It’s that time again as we take a look at the ups and downs of the paper recycling industry in our monthly market report. We hope you find this useful.
June 2023 Market Report
Pricing for packaging grades fell again in the UK this was driven in part by the fall in value of the PeRN and by market price reductions in both Europe and Asia. Paper mills continue to struggle with poor sales and to offset this they are reducing raw material costs. Demand across all sectors is weak and many mills continue with downtime.
The outlook for Quarter 2 remains weak.
Newsprint & Graphic Papers
As previous months pricing and demand remains low, most paper mills are only consuming contract volumes. There is also little to no demand from the Far East.
OI News and OI Pams sales remain reasonable as these grades are used in other sectors and markets in comparison to domestic News and Pams. Volumes of these grades are relatively scarce.
As stated last month we expect increased volumes of Mixed Papers as collectors start to close sorting lines as the advantage to sort news and Pams will become nullified.
Packaging
As confirmed pricing has reduced again in the two main markets. European demand is still very weak and prices low, it has been confirmed one major group that packaging groups across Europe are losing money as they have seen finished goods pricing fall by 50% and significant cost increases. The only way to recover some of the margin is to reduce the input costs of the raw material.
OCC and Mixed pricing fell by between £10 to £20 per tonne.
The outlook for the PRN (Packaging recovery note) price is uncertain. Traders suffered a drop in April and early May of some 60% which meant negative margins in many cases for deals agreed before this reduction. A reduced obligation target was announced against a backdrop of strong PRN generation figures triggering this price collapse. There was some recovery later in May and early June as the EA announced that they will no longer accept claims for mixed papers higher than the nationally agreed 34% but as there has been no change in the fundamentals it could well be that we see a smaller drop again as buyers and sellers look to find a workable value.
The production of white top board continues to see downtime and weak order books.
The folding box board sector continues with downtime across Europe, prices are now crashing as the far east market has become flooded. The box board sector uses high volumes of Mixed Papers, Scanboards, Multigrade & OI Pams.
Tissues
Prices and demand in this sector remain weak as mill stocks are high across Europe & the UK. We have seen further reductions again in Europe on pricing in this sector of up to €30 per tonne. The UK has been slightly more stable in pricing; however, it appears to have fallen by between £15 to £25 per tonne.
Pulp Substitutes
Pulp sub grades pricing and demand is becoming under pressure as pulp prices have reduced, indeed we have now the situation were in some cases Pulp substitutes are of higher value than pulp!! Pricing down €20 per tonne.
Pricing prediction for the paper recycling industry
As we come to the end of Quarter 2 which we expected to be tough, the anticipation for Quarter 3 is that pricing will continue to be under a downward pressure whilst paper mills will also be faced with the dilemma of falling availability of recovered paper.
We believe this will place further constraints on the market but not necessarily on price of recovered fibre, but we do anticipate further downtime, and this in turn will place further restrictions on cash flows of the paper mill / groups, as they see finished good sales continue to fall.
It seems strange that we are faced with this situation when significant new capacity (in the packaging industry) is also starting in the coming weeks in Europe, but this in our opinion will only enhance the difficult situation the paper mills are faced with and increase the strain on their liquidity.
Sadly, the economical situation is not giving hope that demand will come back soon especially in Germany, it is hard to see how the situation will improve.
But ever the optimist, we hope to see a good summer, with plenty of us on holiday enjoying the sunshine and out spending our money buying as many goods as we can that have packaging and reading lots of magazines and newspapers.