Contain Your Enthusiasm

European traders of recovered fibre are facing some springtime challenges in 2012, including a shortage of 40-foot containers that is making it difficult to serve the export markets.

According to H.D. Hitzert of Netherlands-based Reukema Recycling (www.Reukema.com), “We are lucky that the domestic market can absorb tonnage right now, because paying for containers from Rotterdam is tough, as is obtaining space on container ships in April.”

Joris de Caluwe of Netherlands-based Ciparo BV (www.ciparo.nl) also cites rising freight rates and container availability as concerns, saying, “In March and April we are facing general increases of $200 to $300 for 40-foot containers, and a lack of containers.”

Because China is not exporting as many finished goods to North America or Europe (in particular), many containers are “stuck over in China,” adds de Caluwe.

Both traders note, however, that European mills have demonstrated consistent demand in the first quarter of 2012, helping to keep material moving and stabilise prices. “The European mills are pretty eager to buy at the moment,” de Caluwe remarked in mid-March.

Adds Hitzert, “Late in 2011, we had a situation where the inventories were quite low. Then the export market came back stronger in January and February of this year, which European mills were not prepared for, so the mills in Europe started to buy up material as well.”
 

Adding to European demand is the ramping up of SAICA’s new mill in Manchester, England, says Hitzert. “That mill has started sourcing quite strongly, some 30,000 to 35,000 tonnes per month, reducing what is available for the U.K. to export,” he says.

On the supply side, the generation of material in early 2012 has been slow, according to de Caluwe. “There is not a lot of inventory at the merchant level at all; everyone is seeing a decline in the generation rates,” he remarks.

Material scarcity is “across the board for all grades,” adds de Caluwe, including a noticeable decrease in the number of newspapers being printed.

“I would definitely say collections are down compared to last year,” concurs Hitzert. “Council collections of low-grade mixed papers are probably down 3% to 4%. That may not seem like a lot, but when considered for all of Europe, it is. Some are estimating the collections from businesses are down as much as 20% – from offices, from printing houses and for packaging from retail shops.”

The decline in old newspapers (ONP) is also noticeable to Hitzert, who comments that these shipments “are getting a little more colorful, which means the actual newspaper content is down.”

At the Paper & Plastics Recycling Conference Middle East (www.PaperRecyclingConference.com), which was held in Dubai in late February, Peter Engel of United States-based Moore & Associates offered an overview of the state of global recovered fibre markets.

Engel remarked that demand for high-grade fibre is likely to increase as China’s Nine Dragons paper company ramps up two machines that will produce printing and writing paper. The global tissue market, as well, was characterized by Engel as a “major growth sector.”

High-grade supply changes are considerable, however, said Engel. “Conventional office paper recycling programs are declining in favor of mixed paper and single-stream” collection efforts, he said. “Currently, Moore & Associates estimates that up to 65% of SOP (sorted office paper) in the United States is shredded paper, which is up from less than 10% in 2000.”

Adding to high-grade scarcity is the decline of the ink-on-paper book, magazine and directory printing industries. “The supply of pre-consumer grades is declining due to the overall downturn in the printing industry,” said Engel.

Regarding the old corrugated containers (OCC) grade, Engel referred to the European containerboard sector as being in an overcapacity situation. Still, he declared, “No major untapped sources of OCC remain in developed countries; new supply will need to come from mixed fibre and single-stream collection.”

On the OCC supply side, Engle declared, “No major untapped sources of OCC remain in developed countries; new supply will need to come from mixed fibre and single-stream collection.”

A possible scenario, he said, is that within five years unbleached kraft pulp prices “could be competitive with OCC at the top of pricing cycles in China.” Added Engle, “An even more likely scenario is the use of additional virgin kraft pulp in place of some OCC in the southwestern United States.”