As predicted in March, the low collections of recovered fibre across Europe have meant that we have seen significant recovered paper pricing increases worldwide. Packaging grades in Europe like OCC and Mixed have climbed quickly with large % increases. For tissue and pulp substitute grades, again with low availability of supply, has seen price increases across the board in this market.
As reported last month the Graphic Paper market continues to struggle with cheap imports of Newsprint and Graphic papers from North America / Scandinavia who have much reduced energy costs in comparison. These imports continue to put the squeeze on the mill groups operating in Europe / UK, making trading and profitability near impossible. Pricing for recovered paper, most Graphic paper groups don’t want to increase their pricing, but with the increased demand in the packaging business they have had no option but to follow suit otherwise they will lose supply.
With Easter, the announcements regarding tariffs and the subsequent crashes in financial markets, it is hugely difficult to predict what is going to happen in the coming weeks. We are aware that supplies of recovered paper are critically low and this is driving the price increases we are seeing. We are equally aware that the paper mills finished goods pricing has not increased, therefore the paper mills margins are being squeezed dramatically. Following the tariffs and the subsequent financial crashes in the markets, it is hard to envisage increased demand for packaging or paper. Therefore, this price hike could be very short lived.
Packaging
Prices have increased across packaging mills in Europe with OCC 1.04.00 & 1.05.00 rising by €20 – €30 per tonne. Far East pricing has also followed the European increase and, as they price weekly, prices are continuing to climb for these grades. It should be noted that some of the European pricing has increased due to the Far East pricing
Mixed Papers: increased by minimum £10 per tonne
4.02.00 & 4.03.00 grades – we have seen large price increases again due to there being less US material available within the European supply chain. With high demand from Europe (Germany), price increases of €20-€30 per tonne have been seen at the beginning of April.
Newsprint & Graphic Papers
This market remains in a difficult position. Supply, like all recovered paper, is weak and the European Newsprint mills (not including Scandinavia) are under increasing pressure from poor sales, increased energy costs & rising employment costs. Due to the poor availability of recovered papers they have followed with price increases. Price up £5 per tonne.
Tissues
Demand and pricing for the recovered paper tissue grades (Multigrade & SOW) has increased by £5- £10 per tonne.
Pulp Substitutes
Pulp pricing reads similarly to the Tissue sector. Pricing increased £5 – £10 per tonne.
Recovered paper Pricing prediction
Low collections, new production demands and increased demand from the Far East is contributing to supply shortages and increased pricing for recovered paper in Europe.
However, there are a couple of points to bear in mind:
Finished goods pricing is not increasing at the rate of recovered paper. This is squeezing the already tight margins that paper mill groups are enduring.
With the collapse in financial markets, it is unlikely that consumer confidence will return quickly and therefore whilst new capacity is clearly coming online we anticipate that consolidation will occur, with old mills and machines being closed.
As stated, we expect these price increases to be short-lived but with pricing for May remaining at current levels. What happens after that, remains to be seen.