Although last year brought a decline in Europe’s paper recycling rate, the continent is still performing strongly in world terms. Having reached an impressive 72.2% in 2009, the recycling rate for the EU-27 plus Switzerland and Norway was recorded at 68.9% for 2010 - equivalent to an increase of 10 percentage points when compared to 2004. And according to the European Recovered Paper Council (ERPC), the industry will be setting itself an ambitious new recycling target for the period to 2015.
The Euro sovereign debt crisis notwithstanding, several of the major European economies continued to record growth in the second quarter of 2011, leading to increased demand for recovered fibre around the continent. At the same time, Europe was impacted by a continuing upturn in demand from Asia’s leading recovered fibre consumers - including China, India, Indonesia, Thailand, Vietnam, Taiwan and South Korea. Indeed, the region’s demands on European suppliers have been intensified by the fact that the tsunami in Japan has hampered the country’s fibre exports over the last few months.
OCC prices began in April at around $235+ per tonne and were some $10-15 higher by the end of June; over the same period, mixed papers advanced by $5-10 from their starting point of $227+ per tonne. Meanwhile, freight rates between Europe and Asia weakened slightly during the second quarter as a result of new vessel capacities being brought on stream, but a correction is anticipated in the near future.
Much has been said about efforts within Asia to boost domestic fibre collections so as to reduce reliance on imports. However, consumption is developing so swiftly across Asia that, in the foreseeable future, these markets are likely to depend on levels of imports which are at least similar to those of today. Taking China as an example, there was understandable and widespread concern when its total imports of recovered fibre declined to just over 22 million tonnes in 2010 from more than 27.6 million tonnes in the previous year. However, statistics for the first quarter of 2011 paint a brighter picture: Chinese imports jumped from 6.367 million tonnes in January-March 2010 to 6.569 million tonnes this time round. My own view is that China will buy in approximately 26 million tonnes of secondary fibre this year.
While the UK remains easily the largest European supplier to the Chinese market, other countries are now increasing their slice of this export cake. Comparing the first quarter of 2011 with that of 2010, shipments to China from Portugal jumped more than 28% while those from Sweden and Turkey soared, respectively, 46% and 116%. However, Europe’s percentage share of the Chinese import market is likely to be trimmed this year, partly because of ongoing concerns over quality. Again, it is my own belief that the U.S. will gain around 1 million tonnes of additional business in China this year - much of it at the expense of Europe.
As for shipments to Indonesia, another of Asia’s leading recovered fibre consumers, the reverse could well be true in 2011. Europe supplied 51% of the country’s fibre imports last year - equivalent to some 1.257 million tonnes - and could well build on this proportion in 2011 because, as we learned at the late-May BIR Spring Convention in Singapore, freights from the U.S. and Japan to Indonesia are not competitive.
With the recycling rate in Europe already hovering around 70%, how well-equipped is the Old Continent to deal with growth in both domestic and Asian demand? Recent feedback from France, for example, suggests merchant processors’ stocks registered very little improvement in May and June despite healthy collection levels during the course of these two months. And for the U.K., demand for the lower grades remains healthy whereas overall supply of secondary fibre remains so tight that some merchants are reportedly travelling significant distances outside of their normal catchment areas in the search for material.
In contrast, there was a reduction in prices of the lower grades in Germany at the beginning of June as a direct consequence of consumers’ large stocks of finished product. The country’s major cardboard manufacturers are expected to dip out of the recovered fibre market on occasions during July and August.
Meanwhile, as we enter the second half of 2011, the recovered paper industry in Europe stands on the threshold of major developments that will shape its course over the coming years. First, the European List of Standard Grades of Recovered Paper and Board was finalised this Spring and goes forward to the European Committee for Standardization (CEN). Among the changes, the number of grades has been increased from 57 to 93 and a non-paper component threshold of 1.5% has been introduced for all grades. Some experts within the European paper recycling industry have expressed the hope that this could be used one day as the template for a global list which would facilitate business transactions worldwide.
We are also nearing the moment when so-called ‘end-of-waste’ criteria will be agreed for recovered paper at EU level; in other words, the point will be defined in the handling and processing chain at which a material ceases to be a waste and instead becomes a product, therefore falling outside of onerous waste legislation strictures.
But even as our material in the EU stands on the brink of this welcome and deserved boost to its status, we hear of legislative complications elsewhere. In Turkey, for example, brand new rules require those domestic firms wishing to export recovered fibre to obtain a letter from three main domestic mills declaring that they do not need that particular grade. The immediate impact of this new ruling is that fibre exports from Turkey juddered to a halt at the beginning of June.
* Elements of this report are based on information provided to the latest Paper Mirror produced by the BIR world recycling organisation for the benefit of its members.
Ranjit Baxi can be contacted at rsbaxi@jandhsales.com.