Markets wary of reduced consumer expenditure

Prices for recovered paper in Europe and the US are increasing being affected by reductions in consumer demand. Fewer purchases mean fewer parcels and less packaging.

According to the latest BIR Mirror on the paper market, internal demand in Europe has remained low with paper mills grappling with weak order books and high price pressure owing to overcapacity in the sector.

‘Mill inventories remained high whereas they were low in the waste management sector,’ BIR reports. ‘The drop in collection volumes after the [summer] holidays took some by surprise, suggesting perhaps people were consuming less.’

The recovered paper market in the USA continues to show a modest strengthening, it concludes. ‘While nobody is saying we are back to the good times of prices ramping up significantly, seven or eight consecutive months of small increases have created some optimism within the recovered fibre marketplace.’

The rising price trend is being driven by the same factors that have been in play over the past six to nine months, including low supply/collections.

Mills consuming OCC continue to be nervous that their demands will not be met because collections remain soft, and this nervousness is helping to drive up prices.

During the first seven months of 2023, US exports of OCC dropped 14.8% while mixed paper and ONP faced even sharper declines of 26.8% and 30.4%, respectively.

India remains the largest importer of US mixed paper, with significant orders in September.

Meanwhile, North American unbleached and bleached kraft paper prices remained stable in September owing to consistent demand.

Asian focus

The Mirror adds that China-affiliated overseas purchasing arms are intensifying their sourcing of brown grades from the USA and Europe for deliveries to Asia, even while they seek to increase prices for imports in south-east Asia and Taiwan.

‘In recent transactions, they have paid large amounts for US and European-origin OCC,’ it says. ‘Owing to the increasing sourcing costs, vendors in these regions have had to adjust their prices accordingly, with some even halting purchases when prices exceed a certain threshold.

‘End-users, especially major board mills in south-east Asia and Taiwan, have responded to the rising OCC prices by reducing their import volumes and shifting to cheaper alternatives such as local collections. The increased reliance on domestic OCC collections has also pushed prices higher.’

Elsewhere, the weakening of the German economy means a similarly weak order situation for paper, cardboard and, consequently, recovered paper. Most paper and cardboard producers’ warehouses are filled to the brim, both for new paper and raw materials.

In Turkey, lower demand following February’s earthquake extended into the third quarter. Several mills heavily impacted by the earthquake have navigated their way through operational disruptions, including those operated by Kipas and KMK which resumed operations in, respectively, July and September.

A series of announcements about new facilities mark a period of substantial investments and strategic shifts within the industry although a further complication has been inflation in Turkey, which has also led to a surge in lira-based recovered paper prices.

Imports of recovered paper have continued unabated, driven by the fact that volumes harvested domestically are insufficient to meet demand.