Quarterly Report – April/May 2019

At the start of 2018, supply of and demand for the lower grades were stable and at similar levels. For the middle grades, prices remained largely unchanged. The high grades market proved to be more relaxed on the demand side than in the autumn of last year. As a result, prices slowly retreated from their peaks, in particular for 3.16/3.18.01 and 3.14/3.15. Deinking was still in high demand but developments were mixed: some suppliers were able to keep prices stable whereas others had to accept reductions in the single-digit percentage range. Exports beyond Europe remained very low but this did not lead to oversupply because of excellent demand from the European market. At the same time, the impact of higher freight costs was significant; in particular, the increased demand for truck cargo space had led forwarding agents to impose price increases of up to 10%. The paper industry refused to absorb these additional costs, thus applying plenty of pressure to recovered paper suppliers’ profit margins.

In February, many paper producers based not only in Germany but also elsewhere in Europe had well-stocked recovered paper warehouses. As a result of this raw material buffer and the large amount of recovered paper available on the market, order volumes were reduced and special offers could be found at lower prices. Stocks were forming at waste management companies and quantities were not flowing as smoothly as in previous months. Buyers imposed price cuts of Euro 5-10 per tonne on the lower grades and of Euro 10 on average for medium grades such as deinking and printing waste. Higher grades such as rotation waste and woodfree white paper attracted reductions of up to Euro 20 per tonne.

The large availability of recovered paper in Europe was due mainly to reduced exports to the Far East. Countries whose recovered paper was previously exported almost exclusively to Asia were now increasingly offering material within Europe. The UK and even the USA have invaded the German market with lower grades. Owing to the very good business conditions prevailing in Central Europe, the collected recovered paper was finding buyers despite this situation.

As we entered March, paper mills had consistently high recovered paper stocks and some implemented shutdowns for repairs, etc. In the first half of the month, this situation was coupled with a lack of orders from China in leading to an oversupply of recovered paper in some regions. Later in the month, however, demand stabilised once again and recovered paper volumes flowed well. High availability led to further price drops for bulk grades in the lower single-digit percentage range. An East-West price differential was evident: in the east of Germany and in Eastern Europe, prices for mixed grades, department grades and corrugated board were higher than in the West. Medium grades were stable in terms of order volumes and pricing, with only the higher grades (3.14, 3.15 and 3.15.01) experiencing price reductions of higher single-digit percentages. Despite these price adjustments, the European recovered paper market was characterised by stability as the quarter ended; the impact of Chinese import restrictions has been, and continues to be, well absorbed.