Packaging (Mixed / OCC):

Prices for OCC have been up and down all summer by about £10 / €12 p ton, as mills try and use any perceived market weakness or high stock levels as an excuse to drop prices. As I write this, prices on the Far East export market have dropped once more, however with the traditionally busy period of August – October now upon us where Christmas activity is concentrated in the packaging sector, we predict that OCC and mixed prices will stay steady / increase slightly till end of October as mills stay focused on securing fibre for their production. Where we do anticipate a market correction however, especially in the UK / European sector, is when the Christmas manufacturing and subsequent packaging requirements drop off after the shelves have been filled (and re-filled) – consumer demand will cool and consequently finished paper / recovered paper requirements will also cool accordingly. On the Far east export side, rumours have also surfaced that mills are continuing to buy material even on the backdrop of reported high stocks, so as to manufacture another “crash” in these prices. Being as the UK / Ireland is heavily dependent on these markets (Over 35% of UK generated material consumption, significantly more for the Irish market), this would have a significant impact on the industry. This sector certainly needs a market correction as prices are too high viz a viz the economic uncertainty we face today, but another crash like 2008 we can most certainly do without. Needless to say, the prices will start to fall in the very near future – as ever it will be a question of when. Our predictions are Quarter 4, 2011 for the long awaited return to sanity!

De-ink:

As volumes generated of newsprint both from domestic sources and production waste were under pressure, price increases were expected but either did not materialise or were minor in value. Many producers of news and pams from co-mingle sources are being tempted to, or are indeed switching to produce soft mixed instead, at least in the short term, as in some isolated cases the price differences between news and pams and good quality soft mixed is gradually shrinking, to the point where  producers are examining if the benefit v cost incurred justifies the extra effort expended to make news and pams. Coupled with some new sorting capacity in the UK for co-mingled / soft mixed, the demand for feedstock seems to be firming up. Long – term however, in our opinion the value will always be in the production of quality news and pams grades, as well sorted news and pams will always court more interest than soft mixed, which as a grade can carry significant risk with both quality claims and potential TFS issues. From the Highlander operations in Belfast port, trading in news and pams and over issue news has been very brisk, with all of our outlets being pleased with both the volumes and quality of the materials received. Potential price corrections with this grade on its own will be more difficult to predict, especially as one UK mill is predicted to increase production in quarter 4 for 2011, although general rule of thumb is that if one recovered paper sector falls / rises, the others tend to follow.

Tissue:

A temporary reduction in capacity throughout July from one of the largest consumers of tissue grades was expected to put pressure on prices in the very short term as other mills were offered the surplus that became available as a result, however thankfully this never materialised and prices stayed exactly the same, as they have been for several months now. At the very high end of the market, Best white prices increased slightly in line with increases in pulp prices, although we suspect this is temporary as there are reports that pulp prices may start to cool off shortly, thus resulting in price reductions of about £10 p ton for pulp substitute grades. Due to the relatively high costs attached in collecting and sorting grades for this sector, many may argue that rather than being high, prices right now are realistic and deserve to be at this level on a more consistent basis. The potential introduction of new capacity in the market place, would certainly make this sector very attractive for recyclers as we feel there could be some very good returns for investment in infra-structure to service the tissue market. Again however, the same general rule of thumb applies for the recovered paper sectors – if one drops they all follow. In 2008, even though the tissue market was largely unaffected by the crash, as the nature of the consumer is different from packaging and de-ink grades, the prices still tumbled regardless.

Stephen Duffy
Managing Director
Highlander International Recycling