Quarterly Report – September/October 2019

The latest quarter maintained the same momentum as its predecessor: demand is flat and the reel market has failed to mirror its level of 2018. Reel stocks are rising, especially for newsprint, and recovered paper inventories are also high.

For the lower grades, there is insufficient demand for the available supply and the lowest grades are difficult to place in the market. Purchase prices are under pressure; paper makers are loaded down with stock and are receiving many offers. The market is looking forward to the arrival in Europe of the new machines that have been announced. However, some projects are waiting for better days in the packaging sector.

Asian paper mills are offering some solutions, but not enough. Chinese manufacturers are buying very little volume in Europe, reserving their quotas for other markets such as the USA. It is also heard that China’s domestic collections are rising sharply.

Indonesia has put very strict controls in place so that exporting to this country is a complicated matter, but this market offers an alternative to China and its weak collection performance implies a requirement for substantial import volumes to meet paper mills’ needs. The other Far East countries are booking orders at lower prices. Overall, the Asian market is slow and demand for finished products is weak. Furthermore, the Chinese economy has been affected by the trade dispute with the USA.

The medium grade market has been experiencing a year of disruption. Newsprint sales have declined sharply. Customers are also facing competition from low-priced newsprint reels coming out of Russia. The deinking market is subject to regular price declines so that it is almost impossible to sell everything. Several machines stopped temporarily this summer in Europe and will continue with regular shuts until the end of the year. Manufactured product inventories are quite high and, unfortunately, there are not many alternatives. UPM has announced that it will sell the Chapelle Darblay plant near Rouen but will wait until January to find a buyer; the plant has not been running well for some time. Thus, the market may lose another machine from this sector. The only support is coming from German paper mills which have continued to import from France. Meanwhile, it is almost as if the Far East market has ceased to exist.

In the high grade market, the situation is still the same, with demand at low levels for some materials. The market is following the trend in pulp for which there is pressure on prices.    

This a pivotal year in which we are still suffering the consequences of the Chinese government’s decisions. Europe is a market of surplus; demand from the continent’s paper mills is insufficient to absorb available supply and waste management companies must export their material.

Also in this market, quality requirements are rising, and the current and future trend must be towards adapting our production and focusing on quality. Many controls are being established. Professionalism and traceability must be respected. We are in a downcycle, but the market will get going again. The question is how long will this crisis last? The answer will undoubtedly depend on the health of the world economy.

Jean-Luc Petithuguenin - Jean-Luc Petithuguenin (France)

Jean-Luc Petithuguenin

Paprec (FRA)

Quarterly Report – September/October 2019