Recovered Fibre

RECOVERED FIBRE>>EUROPE>> H. D. Hitzert, Reukema Paper Group Europe

Local collection of material has slowed down in the run of 2009 after the problems that rose at the end of 2008. Local packers reported a decrease of household collected recovered fibre by 10%. Business-to-business collections were off as much as 20%.

The current market feeds the idea that we are at the bottom of low collection rates, which have been holding steady for some time now. When consumer trust and spending increase, collection rates will go up as well.

During 2009 the balance between demand and supply were normal in the sense that no sudden price increases or demand collapses were reported. However, at the end of 2009 things started to change

New linerboard production capacity in the eastern part of Germany and Poland has come and continues to come on line, demanding huge volumes of mainly OCC (old corrugated containers). The surge of material flowing into those regions means a change in the total flow landscape. Where some parts relied on exports to absorb material, now local European demand has taken over. The usual circles that one could draw around the big ports of Rotterdam (Netherlands) and Hamburg have become smaller. Apart from that, linerboard production also has increased.

Regarding local demand, existing mills also want and need their share of the market. They are buying in a market where packers do not have any stocks and collections are low, thus making the tonnage more and more expensive.

European mills now need to purchase material to fill their current orders and also to stock for the summer months, when collection is traditionally lower than usual. This will put even more pressure on the market to go up.

After the Chinese New Year the Southeast Asia mill buyers and traders returned to a European market in which the local mills had “taken over”. Whereas these local mills usually follow exports in prices, the export market has to face the fact that local markets are now leading the dance on pricing.

For the medium and high grades, the market effects are the same as for the lower grades. Due to low collection rates and pulp prices increasing, all pulp substitutes have increased in value (15%-20%) and are now back to the level they experienced during the fall of 2008.

In early March, packers are selling short, smaller quantities and “sitting” on their volumes as long as possible, in order to not to miss out on any price hikes caused by the fight between domestic mills and the Southeast Asian export market. This again adds to the pressure on pricing. Finally, in general, the current U.S. dollar to euro exchange rate is helping the export market.

As of early March, exporters are very active in trying to source available volumes. China and India are the big pullers at the moment.

The Chinese OCC market is in high demand. Also, medium and high grades and pulp substitutes have also been in good demand, mainly for India. Indonesia is currently following the market and also notes higher prices. The big surge in price has, in Europe, mainly to do with low collection rates and high domestic demand.

There are several local government considerations that may impact the recovered fibre market. Holland already has a very high percentage of recycling for paper and board. However, the main target of the Dutch central government is to increase the recycling percentage of household plastic waste. This is the main issue on the recycling agenda right now.

Local governments continue to struggle with the question of whether to collect the material separately (like paper) or to conduct sorting after the collection of mixed scrap. The Dutch Recycled Fibre Federation (FNOI), as well as domestic mills, strongly oppose the idea of certain local governments to collect plastics and paper together, thus reducing the percentage of paper and board that can be recycled. It is difficult to predict how this will affect the total availability of recycled fibre.

In general, collections tend to pick up once consumer spending and trust have returned to higher levels, which will increase consumer spending and put more fibre into the front of the recycling chain.

One general factor that may affect increasing the collection of paper and board is that more and more local governments are moving from the general, locally financed collection systems (from schools, sports clubs etc.) to professional and door-to-door collection systems. This shift has increased the collection rate of recycled fibre by 10% to 15%. In a country like Holland, with a lot of people per square mile, this is logistically and financially feasible.

Dutch customs authorities have not made life easier for exporters, as they have never done away with strict ruling on materials and thorough examination/scanning of containers going for export, at a cost to the exporter.

The availability of containers will certainly influence the flow of recycled fibre, but it has not (yet) influenced the price. In fact, freight increases have been absorbed by the exporters, and even on top of that, the price increased further.

What should be mentioned is the thorough screening of plastic scrap containers in the Rotterdam ports. Some paper traders and packers have had some problems with that in the sense that the costs involved by this scanning have to be paid by the company that actually books the containers.

H.D. Hitzert can be contacted at h.d.hitzert@reukema.com.