BIR Reports Forecasts Stronger Second Half for Paper Markets

In its quarterly report on paper stock markets during in Europe and the United States, the Bureau of International Recycling expects most countries to start seeing modest improvements with most grades. At the same time, some countries could see significant improvement in individual grades. The following is the BIR report.

 Czech Republic. Concerns over the recovered paper industry's ability to sell its material were fully justified in the first quarter although an improvement in the overall market situation is anticipated during the second quarter. For the moment, a reduction in capacity utilization by Czech and Slovakian packaging mills has placed considerable pressure on prices for recovered board and mixed grades, leading to falls of 30-40 percent.

Deinking material has suffered similar problems and prices have dropped by around 20 percent. Group 3 higher grades appear to be performing somewhat better and traders have increased their stocks.  In this generally unsatisfactory business environment, Czech exports to Slovakia, Slovenia and Germany have been relatively healthy.

Finland. Supply and demand are in balance for most grades although a surplus exists in news & inserts. Elsewhere, OCC and the other main grades are moving well, prices are stable and stocks are low. Little change is anticipated during the second quarter. Newsprint mills took downtime in the first quarter and this affected news and inserts consumption.

Coreboard and tissue mills have been running at reasonably high utilization rates and recovered paper consumption has been good. Finnish paper and board consumption fell by 8 percent last year to 1.004 million tons but there was a 0.8 percent improvement in paper recovery to 739,700 tons, thus boosting the recovery rate to 73.7 percent from 67 percent in the year 2000.

France. 2001 was a good year for the paper industry, which generally managed to maintain its finished product prices while at the same time paying less for its raw materials. 

For the first time, France saw its recovered paper stocks go down at the end of last year. In an encouraging start to 2002, January production of 830,000 metric tons was greater than last year's monthly average (excluding the traditionally quiet month of August) of 811,000 metric tons. 

Stocks of A4, A5, A1, A2 remain very low at a time of increased domestic demand. Given that there has been a rise in export tonnage despite higher freight rates, the second quarter should bring improved prices.  The prospects for the sanitary and household sector appear bright in 2002. Production increased by 2.4 percent last year compared to the 2000 total of 592,000 metric tons, while output in January 2002 was 73.8 percent higher than in the first month of last year at 51,700 metric tons.

Germany. The first quarter of this year brought low generation of recovered paper - possibly due to reluctant buying following the introduction of the Euro.  The period ended with a fall in export volumes to the Far East owing to a shortage of containers. The following increase in freight rates was absorbed by Asian buyers, and export prices remained stable.

Also on the export front, Italy placed orders for the first time in months. Domestically, Italian paper mills confirmed unchanged prices and ordered anticipated quantities. The markets for most grades are generally in balance - with the exception of in-demand sorted mixed papers and board. There had been satisfactory demand for recovered paper at the start of the first quarter and, surprisingly, collection companies built little in the way of stocks. 

The exception was sorted graphic paper for deinking for which demand decreased due to production cutbacks by some newspaper producers.

Export demand remained healthy in January, particularly for sorted mixed paper and board and supermarket corrugated paper and board. The bulk grade market was unchanged but for some minor price reductions.

February brought more reluctant demand from the domestic paper industry. However, the recovered paper sector was able to maintain relatively low stocks for most grades because of lower collection volumes resulting from the overall economic situation and because large volumes went for export. Deinking material was the exception in that there was an oversupply of material and reduced demand.

Italy. Order books are thin except for the lower grades and, in contrast to other European markets, Italy is feared unlikely to witness any improvement during the next couple of months. It is suspected that market conditions could worsen during June and July. 

The most important market segment in Italy - paper for printing and packaging -  saw little change in the first quarter, although board grades (duplex, triplex, white and gray) have experienced good and generally improving orders.

Elsewhere, the situation for mechanical pulp shavings is difficult: woodfree shavings have lost 5-10 percent in value while deinking grades have dropped by some 10-20 percent. White woodfree prices have also fallen by 10-20 percent in line with the pulp price crisis.

Lower grade stocks are low and prices have increased by 20-30 percent on the back of heavy exports to Turkey and the Far East. However, consuming mills are unable to pay these prices because the general economic crisis has made it difficult for them to achieve price increases on their finished products.

The Netherlands. Both mill and merchant stocks remain very low for the time of the year, with collections adversely affected by lower pagination and the general economic downturn.

Deink prices fell during the first three months of the year and are now among the lowest of Europe, mainly because of newsprint mill downtime. Demand has remained strong for mixed and OCC in particular, and an anticipated shortage in the latter is expected to lead to higher prices during the second quarter.

Freight rates have increased to the Far East but demand remains strong and container availability continues to be a problem. Further freight rises are forecast for April, and it remains to be seen whether these can be passed on to the customer. It is estimated that Europe exported more than 3.5 million metric tons of recovered paper to the Far East last year. Industry and the Dutch government appear likely to sign a new voluntary fiber agreement in the near future.

Spain. Paper mills proved to be reluctant buyers during the first quarter, notably where packaging and board materials were concerned. However, this reduction in demand was counter-balanced by a fall-off in collection volumes following the general economic downturn. Stocks are low of ordinary grades such as sorted and unsorted mixed paper and board and demand has been below average for the time of year.

Prices remain stable for the moment but could well come under pressure in April. In deinking materials too, recovered paper companies point to low stocks, notably in newsprint, as well as imports from France and UK. Magazines appear to be in surplus and exports are continuing to Asia. Higher grades have been suffering from reduced availability although there were signs of a possible improvement during the second half of March. Prices of No 1 white fell by Euro 12 per whereas other grades were relatively stable.

Turkey. Recovered paper prices have remained stable but stocks are below normal at both depots and mills. Seasonal factors and economic stagnation have reduced collection volumes and some producers were forced to import OCC, news & inserts and mixed grades during March.

Import prices, especially for new paper products, have become more attractive than domestic levels, while there has been a decline in exports of new paper products and other industrial goods. Inflation has been pushing up production costs but the flow of imports has prevented domestic mills from increasing their prices.

Demand for OCC and mixed grades began to fall at the start of February. Imports of OCC, news & inserts and super mixed paper are expected to continue in April. Unusually, however, there has been no import of higher grades, for which the market has been stable.

United Kingdom. The predicted first quarter downturn failed to materialize and demand for the majority of grades remained high throughout the period. Recovered paper utilization by UK mills fell slightly last year but, when taking exports into consideration, the recovered paper industry achieved its highest-ever recovery rate. Shippers imposed further freight increases during March although the bulk of these additional costs appear to have been recovered from customers. Stocks at most UK mills are no better than adequate and some smaller operators have been paying premiums to attract 'just in time' deliveries. Meanwhile, merchant processors are keeping only a working stock and are generally confident of continued demand in the second quarter. The packaging waste recovery target for 2002 has been set at 59 percent and this, together with confirmation of a new 320,000 metric tons per annum deinking facility for the manufacture of newsprint, will boost activity over the coming year.

United States. The first quarter brought a dramatic improvement for the secondary fiber sector. Price increases of $10-15 on OCC, newspaper and mixed papers can be attributed to steady export demand and a drop-off in collections due to seasonal factors and poor prices.

Domestic linerboard, chipboard and medium mills have continued to buy at below-average levels but any lack of domestic demand has been more than offset by export orders. In terms of the deinking grades, export and domestic demand remains strong for white ledger, sorted office pack, coated book stock and printed bleach grades with price increases of up to $15 per ton since the start of the year. Despite the decline in pulp prices, pulp substitute price reductions have been limited to $10 at most, thanks in part to continued strong demand from India and other parts of Asia. These grades are expected to remain stable and to enjoy continued export demand.

Overall, the U.S. market is expected to remain strong. Domestic mills are now starting to realize they may have to pay more for lower grades towards the summer when collections generally slow. Export buyers of lower grades claim there is no real demand but prices have continued to increase and appear unlikely to fall in the near future.

BIR is the international trade association of the recycling industries. More than 50 countries are represented through their national trade associations and individual companies that are involved in recycling.

 BIR comprises four commodity divisions: iron and steel, non ferrous metals, paper and textiles, and has committees dealing with stainless steel and special alloys, plastics and rubber.