Signs of investment activity

July 7, 2014
RTGE Staff

Confetti and streamers may not yet be warranted, but some economic indicators are pointing to healthier national economies in parts of Europe that have been struggling to generate sufficient scrap materials to keep recycling plants active.

As measured by Eurostat, industrial output in the EU 28 nations has risen just 0.5% between March 2013 and March 2014. The better news might be that some of the ailing economies of southern Europe are no longer trending downward when it comes to industrial production.

In that same 13-month time span, several nations in Eastern Europe have outperformed the EU average when it comes to industrial output, and, presumably, the generation of old corrugated containers (OCC) and other scrap materials.

While the EU average has been 0.5% growth in industrial production, nations outpacing that average from March 2013 to March 2014 include: Romania (9.6% growth), Hungary (8.1%), the Czech Republic (7.2%), and Slovakia (5.9%).

A recovered fibre trader based in the Netherlands says demand from European mills has been steady throughout the first five months of 2014. “Demand from European mills has been quite good, and the little tonnage that is left finds its way into the export market,” he comments.

The trader would prefer to see generation in Western Europe begin to better match global demand. “Export buyers are in the market, but they are having a difficult time competing price-wise with European buyers,” he says.

Among the companies in Europe making investments to keep producing paper for the long haul is Prinzhorn Holding GmbH at its recycled-content containerboard mill in Dunaújváros, Hungary.

Work is underway at the mill, known as the Hamburger Hungária complex, to build a €150 million power plant, according to a report on the website.

At a ceremony in May, the CEO of Austria-based Prinzhorn Holding was joined by Hungarian Prime Minister Viktor Orbán in a ceremony marking the beginning of the construction project. The new plant will use a combination of the mill’s own residual wastes, biomass and coal to help ensure a steady power supply for the mill.

The two paper machines at the Hamburger Hungária mill “produce annually about 650 000 tonnes of brown containerboard, which accounts for 85% of all paper grades produced in Hungary,” according to the company’s website. It is one of four paper mills operating under the Prinzhorn Holding group.

Whether Europe’s mills will continue to increase their output (and retain their appetite for recovered fibre) remains a source of uncertainty.

The International Monetary Fund (IMF) is predicting moderate economic growth in Europe in 2014 and 2015. In a report released in May, the IMF forecasts 1.7% European GDP growth in 2014 followed by 1.9% growth in 2015.

“Growth has rebounded more strongly than anticipated in the United Kingdom on easier credit conditions and increased confidence,” writes the IMF. “However, the recovery has been unbalanced, with business investment and exports still disappointing.”

The “howevers” pointed to by the IMF in its characterisation of the U.K. economy are found throughout the section of its report on Europe’s economic situation. The IMF also describes the recovery as “uneven across countries and sectors.”

The qualified optimism in the IMF report may be a signal to collectors, processors and traders that—as in previous years—they will continue to be uncertain of generation levels from month to month in 2014.