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After three months of continuous decreases, prices for the brown paper for recycling (PfR) grades started to stabilize across Europe in November. Most market insiders reported steady levels or even slightly higher prices for the bulk grades sorted mixed paper and board, supermarket corrugated paper and board and old corrugated containers (OCC). The development was first and foremost attributed to good export demand and opportunities in Southeast Asia, while demand from domestic mills remained sluggish.
“Buyers from India, Vietnam, Indonesia and Malaysia were very active in Europe again in November, and this has helped stabilize domestic prices in Europe and even resulted in small price increases in some areas,” a contact noted. According to market players in the UK and Germany, OCC prices there accelerated by some £10-20/tonne and around Euro 10/tonne, respectively.
Contacts in France, Italy and Spain also said that exports continued to be good, but most of them reported stable domestic prices and warned that the market will face a difficult December and early January as most paper mills plan to take extensive downtime over the Christmas period.
Prices for the deinking grades, which started to fall in September and October, dropped again in November. According to market insiders, levels in continental Europe decreased by another Euro 10-20/tonne, while contacts in the UK reported drops of around £5-10/tonne.
Prices for the medium and high grades, which had been largely immune to the development in the bulk grade and deinking sectors at first but started to move south in October as well, decreased by another Euro 20-30/tonne and some £10-20/tonne in November.
Although collection volumes are still on the low side, prices continued to drop, with only some pulp substitutes still showing unchanged levels in November.
Another contact said that the announcement by a major tissue producer in Germany that the firm will start using pulp instead of PfR as raw material in the coming months was somewhat of a blow to the market.
“This will definitely have an effect on prices, and the trend is already down. I think the gap between the low and middle grades will narrow even faster now,” he explained.
Low demand due to production stoppages at several paper mills across Europe, relatively high inventories on both sides of the market and weak exports were among the main reasons that caused prices for the bulk grades to nosedive over recent months. Following drastic drops of around Euro 50/tonne or even more in some cases for two consecutive months in August and September, October brought more price decreases of some Euro 20-30/tonne or around £10-30/tonne in continental Europe and the UK, respectively.
While the October decreases pushed prices for some grades close to zero in some countries, some market experts said already back then that rebounding exports helped avoid a complete PfR market collapse in Europe.
“Asian buyers have been very active in the market again since September, purchasing very big volumes. Containers to Asia are not an issue and it is easy to move material to Asia again,” a contact said in late October, and others shared this view.
India is again ordering larger quantities, and other countries in the Far East are also more often pressing their noses flat at the window. This is a welcome opportunity to sell in bulk.
This development continued in November. “After three months of huge decreases, prices for the brown grades were steady on the domestic market,” a contact noted. He added that local mills were still buying only limited quantities as several of them had to reduce production due to high reel stocks. However, exports helped stabilize domestic prices. “Here and there, there are some higher prices for exports to Europe and even to some markets in Southeast Asia,” he added.
Other market insiders had similar stories to tell. “Export demand continued to be good and some buyers from Southeast Asia kept offering higher prices for OCC,” one of them said. According to him, the development was due to delays in shipments from the US to Asia.
“Some bookings for November were pushed back to December in the US, and buyers in Asia got a bit concerned, especially with Chinese New Year approaching fast,” he explained, adding that buyers’ main concern would be to get ordered volumes in by the third week of January at the latest. “With some slowdown in the US, the focus is quickly shifting to Europe,” he noted.
However, as November drew to a close, more and more industry insiders said that customers from Southeast Asia showed increasing reluctance to pay relatively high prices for European PfR.
“It is still possible to win some orders at decent prices, but the general trend does not point to more [export] price increases,” one of them said and warned that with significant downtime in the packaging paper sector expected all over the world, global PfR demand will dry up quickly towards the end of the year.
“Both raw material and finished product inventories are high across the European packaging sector and more and more mills have been announcing extensive downtime, sometimes up to three weeks, for December,” another industry insider said. He added that transportation issues might rise during the approaching Christmas season as some foreign drivers will return to their home countries for an extended period of time. However, it remains to be seen if that will be sufficient to support domestic PfR prices in Europe.
“I expect steady [domestic] prices in December. But it will be difficult for the selling side to sell all available material as some paper mills will be forced to reduce their production and, consequently, raw material consumption,” another one said.
“I don’t think there is any reason to be overly optimistic just because prices [for the bulk grades] aren’t in free fall anymore,” yet another one noted. “High energy prices and low demand will cause massive stoppages at paper mills, and the overall economic outlook is glum. We will be facing interesting times until the end of the year and during the first half of January. These weeks could become very, very long,” he added.
This article was first published in our PPI Europe newsletter. Find out how you can access the latest market developments in Europe directly from your inbox by speaking to our team.