2024 certainly started with an unexpected situation, at the end of December it became apparent that there was a situation developing in the Suez Canal with shipping being attacked by Houthi. This was causing severe issues to shipping, which in turn is having a major impact on the movement of recovered paper to the Far East.
It is true to confirm that demand remains strong in the Far East markets, however, because of the problems in the Suez Canal shipping lines have increased costs and at times these have been reported up to $1500 per box.
At the beginning of January, it was clear that nobody understood the full picture, with many buyers holding back purchasing until the picture had become clearer. And whilst it true to say still that the situation continues to fluctuate daily, many buyers last week purchased high volumes as there is now a bigger fear that there will be a shortage of containers as the resulting hold ups in logistics means that there is less containers being returned to the West which some commentators feel will cause major issues come February.
The impact on recovered paper pricing saw price reductions at the beginning of January by £20 per tonne, however, this has recovered slightly, and we have seen more like a £10 per tonne reduction in price from December.
In Europe, the paper mills held back watching the developments in the Suez Canal, the mills are well stocked, some have tried to take the opportunity to reduce pricing but in the main most have looked to remain stable and try and regain some market presence that they had lost from last year. It is true to say that European pricing remained stable in most sectors.
The outlook for February is hard to predict our feeling is that the real issue will be the availability of containers for shipment, this is the biggest issue faced in the short term until the Suez Canal issue is resolved, this could lead to heavy reductions on price as material will be difficult to move. However, conversely what this will mean is the markets in the Far East will be starved of the material they require once the shipping situation is resolved we fully expect pricing to spike. We are expecting a very volatile pricing situation.
Newsprint & Graphic Papers
The price of News & Pams (N&P), OI Pams and OI News reduced on average £5 per tonne, driven by the above.
Newsprint pricing will be confirmed shortly and this could also affect the recovered paper pricing for February.
Packaging
As stated, Far East with pricing reduced by approximately £10 per tonne.
Pricing in Europe for OCC has either remained stable or reduced depending on the mill group you deal with. The price differential between Europe and the Far East has reduced and is more aligned but there is still a differential of around £5 to £10 per tonne.
Mixed paper pricing has reduced dramatically we have seen price reductions of £20 per tonne as the main user India has maintained its domestic price and we have seen the increased costs in freight.
The UK mills remain quiet and purchasing only contracted volumes, little to no spot volumes available.
The folding box board sector is beginning to show some signs of recovery with increased purchasing over the last couple of months. This counters the falling demand from the Far East as well as the Tissue market where demand has fallen due to a high number of mills shuts over December and January.
Tissues
Demand has fallen dramatically with mills taking downtime during both December and January in this sector, for the same reasons as reported last month. We continue to see price reductions in all grades of between £5 to £10 per tonne.
Pulp Substitutes
Pulp pricing has reduced as many of the larger off-takers have reduced purchasing because of weak demand. As reported earlier we have seen prices fall by €10-€50 per tonne depending on the grade. Some mills have stopped using certain grades and look to change their mix, so we expect volatility in this market for a few months.
Pricing prediction
With the anticipated shipping problems, it is our opinion that February could witness reductions in pricing as it will become difficult to collect recovered paper. However, as the cause is a supply chain issue, the demand remains, and this bottle neck situation will result in a quick return to increased price once the situation is resolved.