Quarterly Report – July 2020

The second quarter of 2020 was a period of stormy confusion. At the end of March, the almost complete virus-related halt to industrial activity led to a severe reduction in paper waste arisings (two-thirds of which comes from the conversion sectors) and thus to an immediate shortage of supply. Those mills to have continued in production encouraged speculation by declaring that they would accept recovered paper only for free or for negative prices, but they suddenly discovered that they were unable to remain in production owing to a lack of raw materials. 

The ensuing furious hunt for supplies triggered an immediate explosion in prices, with OCC rising as high as Euro 170 per tonne and mixed paper to around Euro 50.

The restarting of converter industries in May completely reversed the situation. In the interim, mills had taken advantage of low recovered paper prices in the second half of 2019 and early 2020 to ensure that their customers were fully stocked. Today, these mills are suffering from low demand for their finished products and have been forced to take maintenance downtime in respect of machines that have been worked very hard in recent quarters.

As a consequence, OCC prices have slumped at the time of writing to around Euro 50-55 per tonne ex works, with mixed paper at Euro 45-50. White ledger has remained stable while the white grades, which are very scarce, are around Euro 285-290 per tonne ex works. Recently-announced official prices for July put mixed paper at Euro 0-10 per tonne and OCC at Euro 20-45 ex works for good-quality, well-sorted material; the scale of the price range confirms the uncertainty within the market. All other grades are at stable prices, with some tendency towards small increases among the higher grades owing to their scarcity.

The mill at Mantova is in full production after having finally resolved its problems by paying a fine of Euro 1 million for building irregularities.

In contrast, serious problems have been caused by a government-issued decree with the force of law which unifies the existing classification of paper waste (70-75% of which comes from industrial sources and 20-25% from selective municipal collections). The apparent purpose is to submit everything to centralized control and thus jeopardize operators’ independence. The association of branch professionals within UNIRIMA has appealed against what it regards as a dangerous and unjustifiable initiative.

In June, furthermore, Italy’s environment minister - always a strong supporter of the end-of-waste concept and totally against thermal recovery - issued a decree about processing recovered paper to a point where it ceases to be “waste” and instead becomes a “secondary raw material”. Unfortunately, the decree makes reference to several previous precedents and risks creating confusion. For instance, the producer is required to stock sufficient samples of materials supplied to the consumer for a period of up to six months. Once again, there is a big difference between theory and practicality. Also, severe fines are proposed for those failing to comply with these rather complicated bureaucratic controls.

July will be a somewhat complex month for domestic trade whereas better prospects surround responsible exports. However, problems are continuing with shipments by container.

August traditionally sees a reduction in paper and board production. Owing to the impact of the virus and to the drop in the overall production index, recovered paper collections are also expected to fall.

Giampiero Magnaghi - Giampiero Magnaghi (Italy)

Giampiero Magnaghi


Quarterly Report – July 2020