good. Demand is very strong
in Europe while some orders have con-
tinued to emerge for Asia, but at slightly
lower price levels. Demand in Europe has
also been healthy for most of the mid-
dle grades of recovered paper, although
orders for archive grades have reportedly
declined. There has been an improvement

in demand from India and other Asian
countries – but, once again, at slightly
lower prices than those prevailing in
Europe. With decent incoming volumes,
European prices have been stable to lower
by some Euro 5 per tonne for January.
As regards the higher grades, there
is not much material available and
demand is healthy at stable price levels.

North America
Mills take advantage
As the new year settled in, demand for
American recovered paper was being

driven mainly by bargain-basement pric-
es. Domestic mill prices for most grades
either continued their declines or held
firm in January relative to December.
That said, traders reported that ONP
was showing some hints of firming
up, particularly on the export market.
Towards the middle of the month,
exporters also began to see some slight
teetering up and down on OCC prices,
especially on the West Coast. On aver-
age, however, export prices were set-
tling in at the December numbers, or
slightly below.

Taking advantage of these low prices,
mills in the Pacific Northwest – which
were reportedly running moderately
well – were also stockpiling extra OCC
in order to build inventories ahead
of the seasonal February drop-off in
generation which, theoretically, would
push prices higher. In the Midwest and
eastwards, however, mills were report-
edly loaded down with OCC and were
running weak. One Midwest mill buyer
said suppliers were being asked to hold
shipments for a week owing to abun-
dant inventories.

Smurfit Kappa boosts Latin American portfolio
Ireland-based Smurfit Kappa Group
(SKG) has entered the Brazilian
packaging market with the acqui-
sition of Industria de Embalagens
Santana (INPA) and Paema Embal-
agens for a total consideration of
approximately Euro 186 million.
The combined operations of these
privately-owned integrated paper-
based packaging businesses include
three recycled containerboard mills
with a total annual capacity of 210
000 tonnes and four corrugated
facilities.

Net assets as of September 30 last
year amounted to Euro 30 million for
INPA and Euro 6 million for Paema.
The combined business employs over
1700 people and the group currently
expects to generate synergies of
approximately Euro 6 million to be
delivered by the end of 2017, primar-
ily through operational improvements
and supply chain optimisation as the
businesses are integrated.
According to SKG, the size and loca-
tion of the combined operations
will build on the group’s leadership

position as the largest pan-regional
corrugated packaging supplier in
Latin America. The acquisition ‘will
extend our reach into a strategically
important market and build on our
geographic diversity and strength’,
comments Smurfit Kappa Group ceo
Tony Smurfit. ‘We are confident that
their expertise and the high qual-
ity of their asset base will provide
us with a strong entry point into
the Brazilian market and further
strengthen our service offering to
our existing international customers.’