December market update:

To all suppliers:

Welcome to our final market report of 2011! It has been a year of mixed fortunes for recyclers and processors alike and the markets in general have been unpredictable, testing and not short on surprises!

Packaging (Mixed / OCC):

OCC markets on the whole, have proven to be particularly robust during the price correction periods we have experienced since early October. While the prices have taken a downward turn, demand has been maintained and material has been moving relatively freely, this despite historical evidence showing that OCC is one of the first grades to “take the hit” in relation to market prices, orders and general demand. The month of December saw purchase prices swing £15 p ton up and down as major buyers popped in and out of the market, depending on their stocks, market prices, finished paper orders and available tonnage from the supply market. Even 1 week of reduced or increased purchasing volumes from the major Far East consumers can have a dramatic “cascade” effect on the future demand requirements, ergo prices, for the following immediate periods thereafter. Also, the demand for the finished paper has a major bearing on the demand for OCC – with uncertainty in the Eurozone and America – the two largest consumer regions on the planet – demand for goods and services in general is expected to take a downturn in 2012, which will have a knock on effect on the growth prospects for the aforementioned regions and as logic would normally dictate, have a knock on effect on the demand for raw materials in general, including recovered paper. Logic however, doesn’t always apply to the paper recycling market where the demand / supply balance is king and a lack of volumes in 2012 may be a major factor in where the prices fall in the first quarter of next year, as it was at the start of 2011. We don’t anticipate the prices will be anywhere near as high as they peaked in 2011, however this is probably light relief for all players in the market, as a large dose of reality was most certainly required as UK mainland prices hit £145 - £150 p ton ex works. Prices at these levels again cannot be sustained in 2012 as paper mills all around the globe continues to battle increases in all its costs, such as power and gas, which are also at record cost levels.

In the UK, the prospect of a new, fully operation board mill in 2012 may certainly boost the local markets – as of today, prices of £105 p ton ex works are being offered in the North West region, which will undoubtedly prompt rival buyers to respond. This should be a very interesting marketplace until market equilibrium is reached in this particular region.

De-ink:

This sector seems to have almost bottomed out as of the end of December, with UK prices sitting at around £115 p ton delivered mill. For 2012, we expect further capacity increases from one UK mill as part of their overall mill commissioning / operating plans which will undoubtedly increase demand in for news and pams, however this will be a drop in the ocean in contrast to the overall prospects for the newspaper industry, which remain grim. Direct competition with digital media – for both advertising and news sourcing – remain a major threat to print media and specifically newspapers, as traditional advertising markets such as car sales or recruitment for example, are slowly being shifted from print to digital.

http://www.thedrum.co.uk/news/2011/11/15/johnston-press-sees-continued-print-and-ad-revenue-decline-8-second-half-2011

The above web link highlights the current problems being faced by newspapers accurately and may be of interest to our suppliers and the below paragraph from the article sums up the main issues perfectly:

“Also in decline was the group’s largest revenue category, display advertising, falling by 3.4% during the second half, while employment revenue fell by 19.2%, having declined during the first half by 30.4%.”

As you can see, these are significant falls in revenues for any company.

The industry however, is far from dead and there will always be a demand for newspapers – as the new Chief executive of one of the largest newspaper printers outlines, there will need to be changes for the industry to flourish once again:

http://www.thedrum.co.uk/news/2011/11/17/new-johnston-press-chief-executive-stresses-need-get-right-balance-between-print-and

Tissue:

Prices have fallen £60 p ton since October 2011 and this sector shows the largest overall reduction of around 40%.

Again, the situation seems to have almost bottomed out, although the further fall in pulp prices in December was a blow to the short term outlook for this sector.

There is however good long – term prospects for this sector as demand for tissue products as a whole continues to steadily grow.

At the high end of the market, being White Heavy Letter, Best white 1 and 2, short term prospects are still weak with orders being very scarce. Case in point, a large collector and supplier of Best Whites in Europe had their December allocations cut from 2000 tons to just 100 tons. Drastically falling pulp prices, coupled with weak order books has seen movement of these grades curtailed significantly, with market movement not expected till February at the earliest. The scarce orders that have been available have been around the £250 p ton ex mark – a reduction of approximately 30% on peak price levels.

All that is left to do is wish all our suppliers a very prosperous New Year! May we thank you all for your continued support and business and we look forward to being of service to you in 2012 - all the best from the Highlander Clan !!!

If you have any questions about the markets or any other aspect of this article, please do not hesitate to contact Stephen Duffy at 01355 524 215

Stephen Duffy
Managing Director
Highlander International Recycling