Quarterly Report – September/October 2019

The previous report highlighted the contradictory policy that promoted an increase in recovered paper collections at a time of evident surplus. This self-defeating exercise has persisted over the last couple of months, with public collection activities helping to create a clear oversupply.

At the same time in August, most mills stopped production for what they claimed was extra maintenance work, but in reality the reason was probably that they were already overstocked with finished product. This situation has not been so different from that seen in the rest of Europe, with talk of stock lots of reels at lower prices and of supposedly “second and/or inferior quality”.

Recovered paper suffered as a consequence. Despite a reduction in voluntary collections, operators have had to contend with excessive stocks on a regular basis.

There is still some export activity. Overseas shipments remain a possibility if the material is satisfactory in terms of cleanness and quality; the main outlets are in Asia (including limited volumes heading to China) and also elsewhere in Europe. Export prices are clearly more attractive than those prevailing on the domestic market.

The domestic price of OCC is between Euro 50 and 55 per tonne, but a general reduction of Euro 1 per tonne at the end of August could signal further declines during September. Mixed paper was in good demand at the end of July but the market is now calmer.

Appeals to the mills to take material in line with previous arrangements have come to nothing, with the resultant problem of stocks exceeding permitted limits. In turn, the functioning of the public collection networks (selective and non-selective) promoted by Comieco has been compromised, causing great disappoint and problems among municipalities.

Circular economies are nothing but a stratagem to help with public waste problems.

Going back a number of decades, recovered paper companies focused solely on industrial paper waste and encountered hardly any management problems. However, the advent of a “green” government which is against the construction of thermal recovery plants will certainly complicate the landscape even further. Italian mills are also claiming that energy costs (largely gas) are 15% higher than those of their competitors elsewhere in Europe, and a number of medium-sized producers which have enjoyed some good times over the past two years are today reaching a point of jeopardy.

Under a legal action promoted by the antitrust authorities in 2017 against a group of mills, a tribunal has now imposed very consistent fines on those responsible. This has included the mill in Mantua, which has had other problems too and is not actually operating.

Larger, well-structured recovered paper operators have continued with their activities - albeit at a reduced pace - but smaller companies could find it more difficult in future either to survive or to remain independent.

Debates have taken place about the necessity of producing an official assessment of collection, transportation and processing costs that should drive the management of this sector. Such a move could demonstrate that the recovery of some materials is effectively a cost when taking all factors into consideration.

Meanwhile, everyone is awaiting with interest the results of the auctions set to take place at the end of September.

When compared to the first five months of 2018, domestic paper and board production was 2.5% lower in January-May 2019 at 3,826,670 tons; over the same period, imports fell 2.9% to 2,254,158 tons while exports dropped 5.2% to 1,581,645 tons. Cellulose imports edged 1.4% lower to 1,365,700 tons.

Making the same five-month comparison, apparent collections of recovered paper climbed 4.1% year on year to 2,817,111 tons, with imports dipping 2.9% to 158,149 tons and exports surging 18.8% to 800,451 tons. Apparent consumption of recovered paper was 1.4% lower than in January-May last year at 2,174,800 tons.

Giampiero Magnaghi - Giampiero Magnaghi (Italy)

Giampiero Magnaghi


Quarterly Report – September/October 2019