In this new feature, IWPP commercial director Chris Burton will look each month at the market for key grades of paper and cardboard for recycling.
Clearly, the Covid situation continues to dominate the global economy and the world market for paper and cardboard is no different.
As an industry, we have been largely resilient and have managed to keep going, even during the height of lockdown. However, that doesn’t mean there weren’t challenges. As we head towards winter and the potential for a second wave and further restrictions, then there is concern in the market at what might be ahead.
On the plus side, Christmas is approaching and this tends to be a busy time of the year. This is likely to be an Amazon Christmas where many people buy online rather than on the High Street. We’ve already seen a switch towards this from the first lockdown onwards.
Those mills supplying the online retailers will continue to need material, but getting it at the right quality will remain an issue especially if more fibre is coming from domestic rather than commercial sources.
The biggest concern though I am hearing about in the market is Brexit and the end of the transition period at the end of the year. Michael Gove’s letter today to hauliers that there might be queues of 7,000 lorries in Kent has created a lot of worry.
There is a lack of transparency about what is going to happen and whether there will be a deal. Europe continues to be a vital market for UK fibre, and we don’t want European buyers to think the hassle of getting UK material isn’t worth it. With other markets around the world getting tougher, such as China, Indonesia and Turkey, it is really essential that we keep this market open too.
The last month has been relatively stable for OCC prices. I’d say it has been in a range of mid-£70s to mid-£90s overall depending on where you are sending the material and how much mills want your material. It has definitely been a case of mills choosing you based on the material you provide, rather than an open market.
We seem to be at a crossroads at the moment with the loss of the Chinese market, tougher registration for Indonesia and lower quota in Turkey. But we also have the Christmas period ahead of us, and we normally see more interest then.
Those selling for October are getting the mid-£80s at the moment. They could be old orders, but I tend to be optimistic that we will see those prices next month, while others are more pessimistic and expect price falls.
While China is likely to exit from a UK point of view, US companies will still be able to export there for most of the month and will have a delaying impact on this side of the pond.
Indonesia is challenging in terms of registration, but mills there need fibre, and my view is that once companies are registered, that market will come back up.
Turkish mills are saying it is fine to export there and send material as we have before. I’d be a bit more uncomfortable about sending fibre there until it becomes clearer how the new Turkish regulations are working.
UK mills haven’t been too active recently, even completely out of the market at times. Perhaps they are getting everything they need from council contracts, but I could see them coming back needing Christmas stock soon.
European mills aren’t too active for OCC at the moment because of the high prices. Once you add in the additional costs for freight etc, then it doesn’t seem worth buying UK material when they can secure cheaper material locally.
This grade has risen a lot over the last few months. When I was on holiday in late-August, £5 per tonne was typical. Now it can be £30 to £50 per tonne for the best stuff, although the top prices are for the very best hard mixed.
Poor quality mixed is still more like £10 to £15, but IWPP isn’t interested in touching that.
UK mills aren’t interested in mixed, like they aren’t interested in OCC. But European mills are and see UK mixed as good value, especially after extra capacity came online in Germany. It is Europe that is driving the price.
Far East demand is there a bit too to some destinations.
October will be an interesting month for mixed and I can’t see the price dropping as I think European mills will still want it to keep stocked ahead of Christmas. I’d expect prices to stay stable though as I think they have reached their limit, and any higher will lead to less European interest.
News and pam
I haven’t been too active in this grade recently, as it is a declining commodity. The proposed sale of UPM Shotton shows the writing is on the wall, while downtime has also been seen at newsprint mills in Belgium and elsewhere.
The price is just bumbling around at the moment and seems to have reached a level at the low-£60s where it is comfortable. Over time though, demand looks set to gradually fall and I’d expect prices to go the same way.
SOW and Multi
March, April and May saw huge demand for these grades and a lack of supply as lockdown happened across the world.
With more restrictions potentially ahead of us, I haven’t seen a sudden surge of interest though, which suggests a stable market.
That has been the case with prices too, and I wouldn’t expect that to change too much in October.
Around £150 is typical for both grades, but above £170 up to maybe £200 can be achieved on rare occasions into Europe for multi.