Market Report: Recovered Fibre, Europe

Recovered Fibre>>Europe>> Dominique Maguin, La Compagnie des Matieres Premieres

Normally during the summer, we have quite a quiet period because quite often we have some prices which are decided for July and are recumbent for the month of August because mainly it is a vacation period for everyone. It is preferable for the buyers, for the customers, and for the sellers, to settle an agreement at the beginning of July, agreeing on prices for two months. And as a matter of fact, we saw prices moving during the month of August, which means that the demand was quite good from Europe. It was even stronger from Europe than it was from the Asian mills and it was enough to support prices and to push some prices up.

We have some increment prices for €5 to €10 during the month of August, which was quite unusual I have to say. Why? Because the demand is important and also because the generation of tonnage is still not so important. So we have the two problems. The companies which are in charge of the collection are not collecting as much of the waste as they were doing in the past so we are still missing tonnage so the offer is still a bit below the level of demand. That is why, of course, we see some impact on prices. And I think also the second point, which is important to me, is to notice that the level of inventories, at the customers’ level and at the merchant level are very low. So the level of the raw material at the consumers is very low compared to what it was in the past. We could say, for example, there is a range of roughly 10 to 11 days of inventory, of consumption, in stock as raw material for consumers and that is it. Of course sometimes you can find some exception to that. At the same time, it is very low and this is everywhere in Europe!

So of course when a customer, a producer, doesn’t have a lot of inventory in front of it and if he is getting some good order books, then of course then suddenly he wants to buy more because he wants to make sure that he will get the raw material to be able to produce. So we had a lot of movement in prices due to that.

It is not the fact that the companies, the merchants are not paying to recover what they can. They are doing their best, but the production and the consumption is not as important as it was in the past years. So we are still missing tonnage there, and for that reason, we have a sort of problem between the possible offer and the possible demand. And also what we have been able to see during the summer is that our Asian buyers started to come back on the market during August. And now we have, for example, that for September we will see new movement of prices because now we have the Asian buyers which are very present in the market and quite running everywhere to find tonnages. And at the same time, the European mills they need to find the stuff. And we will not see a huge generation of tonnage coming off the street. For that, we need a better level of consumption, and that is still not the case.

The de-inking material, there is a very different information there. We just have been informed in the last week of August that there may be a possibility of a merger between Stora Enso, Holmen and Norske Skog, which the three of them are the biggest producers of the biggest de-inking mills in Europe. So we can image what is going to happen if these guys decide to merge their companies together. Of course we can think that if they do that, it will reduce the capacity in some way. They will decide to close down some mills and run the most efficient ones they have. Because of course what we still know is we still have another capacity on this market in the world, but also in Europe where the old industry is based in America and in Europe. If we see this kind of merger, then it means to me that they were trying to catch some inefficient plans and inefficient mills to be able to better their own businesses.

Specialty grades such as and tissue grades are in demand. We have also had a very good time because the prices went up in activity on the paper side, and also pulp prices went up pretty quickly. And now what we are seeing is that the level of inventories on the pulp are going up a bit, and it seems that after this long period of high prices of pulp, we are facing some decrease in price already. We have to be careful of that part, because it means that to utilize virgin pulp or de-ink pulp or recovered paper, then there is a risk that these materials are under pressure on the market. Frankly speaking, I think that we still have a nice period in front of us. It seems that we find of the market that the crisis is not over but we are recovering better from the crisis than we did previously in the last eight-month period. So the first figures we are seeing now from the results of companies from the first six-month period of the year are quite good proving that I think it is also fine for our business that there will be some more generation of possible paper to be recovered in the next month.

One of the risks we have in our sector is the credit of our customers, because they are in a weak position. The results were not good in the last years, so they are in quite difficult shape. All these kinds of things we have to think about when we speak to the customers and do business with them. 

Dominique Maguin can be contacted at Dominique.maguin@cmp-sas.com.