European Paper Markets Start to Stabilize

The following is a quarterly report on paper stock markets in Europe. The observations have been put together by the Bureau of International Recycling, a  Brussels, Belgium-based recycling association.

Baltic countries. There is renewed confidence in recovered paper demand for the Baltic countries. Mills in Latvia and Lithuania have been buying larger volumes of recovered paper and prices have risen slightly. The Singapore-owned Horizon paper mill in Estonia has been bought by South African interests and an increase in capacity is now anticipated.

Czech Republic. Sales of recovered paper were stable in the final quarter of 2001 and collectors have been left with low stocks. There has also been price stability with the exception of newspaper and bleached woodfree PE-coated board. In terms of exports, there has been no substantial change to report. Looking to the first quarter of this year, cardboard and mixed paper prices are expected to come under pressure while paper mills are likely to reduce their orders if production capacities cannot be fully met.

France. Last year ended on a high note in terms of both volume and demand, while stocks in recovered paper depots dwindled to almost nothing. Paper production dropped by five percent or around 280,000 metric tons at the end of September whereas there was a 50,000 metric ton increase in secondary raw material use. This is a direct consequence of sustained demand for recovered paper at a time when the paper industry has talked mainly of lower production which, of course, is not necessarily linked to lower sales - particularly for corrugated.

This new year is unlikely to be as difficult as some analysts have predicted and it will be interesting to see the results of the papermakers who have effectively cut the recovered paper industry’s prices by a factor of three since July 2000, when prices of finished products made from the industry’s materials have dropped globally by 8 percent since September 2001.

Germany. Several mills cut production last month due to slack orders. However, these moves affected only deinking grades. Reduced orders for mixed paper and board were offset by high demand from the Far East and an increase in volumes shipped from Germany to France and the Benelux countries. Overall, the year ended with balanced market conditions and no price changes; middle and higher grades were also stable.

The final quarter of last year began with a stable market and a growing supply of paper stock. Demand for sorted mixed paper outstripped supply due to an increase in exports to Asia. Demand for deinking material decreased during October in line with reduced mill production levels. Supply and demand were in balance for supermarket corrugated paper and board.

Profits on individual grades depended on respective market conditions: sorted mixed paper and board became more expensive, particularly for export; supermarket corrugated paper and board remained stable; and sorted deinking grades fluctuated slightly at relatively high price levels. Higher grades were in good demand and maintained satisfactory price levels.

Lower grades were in greater evidence during November. The overall market ended up the year more balanced.

Italy. The final months of 2001 were lackluster. In December, prices for lower grades dropped by around 20 percent. Mill stocks were low but poor market conditions left manufacturers unable to pay more for their raw materials. Higher grade prices were stable although woodfree shavings and newsprint suffered a slight decline in the days leading up to the Christmas break. There has been some improvement in exports, notably to China, Turkey and Ukraine, and to a lesser degree India and the other Far East countries.

In general, further price reductions are expected this month.

The Netherlands. Mill and merchant stocks are low as a result of a downturn in the domestic economy. However, inventories were expected to build over the winter break due to extended mill shutdowns and a reduction in shipments to the Far East, where demand - notably from China - has been good. A small price reduction for commodity grades is likely this month, and many industry experts are anticipating that domestic mill demand will remain below normal levels for the first quarter of the year. Generation also is expected to fall.

Spain. Recovered paper remain low, although a small increase was expected last month. Mill inventories of recovered paper, meanwhile, are normal. The packaging industry has experienced poor demand for its finished products while other paper sectors have witnessed either normal or slightly poorer market conditions than normal.

The final quarter of last year started with a small price increase for news, inserts and lightly printed shavings. Mill demand remained steady until mid-November but subsequently slowed to create uncertain prospects the first quarter of this year. Many Spanish mills produced for only two weeks in December in response to weaker demand. This impacted on demand for recovered paper and led to a reduction in European OCC, news and other grades during December.

A price reduction for packaging reels, newsprint and cardboard products was not ruled out for the end of 2001/early 2002, although lower generation of recovered paper may help keep prices stable in January.

Turkey. The market changed slightly in the final quarter of 2001 with low stocks reported in paper stock plant and mills, as well as stronger mill demand for all grades. Collection has continued to run at low levels due to seasonal factors and stagnation in the Turkish economy.

Demand for OCC and mixed grades have shown signs of improvement and this trend is expected to continue in the next few months. Domestic prices have increased sharply and are in line with import levels. Import volumes are likely to increase during the next couple of months.

There has been a continued downward trend in newspaper sales and supplies of news and inserts have dropped accordingly. Mills have reasonable stocks and their requirements are expected to grow in the near future.

There was improved demand for higher grades in the fourth quarter and mill stocks fell during the period. A further increase in demand and higher prices are anticipated for the coming months.

United Kingdom. Expectations were exceeded in the last quarter of last year with many board mills running at full capacity through the holidays except for statutory holidays. However, some newsprint mills took downtime and there were continuing problems for white wood-free paper producers. Tissue mills have been operating at high levels although they have tended to use a larger proportion of pulp in their products. Overall, there are grounds for anticipating a market upturn in the second quarter of 2002.

Recovered paper stocks dropped sharply in early November but were subsequently rebuilt, aided partly by a price increase for KLS. Export sales have remained high with packaging grade shipments boosted by some exporters issuing Packaging Export Recovery Notes. Meanwhile, continuing low deep sea freight costs to Asia have helped maintain sales momentum to the region at prices equal to, or sometimes better than, those available domestically.

While most processor announcements during 2001 related to mill closures, there was also confirmation of funding for a new newsprint machine to come on stream before the end of 2003.