Packaging (Mixed / OCC):

As prices in these grades have been rising sharply over the last few months, there seemed to be no end to the madness of excessively high prices for relatively low grades of recovered paper. Fuelled by a reduction in collection volumes against a backdrop of recovering demand, the last couple of quarters have been once in a decade occurrence where prices seemingly spiral out of control as mills scramble for any available tonnage on the market. Thankfully, some of the signs are that this sector of the market seems to be cooling off slightly, as mills in Europe approach full stock levels, prices in the Euro-zone have reduced from between €10 - €20 p ton for packaging grades. Naturally, this resulted in extra volumes being offered to the export market and never one to miss a trick, Far East buyers began taking action to try and reduce prices here also. The last couple of weeks however has saw the OCC price yo-yo $5 - $10 p ton dependant on the buying requirements of each mill. As the Far East mills are generally very coy about their stock levels and pending shipments, we are unsure of how this market will continue to react to the availability of extra tons from the European market – coupled with summer fast approaching where traditionally recovered paper collection volumes drop off, we predict that we may experience some price drops through June / July, however prices should recover in August as mills get ready for the Christmas demand. In the UK, the first major capacity investment in the packaging sector for some time, will see a new paper mill commence manufacturing late 2011 and this will undoubtedly have a short to medium – term effect on OCC prices as the UK will need an extra 450,000 ton per annum to satisfy mill demand. Interesting times indeed for this sector.

De-ink:

Following the same trend as packaging grades, prices for news and pams and Over issue news have increased also over the last few months. The background for these increases are also attributable to low collections versus recovering demand. From our own experience, April in particular was a tight month for de-ink grades, more so for over issue news and it seemed that the gap between supply and demand stretched above the levels that have been the norm for 2011. While predictions for the future of the newspaper industry as a whole are generally doom and gloom in the face of tangible competition from the internet for news seekers, a reduction in UK newspaper circulation figures for 2007 – 2009 of 25%, seem to have abated in 2010 and the prediction is the things will continue to improve – slowly but surely - for this sector. Like the packaging sector however, a semblance of sanity will need to prevail at some point where prices return to normal levels – the timing of this cooling off is the key factor here and it could be late 2011 / early 2012 before this transpires.

Tissue:

As pulp prices increased in May by $40 p ton and are predicted to increase in June also (We hear at least $20 p ton), it follows that recovered paper grades in the tissue markets should increase also. For May / June however, one of the major tissue grade consumers took planned down-time of at least 3 weeks, which reduces capacity in this sector for the short- term by about 3000 tons. Despite this short term blip, the prospects – as ever – are positive in this sector. Rumours that a new tissue machine is to be announced in the UK shortly is ample evidence that a confident outlook is merited. The knock – on effect of a new machine in the UK is that the export market for grades such as SOW and Multi-grade will find it tougher to source UK volumes, which may cause prices to spike if / when the new machine is ready to start consuming recovered paper. On a whistle – stop tour of several tissue mills recently, Highlander found the general expectations to be very much forward looking, despite obvious commercial pressures such as increasing energy and raw material costs. While the economy recovers ever so slightly, we expect printers and office paper volumes to increase, which should help ease any potential supply issues should new machines arrive in the UK market, however as with any increase in the capacity to use recovered paper regardless of the sector, prices will undoubtedly increase, at least for the short – term.