Insights into the paper recycling industry
Pricing in Packaging and bulk grades to the far east collapsed by £30 per tonne in January with further reductions expected throughout the month. As confirmed last month the domestic market and Europe, the paper industry is under considerable pressure as demand for finished goods has seriously weakened, paper mills are well stocked, and the energy crisis continues to cause serious problems. This has resulted in January further price reductions across all sectors including, packaging, De-ink and Tissue. Indeed, in Germany the largest paper manufacturing country in Europe price and demand is extremely fragile with mill downtime and substantial reduction in offtake expected across the board.
The only light at the end of the tunnel is as the far east recovers from the pandemic there is a large expectation that China will re-enter the world market in this quarter or the second with high demand, but this is fragile and can change quickly but we live in hope.
Newsprint & Graphic Papers
Pricing and demand in this sector are weak, pricing has reduced by £10 per tonne in January and it is expected that this will further reduce throughout quarter one. Mills have high stocks and order books are poor. Supply in recovered paper appears to be outstripping the demand of the mills.
As stated in November, an assessment of volumes and stocks would be undertaken in the new year before pricing is determined. As anticipated the fact that the volumes and stocks are high the demand for finished goods poor, no sign of any improvement in the energy situation, rising costs due to inflation. Paper mills are looking to recoup costs where possible, therefore pricing for recovered paper it is expected will reduce throughout this quarter.
Unlike December pricing in January decreased for both OCC and Mixed Papers to the far east and European / UK mills have reduced pricing as they face all the same issues as the De-ink paper mills. UK supplier’s prices remain high compared to European suppliers because of the value of the PRN / PERN (Packaging recovery note) which is supporting effectively low pricing to all paper mills domestic and export.
As confirmed last month order books for finished goods remain weak, and it is anticipated as per the De-ink Market that there will be downward pressure throughout Quarter 1 particularly domestically and in Europe.
The folding box board sector which produces packaging for the food and pharmaceutical industries, continues with downtime across Europe and are reporting reduced orders for its finished goods. The box board sector uses high volumes of Mixed Papers, Scanboards, Multigrade & OI Pams. However, unlike December we are seeing increase in the demand for the grade of Scanboards (Pharmaceutical and food packaging) and pricing has strengthened slightly. This is a rare but interesting chink of light as this grade is a good barometer for demand. Hopefully, this is a positive sign of things to come.
Prices and demand in this sector have reduced, as paper mills recovered paper stocks are full and the demand for finished goods is weakening. Multigrade, Scanboards, De-ink grades prices have all reduced. However, there is concern that there is a real lack of supply and pricing could therefore swing quickly in the coming weeks.
Pulp sub grades pricing and demand have reduced in line with other sectors.
As stated, it is our opinion that in quarter one and the beginning of quarter two, pricing and volumes are going to be challenging. The only good news is the possible opportunities in the far east, but this is dependent on China coming fully out of the pandemic and clearly this is a slow and not steady process. Other than that, it is working through the recession we are in and coming out of the other side.