Export brokers can offer European recyclers a profitable scenario despite the long distances involved, according to presentations at the European Paper Recycling Conference, which took place in Brussels in early October.
Several nations in Asia, most notably China and India, have experienced “continual growth over the last 10 years” in their scrap paper consumption, according to R.S. Baxi of J & H Sales International Ltd., London. That growing consumption “is being satisfied with imports,” Baxi stated.
While this stronger demand is good overall for the recycling industry, Baxi remarked that it also presents challenges. Problems cited by Baxi include overseas buyers who pull out of the market when prices are high and overseas freight increases that can catch prompt fiber buyers to shift their focus from North America to Western Europe suddenly
Baxi said he is working with recycling associations to “lobby with shipping lines . . . to synchronize freight increases in Western Europe and North America.” Baxi remarked, “Recovered paper is an important commodity and must be respected.”
Regarding India in particular, Baxi said there about 600 mills operating in that nation with a growing demand for secondary fiber that is expected to reach 9.3 million metric tons by 2015.
Andreas Otto of Melosch Export, Hamburg, Germany, helps his company ship some 1.2 million metric tons per year out of Germany to some 65 mill customers in East Asia.
According to Otto, for German recyclers, “The closer the packing plant is to the harbor [of Hamburg], the more attractive the export price is.”
Otto believes that Germany’s 65 percent recycled fiber utilization rate has about reached its peak, as has its 73 percent recovery rate for scrap paper. With those rates currently in place, German recyclers are processing about 1 million metric tons per year more than domestic mills consume.
The demand for this excess scrap paper is not likely to go away, says Otto, as China is still consuming just 99 pounds of finished paper per person, compared to a figure of more than a quarter of a ton per person per year in the established German market.
A wild card for European exporters in the future will be shipping rates, which currently are very affordable on the backhaul from Europe to China.
Niclas Egmar, head of trading derivatives for Sweden’s Ekman & Co. AB, relayed to attendees his view that hedging provided a safe way to ensure profits when recovered fiber pricing is volatile. Egmar said recyclers can ensure themselves a steady profit through a hedging agreement—sometimes a smaller profit than they may otherwise see, but also guaranteeing a profit during periods of falling or suppressed pricing.
The European Paper Recycling Conference was hosted by the Recycling Today Media Group and took place at the Hilton Brussels.