Quarterly Report – July 2020

In April, the recovered paper market continued to be affected by the COVID-19 crisis. Given their very good order situation, packaging board manufacturers produced at full capacity as their products were considered essential to maintaining the supply of food, hygiene products, etc. In addition, mills kept high stocks while their customers also built inventory. As a result, there was a significant increase in demand for the lower grades of recovered fibre.

Fibre suppliers met the needs of the paper industry despite some challenges, including a massive decline in industrial/commercial collections owing to the lockdown as well as a temporary closure of municipal recycling centres. Another hurdle was partially disrupted supply chains owing to temporary difficulties at the border with importing recovered paper into Germany and to the lack of logistics personnel.

In addition to sales, graphic and hygiene paper manufacturers also sought to maintain high stocks.

There was a slight increase in recovered fibre demand from South East Asia, but only for exceptionally clean goods such as corrugated cardboard II, 90/10, new corrugated cardboard waste, etc. Recovered paper collection companies kept almost no stocks in April. The increase in demand led to an improvement in sales of the lower paper grades but this was not sufficient to lift prices out of the negative cost area. Medium grades recorded a moderate increase in sales while the higher grades maintained constant prices.

In May, recovered paper market conditions were quite volatile and varied according to grade. The COVID-19 lockdown resulted in a sharp reduction in domestic collection volumes, with mixed paper, supermarket grades and used corrugated cardboard entering sorting systems in greatly reduced quantities. The sortable proportion of deinking goods from household collections dropped to a maximum of 40%, mainly because of drastically reduced advertising activity and newspaper inserts as well as the accelerated changeover of many people from print to new media owing to more home-working as a result of COVID-19. The drop in paper industry demand for these recovered fibre grades created a certain balance. As a national average, the volumes of recovered paper recorded in commercial enterprises were down 40-50%.

At the beginning of May, paper mills continued their somewhat panicked purchases of brown grades. Demand remained high from the corrugated cardboard industry, fuelled primarily by healthy orders from the food sector. At the same time, there was a perceptible shortage of recovered paper at these mills as volumes collected in neighbouring countries had also dropped by 40-50%. With Germany an importing country, there were fears of a raw material shortage.

Brown grades initially became more expensive but conditions changed as May progressed. Firstly, the government’s initial easing of COVID-19 restrictions led to a slow restart of commercial activities and thus to a slight increase in fibre collections, although no stocks were formed. Paper mills switched to using their abundant raw material stocks and, in some cases, cut agreed recovered paper order volumes. There was no longer any sign of panic in the procurement of raw materials, leading to a drop from the price peaks and an end to orders at spot prices.

The medium and higher grades remained in good demand amid very low availability. The hygiene paper market calmed down and there was an end to the boom in purchases for further stocking. Grades required for production - such as files - were stable in price.

German recovered paper exports outside of Europe came to a standstill in May. Export prices were significantly below the domestic level and major buyer India was paralyzed by the world’s most extensive lockdown. Hundreds of containers filled with recovered paper were waiting to be processed through Indian ports.

In June, many sectors of the economy gradually resumed production, the catering trade opened its doors and overall consumption increased. Recovered paper collections climbed accordingly, but never returned to pre-COVID levels. There was a drop in customers’ fibre demands as numerous mill warehouses were stacked with new paper but their order books were no longer full. In some cases, mills unilaterally reduced the quantities of recovered paper on order, and remedial measures and early maintenance did the rest. This was primarily the situation for producers of brown products, and increasingly for deinkers; the tissue industry offered no exception to this decline in orders.

Exports of recovered paper remained at a very low level in June.

With the drop in recovered paper orders, there was greater pressure on prices and the increases seen for lower grades in April and May were reversed. Medium grades remained unchanged while, among the higher grades, only woodfree white prices showed an occasional upward trend.

Reinhold Schmidt - Reinhold Schmidt (Germany)

Reinhold Schmidt

Recycling Karla Schmidt (DEU)

Quarterly Report – July 2020