Quarterly Report – September/October 2019

Many of the recent production stops implemented by consumers of recovered paper were due to the weakened economy. In July, this led to reduced demand for recovered paper, and especially the lower grades. The result was price cuts on occasions, but the price declines now appear to have stopped.

Contracts differed according to geographical region. For the middle and higher grades, the market situation varied from one quality to another: some, including 3.04, were in good demand and were achieving higher prices, whereas others such as 3.18.01 were experiencing too much availability. Overall, the market in these segments was fairly balanced. At the same time, the amount of recovered paper and the volumes collected by waste management companies were in decline. The main reason for this was the significant economic downturn across all manufacturing sectors. All recovered paper volumes were sold either in Europe or in export countries.

In August, the recovered paper market lacked momentum. Recovered paper stocks were high for both suppliers and customers alike. The situation was unaffected by the significantly lower quantities of material collected by waste management companies owing to the overall economic situation. Numerous paper mills tried to reduce agreed volumes, in some cases quite substantially, and justified this approach by claiming a drastic decrease in their order books. On balance, demand from the paper industry was lower than it had been for a long time.

Recovered paper exports, which had been low for a considerable period, contributed nothing in the way of an improvement to the situation; indeed, the contrary was true. Indonesia’s new, restrictive import policy has closed the supply pipeline to this country until further notice. In Germany, prices for the lower grades dropped by single digits, but by double digits for the higher grades. The recovered paper collection industry was trapped between, on the one hand, massively increased quality, logistics and labour costs in various areas and, on the other, continuously decreasing prices.

As for September, recovered paper availability was high and in line with the seasonal norm. Excess availability persisted among the lower grades in particular. Shutdowns by paper mills appear to be over, with production in Germany returning to almost normal levels. With regard to the quality control of incoming material, complaints from numerous paper mills increased sharply. Recovered paper that used to be good enough in terms of quality is now often penalized with price cuts or even rejected.

The potential for exporting recovered paper to Asia improved slightly. Clean material with a guaranteed maximum 0.5% of non-paper components was also accepted by China. Prices dropped for the lower and deinking grades by around Euro 5-10 per tonne. Medium grades and woodfree chips were relatively stable; these are enjoying good demand as the demise of the printing industry is causing a supply shortage and so prices are tending to go up. For rotation, woodfree white and unprinted CEK, there were price drops of around Euro 10 per tonne.