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Paper outlook: Markets buoyant despite global stresses

The switchback nature of the paper industry in recent months makes market forecasting very difficult.

Sometimes when there are so many factors at play, it is difficult to analyse a market and make predictions. This is the case at present. On a global scale, traders have to cope with pockets of serious Covid outbreaks such as those experienced in China and thus at key Chinese ports. The Russian invasion of Ukraine has prompted a series of consequences, particularly for oil prices.

There was also the inadvertent banning of exports of recovered paper from Europe to India (now rectified) on top of the continued worldwide disruption of supply chains which is a knock on from the factors described above and allied to the effects of Covid which are still very much in place.

Market insiders are not on the same page when it comes to forecasting. Some expect, because of still-disappointing collection levels and continued demand, at least a price-sustaining situation. Others point to inflation, rising costs for businesses and citizens and decreasing delivery times for new paper, all the while expecting a negative correction to current price levels.

India effect

Following the resolution of the Indian ban, many exporters immediately jumped back into the Indian market, leading to oversupply, and some British and American suppliers supplied at lower prices. This temporarily disrupted the market. Supply chain issues and increased domestic demand in the US also meant that the UK was also a vital supply chain for southeast Asia.

During the Easter break period in the UK a perfect storm developed at UK ports with a combination of increased traffic, Brexit and IT problems, plus the continued disruption caused by the ferry operator P&O’s decision to sack its entire workforce, led to massive and disruptive jams at UK ports.

Production capacity for new paper is being built on an international scale, most of which will use recycled paper for a large part of their raw materials. For the packaging market, an upwardly adjusted growth rate of 67% until 2035 is expected. The scrap paper market, with irregular ups and downs, is likely to increase further in volume and value in the coming years.

Graphic paper demand

Graphic paper – the so-called de-inking types – once again occupies a special place. Over the years, the market has shrunk considerably in response to fewer newspapers, fewer magazines, fewer pages and lower circulations. Mill owners noted the decline and converted their machines to the lucrative growth market of packaging paper.

But now things seem to be out of balance: a shortage of new graphic paper and the remaining factories barely keeping up with demand. Long delivery times and higher prices are the result. For new graphics paper, market experts are even predicting a possible doubling of the current price level.

The transition at the paper companies from graphic paper to packaging paper has not yet come to an end. Recently, the large Finnish-Swedish group Stora Enso announced divestments for its paper mills in Anjala (Finland), Maxau (Germany) and Hylte and Nymolla (both Sweden).

Read the full paper update in our upcoming issue >>

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