Quarterly Report – April/May 2019

As elsewhere, the majority of operators in Italy are suffering from an excess of recovered paper, production of which climbed 2.3% year on year in 2018 to 6.646 million tons, with consumption by domestic mills at around 4.5 million tons and exports at some 1.8 million tons.

Italy’s paper and board industry has officially reported that its production in 2018 edged 0.1% higher to 9.081 million tons. Imports grew 3.9% to 5.493 million tons whereas exports declined by 4.4% to 3.881 million tons.

Mills worked at full capacity in the first three quarters of last year, with their activities supported by good domestic availability and favourable prices for recovered paper owing to the reduction in Chinese imports which were never interrupted but complicated by the lack of inspectors - a situation that has persisted into early 2019. Chinese imports have been focused on a select number of suppliers (evidently those producing good, clean material) whereas other Asian consumers have shown more tolerance.     

Recently, however, Indonesia has adopted the same measures as China regarding recovered paper, and this will further reduce exports.

The final quarter of 2018 and early 2019 have witnessed a constant increase in recovered paper stocks among collectors and mills owing to the clear excess of available materials. Only small quantities - reportedly with high waste contents - have arrived on the back of bulk grade offers at zero prices from the UK and the USA, but mills have still been able to use these as a scare tactic to depress prices. At the same time, prices of reels began to surrender to pressure from box makers and packaging operators who had been comparing the low price of raw materials - in other words, recovered paper - with the strong sales prices for reels. The situation has remained unchanged in the first quarter of 2019.

A major contribution to confusion in the market has been made by the campaign to collect increasing volumes of recovered paper for the somewhat theoretical purpose of boosting the Circular Economy. The collection campaign was driven by COMIECO, which received supplementary financing of Euro 20 per ton, surprisingly in collaboration with UNIRIMA. Mills supported the campaign with pleasure, supposing that reduced exports of recovered paper plus an increase in local generation would result, as indeed happened, in a fall in prices that would be to their great advantage while causing discomfort to the recovered paper sector.   

Thus in the latter months of 2018 and the first quarter of 2019, not only did collectors have serious problems with stocking their excess recovered paper but also mills experienced a similar situation with their high stocks of reels. The fire service has been calling for controls and fines after fires broke out in several storage depots.

Municipalities in the southern regions that were not part of the circuit - one of the main recruiting targets of the campaign - were in principle very happy. Unfortunately, the clear result of the campaign has been to increase municipal waste problems because not all cities in the south have incinerators or thermal recovery plants.

The normal objective of selective collections is the recovery of paper, plastic, glass, etc. that were previously widely used but less so now, such that sorting and cleaning costs for these materials render the process uneconomic. Of course, this concerns public selective collections whereas fewer problems surround industrial waste. In effect, the campaign has benefited essentially those managers of a few rubbish dumps or of incineration plants who are enjoying an escalation in prices for their services.

The second quarter is likely to be confusing and some smaller operators will be obliged either to adopt costly sorting processes that may require the installation of additional equipment or to reduce their activities. Several days of holiday occur in April and recovered paper collections will be reduced as a result; some mills will take the opportunity to introduce downtime for maintenance. Meanwhile, DS Smith has received all the necessary permits to build a new plant in Tuscany with an annual production of 400,000 tons, but the company has yet to reveal when construction will begin.  

The coming quarter will not be so positive owing to the general economic situation against a backdrop of quarrels and duties, with Italy also having the problem of the cohesion of its government.

The recovered paper sector will remain an indispensable source of raw materials for the paper and board industry, but its future should be mapped by competent bodies - such as BIR or ISRI - and by those actually operating in the sector rather than by others coming forward with well-intentioned but fanciful theories.

Giampiero Magnaghi - Giampiero Magnaghi (Italy)

Giampiero Magnaghi


Quarterly Report – April/May 2019