Quarterly Report – April 2020

For seasonal reasons, recovered paper collection volumes increased in January. Given that paper mills had stopped all purchases during the end-of-year holidays, this meant further growth in the drastic oversupply during the first month of 2020. The thin silver lining was that packaging paper manufacturers were busier than usual, thus slightly improving recovered paper outflows both domestically and for export. The bulk of shipments to Asia would mainly have happened before the Chinese New Year; furthermore, only absolutely clean material was finding buyers on that continent.

While the recovered paper surplus remained extremely high in Germany and Central Europe throughout January, German paper mills maintained their high quality standards for this secondary raw material. Against this backdrop, there was no logical reason why relatively low-quality recovered paper was continuing to find its way to Germany.

Given the volumes available, paper mills cut prices by double digits across all grades in January. For baled mixed paper, additional payments were requested in some instances. The recovered paper management industry in Germany has strived successfully over many years to meet supply and disposal requirements, providing the paper industry with a high-quality secondary raw material. But without remuneration that at least covers collection, processing and handling costs, this can lead to significant structural problems.

Recovered paper collections followed their traditional decrease at the end of January and into February, while still remaining higher than normal. As a result, there was an urgently-needed decline in stocks, albeit only small. Prices for the lower grades, including deinking, were again cut by double digits in February. The situation for deinking was aggravated by two factors: material from neighbouring countries was pushing into the German market, being cheaper than domestically-sorted grades; and closures/bankruptcies in Germany resulted in significantly lower demand.

Furthermore, mixed paper and supermarket grades were increasingly accepted only against additional payments. Prices for medium grades were corrected downwards in the single-digit range whereas better qualities were stable. For coloured files, mills reduced their orders by 30 to 50% in response to high inventory levels, with hardly any supplier able to store all of his files. Accordingly, prices fell in February in the low double-digit Euro range. Top-quality supermarket grades were sold for export.

Domestic collection volumes were quite high in March. Mills achieved very high capacity utilization levels and stocks were increased because of the low price levels. By mid-month, exports of brown grades were at a decent level but significantly lower than in February owing to container shortages; the main customers were India and South East Asia.

The COVID-19 crisis had an increasing impact on the recovered paper segment as March progressed. Lockdowns in a number of India’s major cities and provinces changed the situation for exports.

Europe as a whole still has a major recovered paper surplus. Until recently, more than enough recovered paper was also available in Germany. With the COVID-19 crisis, however, the slight decrease in domestic collection volumes in the second half of March has already caused unrest. The closure of numerous municipal recycling centres contributed to this decline. In addition, imports of recovered paper - on which Germany has always been dependent - were hampered by truck backlogs at borders as a result of virus containment measures and staffing issues among logistics service providers. Meanwhile, the paper industry’s raw material requirements remained very high, especially among manufacturers of urgently-needed packaging.

From the perspective of German association bvse, the problems caused by COVID-19 and the extremely low price levels for recovered paper must not lead to a reduction in municipal recovered paper collections. It is important that existing private and municipal collections are carried out consistently and regularly to avoid serious consequences for the supply chain.

Reinhold Schmidt - Reinhold Schmidt (Germany)

Reinhold Schmidt

Recycling Karla Schmidt (DEU)

Quarterly Report – April 2020