There has been quite a bit of market activity over the last two weeks and we are delighted to provide a summary of this as enclosed:

Packaging (Mixed / OCC):

As of writing this, the price of OCC on the export market, has fallen a couple of times, with cumulative price drops of about £15 over the last couple of weeks. In an unusual situation, demand for OCC remains relatively strong with no sudden halt in buying expected anytime soon, however with many mills in the UK, Europe and China having relatively high stocks of OCC, the markets have found it a prudent time to drop prices and there would be an ability to survive on current stock levels, if merchants / suppliers decided to hold onto stock in the hope that prices would increase again – a situation we feel is unlikely in the current climate.

One of the main dangers in a falling market, is the chances of quality claims being received – especially on the export market where the opportunities to challenge them are almost impossible, for logistical and cost reasons. Shipments of recovered paper from the UK / Ireland can take up to 8 weeks to arrive at its destination. When material loaded in containers are on the water to their destination, during a period of price reductions more often than not quality claims materialise, as buyers – especially in the far east – see opportunities to save money by paying “extra attention” to the quality of materials supplied by the sellers. In many cases, merchants who have either supplied mills direct or to brokers feel aggrieved, often justifiably, when quality claims start to filter through for material supplied just before the markets start to decline. This trend is as old as the concept of exporting recovered paper itself, and can often leave a bitter taste in the mouth as the materials and processes stay the same, yet the buyers mysteriously start to find problems with the quality. Our advice in these times is to pay extra attention to the quality supplied, as we can assure you the buyers will most certainly do so!

The exact same trends form for mixed paper, however this is far more susceptible to quality claims and even outright rejections due to the subjective nature of the main quality factors such as out-throws and moisture.

It is the strangest concept that when the markets cool and prices fall, the quality needs to improve but when the prices are high and the markets need material, the quality requirements are more likely to be “relaxed”

De-ink:

Again, high stocks are the order of the day and the main reason for price reductions in both Over issue news and news and pams. The surge in demand from the UK markets caused by new capacity and a general shortage of material has now tempered. UK prices have fallen £15 p ton in October and we can expect a similar reduction for November or perhaps even sooner. Export prices have fallen suit (By as much as €30 p ton in some cases) and again we can expect the same for November.

From an Irish perspective, Norske Skog, exclusive buyers of de-ink from Highlander International Recycling, have one paper machine out of commission for the month and one machine on a week’s downtime. This has dramatically hampered our ability to buy spot volumes for the mill however all contract volumes are moving smoothly as normal. November should see us be able to offer spot prices again however at vastly reduced prices and with a reduced volume allocations.

On the quality side, especially News and pams from co-mingled sources, mills will undoubtedly be scrutinising all loads and shipments received and unfortunately, this will also include shipments that have already been despatched prior to the market prices starting to fall. We are advising all suppliers to be very careful on what they load for shipment and if you are in any doubt, don’t load the material as even a single bale falling out of the load specification will be enough to trigger claims, downgrades or even outright rejections of loads. The two key quality aspects that suppliers must be acutely aware of is out-throws (including cardboard and other non – deink papers) and moisture. For guidance, moisture should be no more than 12% and out-throw targets should be no more than 2%. As always, presentation is very important as in most cases, bales that look clean and tidy on the outside, will be regarded by mills as clean and tidy on the inside.

Tissue:

Ironically, it is movement at the very high end of the market which is causing the most concern in the market right now. Best white 1 & 2 prices have not just fallen in line with the downward correction in pulp prices, many mills operating at this end of the market are now simply refusing to buy any pulp substitute recovered paper and use only virgin pulp instead as their machine feedstock. Any orders for this material are certainly not coming from Europe, with only Far Eastern buyers showing any interest in these grades at vastly reduced prices against what was being enjoyed only 4 weeks ago from European buyers.

Three things have contributed to this rapid fall in demand for Best whites 1 & 2. Firstly, pulp prices have fallen dramatically over the last few weeks and this will continue into November – what will happen after this is unsure as pulp supplies can easily be restricted by pulp producers to create artificial demand, therefore push up prices (in many ways exactly like oil producing countries can restrict supply to increase the price for a barrel of oil). If this occurs, then pulp prices will hopefully increase that will re-stimulate interest in recovered paper which will improve prices.

Secondly, many European mills making high end writing / printing or luxury tissue products that use Best white 1 & 2 are have relatively low order books and as a result they are taking periods of downtime for maintenance etc. Obviously, mills that are not operating will not be buying any material ergo will lead to merchants trying to offload stocks at lower prices, which is exactly what has been happening.

Lastly, when Best white 1 & 2 prices were at their peak about 6 weeks ago, some brokers in Europe started to import material from America in an attempt to take advantage of a buoyant market situation. Unfortunately, as the material has started to arrive into Europe and be placed into stock ready for delivery to mills, the above 2 factors have reduced the prices and with up to a rumoured 5000 tons of material having being imported, this has caused a massive imbalance in the supply / demand of these grades.

We predict start of November, possibly even mid November before this market starts to show any signs of activity, and even then prices and orders will not be particularly attractive for merchants or producers.

Again, quality is absolutely paramount in this market sector – downgrades or rejections can cost several thousand pounds per load and as mills have a ready made, readily available and cheap alternative in the form of pulp, they will have no qualms in rejecting loads for even minor issues.

General

Not to compound the situation we are experiencing, the below article in lets recycle may be of interest to all suppliers. This highlights that it is not just customer /  complaints we need to contend with, but potential TFS issues also – the next couple of months will be difficult market conditions for all sectors – we will keep you all up to date with developments as always. The buzz word for the foreseeable future will be quality as mills have an abundance of material to choose from at better prices, they will invariably choose better quality material, or more bang for their buck as they say.

http://www.letsrecycle.com/news/latest-news/paper/two-waste-firms-fined-in-illegal-export-case

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