Going with the flow

Demand for recovered fibre has kept pace with supply heading into the fourth quarter of 2015, keeping prices for most grades stable and allowing sellers to serve markets near and far.

A trader in Western Europe says “demand from European mills has been quite healthy,” which has kept inventory at most recycling plants at low levels. “There are no stocks at the collection points or at traders’ warehouses with regard to OCC (old corrugated containers),” he says.

Demand from the larger containerboard mills in China remains a factor in the European market, he says, although it has fallen from an earlier peak. “China is up and down,” the trader comments. “The three Chinese buyers in Rotterdam are still making purchases, although at lower levels than normal.”

The long-term impact of one of those Rotterdam buyers, America Chung Nam BV (ACN Europe) can be seen in its announcement celebrating its 1 millionth container shipped from European ports.

The company held a dockside ceremony in Rotterdam in September 2015, with the vice mayor of Rotterdam crediting ACN Europe for its “major contribution to the volumes moved through our port.” Although ACN also sells some brokered plastic scrap, the vast majority of those containers have been filled with OCC and other recovered fibre grades.

While the summer and early autumn of 2015 has featured declining metals prices—particularly for iron and steel scrap—collectors, processors and traders of recovered fibre have enjoyed relative stability.

Eurostat’s measurements for the first four months of 2015 show a relatively flat average monthly price range of €123 to €127 per tonne for the different grades and transactions captured by its methodology.

Using United States-based pricing collected by RISI as a benchmark, OCC prices increased after that, rising from around $72 per ton in April to around $88 per ton in September.

As of early October, the Western European trader remarked, “China has tried to bring prices down, but they will not succeed because of low inventory.”

The relative strength of the U.S. dollar against the euro, however, means Europe remains an attractive shopping region for Asian mill buyers. Also adding to the flow of fibre traffic from Europe to Asia is affordable freight rates.

“Freight rates have gone down over the past several months for all Asian countries,” says the trader. “There is not much cargo [heading from Europe to Asia] and lines are also suffering on rates they are getting for their haulage from Asia to Europe,” he adds.

Europe’s domestic mills remain steady buyers based in part on an overall economy that, while far from booming, has shown some encouraging signs in 2015 when not distracted by the “Grexit” drama or other geopolitical situations.
 

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Throughout 2015 industrial production in the 28-member European Union has trended toward growth, according to Eurostat, with even the vacation-heavy month of July showing increased output compared to the previous month.

Comparisons against July 2014 also are encouraging, with production in the EU overall up by 1.9% and durable goods production improving by 2.6%. Nations showing particular strength include Ireland, the Czech Republic and Slovakia.

The July 2015 industrial production index figure of 102.1 for Spain is one of the few times that nation has enjoyed a triple-digit index figure in the past few years. Fellow financial crisis casualty Italy also showed a strong July, with a 106.2 index figure.

Europe’s economy heads into 2016 with the potential for a good year.