UK and European First Half Report from BIR Writing in the BIR World Mirror Quarterly Report for the Recovered Paper Division, Keith Trower of Viridor reports that in the second quarter of the financial year, the UK recycling industry was in the midst of the global Coronavirus pandemic, but the industry remains modestly optimistic about the future despite the fact that government restrictions continue to impact demand, collection volumes and recycling rates.
Recent months have been a game of two halves. Demand for recyclates increased initially owing to supply shortages in Europe, but once supply and demand came more into balance, there was a decline in interest from buyers. The absence of commercial arisings helped to slow and then stabilize recent OCC price falls.
European mills are sitting on high inventories of OCC and finished product – some are looking at taking downtime over the summer.
Mixed paper pricing has remained relatively stable. A high price delta at the peak of OCC prices helped to maintain demand for mixed paper, particularly from mainland Europe.
The tissue sector has also experienced declining demand following the peak of activity in April and May. Some UK tissue mills took market-related downtime in June.
High-grade material into mainland Europe remained problematic as mills were sufficiently stocked and were not consuming as much as previously. There was also little distinction between pricing of white grades.
The pandemic is causing European haulage issues, with port checks and border restrictions impacting on sales flows and delays to overall logistics. Quality will keep material moving and must remain the area of focus for all UK waste management companies and recyclers alike.
The wider export market was already vulnerable and now finds itself in the middle of the COVID crisis. The impact of the virus has been felt across Asia’s recovered paper market, with the supply chain disrupted by a severe shortage of available containers. The pandemic has significantly impacted general imports and exports; vessel omissions and container shortages are forecast to continue with upward pressure on freight rates.
There are now minimal opportunities to supply China directly owing to low import quotas and lower CIF prices from mainland Europe. At the same time, demand from South East Asia for the UK’s OCC has been stabilising or growing as these markets slowly open up to supply China with finished paper and recycled pulp.
Political unrest in China/Hong Kong, port congestion in parts of Asia and regulatory uncertainty in South East Asia make market demand over the next two to three months difficult to forecast.
Also writing in the same BIR quarterly report with regard to the European market, Jean-Luc Petithuaguenin of Paprec of France (BIR President of the Paper Division), says that 2020 is and will be remembered as an extraordinary year – from a health as well as from a market point of view. Following two tough years for recovered paper and board characterised by high stocks and hectic pricing, 2020 seemed at first sight to suggest a change was about to take place. Early in the year, demand improved slightly and stocks fell a little. At that point, we could have reasonably hoped for prices to increase from the spring and/or summer.
However, everything started to happen much faster with the onset of the COVID-19 crisis and the resulting lockdown. As lockdown restrictions are being eased in most countries, collections are improving but the industry now faces a lack of demand. June was complicated by low demand from the mills and by prices going down – and July was complicated too with recovered fibre stock levels becoming high once again. Regarding the lower grades, Europe witnessed reduced demand in June and July. However, the decrease in prices has opened up the possibility of exports once again.
For the middle grades, volumes have also decreased but customers are seeing a shortage of demand for newspapers and magazines as well as for tissue products. The office papers market is satisfactory but volumes have decreased owing to more home-working. Good levels have been maintained among the high grades but, are under pressure.
What can we expect in the second half of the year? All will depend on how the COVID-19 crisis develops. Activity levels appear to remain acceptable, with some industries and sectors suffering more than others. If this trend continues, then demand could return in Europe as well as in Asia. New corrugated casemaking paper capacities in Germany, Italy and Turkey should help sustain demand for recovered fibre in the short term while for the future, investment at Norske’s Golbey mill in France will see more than 1 million tonnes of testliner and newsprint being produced annually from recovered fibres by 2023.
