Recovered Fibre

Europe - Dominique Maguin, La Compagnie des Matieres Premieres

Europe - Ranjit Baxi, J&H Sales International Ltd.

 

 

RECOVERED FIBRE>>EUROPE>> Dominique Maguin, La Compagnie des Matieres Premieres

 

The last time that I gave a report, I said that I saw some light at the end of the tunnel. I was very pleased to notice at the beginning of this year, for the first time in my life, I was not overly optimistic in that thinking.

 

Prices have increased and demand was much more active at the beginning of the year. We had an increase in European prices for all the brown grades and low grades. This increase was about €20 per ton. It’s a very huge increase and it was very good. It was mainly due to the fact that Asian mills were very active on the market. I was very surprised about the inquiries from that region just before Christmas.

 

Due to that, I think we had some very important movement in prices in the very first days of the year. That was the case for the brown grades but not for the other two major sectors, which are the printing and tissue sectors, which were still affected by the crisis. The demand was not so good for the printing and the tissue.

 

Tissue has been very active and steady recently but the prices are not very attractive. Now what we are facing in the first days of February is that we got information that the Asian mills were not going to buy a lot. This is, of course, mainly due to the period of Chinese New Year coming up on Feb. 14. We all know now that the Asians and the Chinese sectors are very active, as are many other countries around China. Due to that reduced activity from the Chinese New Year, we have a feeling that they will not demand too much and prices could come down.

 

We have some buyers from China and Asia who indicated they were going to push down the prices at the beginning of February. But, as a matter of fact, it seems that they are not able to drop the price. Now the European mills have decided to maintain the price level they have accepted for January, which is good. For that reason, I don’t see the Chinese buyers being able to push the price down too much. I think we are going to maintain the price.

 

Now we have a second step, which is very interesting in the printing grade papers and tissue. The printing grade sector is asking for a lot of tonnage, which is quite surprising. We still have no production of finished products in this sector worldwide. The results of the mills, which are present in this sector, have been producing bad figures the past year. But this time, they are pushing the prices for the raw material up very, very high; something crazy like €20 to €35 increases, depending on the different grades.

 

Also, the tissue sector, which is competing with the printing edition sector on the same trade of recycled recovered paper to produce pulp, are also going through the same struggle. They are also trying new increases on prices since the first day of February.

 

This means that the whole sector is going up again, but what we can also say is that the volumes are still very low. The reason, we all know, is that consumption is low. If we do not have good consumption, obviously we cannot get good collection. And on top of that, we also have problems related to the weather. When the weather is horrific, it is difficult to collect.

 

I heard a program on the radio and there was a statistic about one newspaper in France that had, for the first time in its life, the same level of investment on advertising for the paper edition and the Internet edition. We have to say also that the sales and volumes of printed editions were worries for the newspaper. It is quite interesting to see that you have some companies that are now ready to advertise on the same level in the newspaper and on the Internet.

 

For that reason, I think that this is interesting, that now, the fibre sector in Europe is very active. It is probably possible to say that the price may be reduced in the next month, but at least for this month we are experiencing very interesting increases on prices, which is very good for the merchants. We have been suffering for a long period so it is a pleasant change. 

 

Dominique Maguin can be contacted at Dominique.maguin@cmp-sas.com.

 

 

RECOVERED FIBRE>>EUROPE>> Ranjit Baxi, J&H Sales International Ltd.

 

At the beginning of 2009, the very survival of the global recovered paper trade was being called into question as the recession wreaked its havoc. However, 2010 has begun on an altogether more confident footing.

 

Several factors have conspired to produce significant gains in recovered paper prices over recent weeks. Most notably, prices for European exports of OCC (old corrugated containers) to customers in Asia have surged from around US$150 per tonne at the start of last year’s fourth quarter to US$195 and beyond at the time of writing. Meanwhile, a mixed paper export price of US$145 per tonne in early October had raced to more than US$177 by the end of last year, with the new year bringing further upward price progress.

 

Much of this market momentum has been provided by consumers in Asia, many of whom have been booking healthy volumes of recovered paper from Europe on the back of improved orders for their finished products and low raw material stocks. These recovered paper export prices have also been boosted by higher freight and haulage rates; over the course of 2009, some lines imposed rate increases in excess of US$1,000 per 40-foot container on routes between Europe and Asia.

 

China has remained the engine of this demand, though strong orders for European recovered fibre have also come from India, Thailand, South Korea, Vietnam and Taiwan.

Indonesia also has remained a firm customer, while at the same time developing new import procedures for recovered fibre. Finalised in late 2009, these new controls, including pre-shipment inspection by approved surveyors, have been applied to all shipments arriving after Jan. 1, 2010. 

 

In this context, it should be noted that Turkey is also proposing new criteria for recovered paper imports, again involving a requirement for pre-shipment inspection certificates.

 

Asia’s paper and board producers are continuing to meet resistance to higher prices for their finished products, therefore implying that a ceiling for recovered paper prices will be reached shortly. At the same time, however, these producers have been forced to respond to reduced recovered paper availability brought about by: more conservative consumer spending leading to a decline in overall consumption and, therefore, significantly lower collection volumes; and the adverse impact of severe winter weather on collection tonnages. Mills in Asia have also needed to take account of the reinvigorated competition from mills in Europe, many of which have started 2010 at full capacity and are therefore prepared to pay higher prices to secure their raw material supplies.

 

Price progress has not been limited to the brown grades: news, magazines, sorted office paper, coated book stock and other grades have recorded higher price levels in response to healthy demand. It is worth noting that supply of the deinking grades has continued to be deeply undermined by severely reduced activity levels in the printing sector as well as by a drop in newspaper and magazine production.

 

Although many European countries have officially emerged from recession, the impact of the economic downturn on recovered paper collection volumes was quite pronounced last year. For example, tonnages from industrial and commercial sources fell 25% to 30% among the Baltic Countries; total collections in the Czech Republic and Finland dropped 10% and 12%, respectively; and volumes in Sweden were some 15% lower. In the U.K., meanwhile, latest data reveal that domestic collections were almost 8% lower in the first 10 months of 2009 despite a slight upturn in October.

 

The U.K. has been a point of focus for new recovered paper-based capacity taking root in Western Europe. Last August saw the opening of Palm Paper’s £400 million (US$650 million) newsprint facility in the east of England which will be capable of processing 400,000 tonnes of paper per year. The start up of this facility led to the unusual situation in late 2009 of domestic deinking prices exceeding those available from export customers; recently, however, the two sets of prices have come more into line.

 

In January 2010, Spanish paper group SAICA announced the reactivation of a £290 million (US$470 million) paper mill construction project in northwestern England which was put on hold in 2009. With start up scheduled for early 2012, the mill will produce 400,000 tonnes per year of 100% recycled containerboard when at full capacity, thereby diverting 450,000 tonnes of recovered fibre from the export stream.

 

At the European Paper Recycling Conference held in Brussels toward the end of last year, one of the dominant themes was the construction of fresh capacity in Eastern Europe - specifically, the east of Germany, Poland and Hungary - which together will boost consumption of recovered paper by more than 1.5 million tonnes per year. The impact of these developments on Europe as a whole is likely to be substantial: buyers will be looking to use imports to redress a recovered paper supply deficit in Central Europe, resulting in a tightening of supplies further west.

 

With this new capacity coming on stream, the days of relatively inexpensive volumes of recovered paper heading from Central to Western Europe are effectively “in the past,” conference delegates were told.

 

* Elements of this report are based on information provided to the latest Paper Mirror produced by the BIR world recycling organisation for the benefit of its members.

 

Ranjit Baxi can be contacted at rsbaxi@jandhsales.com.