Like the September market for the recovered paper, we have seen some price improvements, for OCC and Mixed papers driven again by demand from the Far East. The European markets upturn however, was short lived and there is a large lack of demand in all paper sectors.
Many mills are reporting that pricing for finished goods are making it financially impractical for them to increase the price for recovered paper even though they may need this for their productions. They would rather take downtime in some cases than increase the input costs against falling finished goods prices and increased losses.
Whilst we had expected for Q4 to see an increase in demand from the paper mills in Europe for the Christmas period this now will not happen and pricing will only increase in Europe if demand and price for recovered fibre for the Far East markets are maintained, therefore putting pressure on other markets and sectors. But these prices for OCC and Mixed for the Far East markets could equally result in further downtime and closures in Europe making the situation worse. The market is in a very delicate situation.
Newsprint & Graphic Papers
With Mixed paper pricing increasing this will place pressure in this sector for N&P its main feed stock. However, it remains to be seen if this pressure in high Mixed pricing results in downtime rather than price increases. Pricing for N&P this month is stable in the UK and Europe but expect real pressure to begin during this month for pricing of N&P in November.
OI Pams with high brightness (so mainly Super Calendared) continues to be in demand across several mills in Europe to help increase the brightness of their Newsprint.
As stated, pricing again increased in this sector as OCC from the Far East saw an upturn of £20 per tonne in some cases. In mainland Europe prices also increased slightly but not to the levels being quoted from the Far East, it is noticeable that the Far East price compared to Europe for OCC there is now a £40 per tonne differential.
Mixed paper equally there is a gap in pricing for Europe and the Far East which roughly equates to the same as OCC.
The UK mills have followed suit of the Far East markets and increased their prices and spot purchasing to ensure supplies.
The folding box board sector continues with downtime across Europe, but we are seeing higher demand from the Far East in this sector, as well as the Tissue market.
As stated last month prices and demand in this sector was finely balanced but it is clear now that supply of recovered paper grades in this sector is becoming less, so we are seeing increases in pricing, not to the extent that had been anticipated but some movement. It is interesting that some commentators are reporting that the away from home market is still suffering with weak demand, so again the market remains finely balanced.
Pulp pricing we expect weak demand in October, many mills are not buying any of this product including the bigger users in Europe. Prices to fall by €15 per tonne. It should be noted that this markets main demand is Europe.
In October, we have seen a very strange market, high and strong demand from Asia. Very weak and low demand from Europe in particular the packaging companies. Newsprint and Tissue sectors remain finely balanced, and we expect to see price movements in November assuming the Far East demand remains strong.
In September we had hoped to see improvements in the German market, this has not happened. We are now fully expect that in Europe there will be no demand from the packaging producers this winter, volumes and pricing will be low. The UK market will be different from the European mainland as it will have to compete with Asia and its markets. We therefore expect that if the demand and price from Asia remains strong then pricing in the UK for Recovered fibre will increase during the remainder of this quarter. Conversely should the demand from the Far East fall (This is possible, as logistic rates are at an all-time low as well Asian buyers could well divert away from the UK if prices get too high). We then expect that pricing will quickly reduce.
Expectations demand and price to quickly fall in December and beginning of Q1.