The severity of the pandemic became clear in Turkey around March when the first cases began to emerge, affecting the markets throughout the second quarter. Free trade with restrictions/controls will restart from July but we must accept that the pandemic will have a prolonged effect on all aspects of business and life in general. Therefore, it is hard to make any forecasts.
The first quarter of 2020 saw a demand below the 2019 average and thus a reduced capacity utilization. Despite the market impact of the pandemic, the start of the second quarter brought some improvement as high demand from the food sector boosted orders for corrugated cardboard.
Exports were not strong but continued during this period. Unlike for many other sectors, April and May were relatively good months for both corrugated cardboard and paper mills, with numbers at least matching 2019 averages. In these two months, the price of recovered paper surged by an average of 30% when compared to the first quarter of 2020 in response to finished paper price gains. For a short period, domestic recovered paper prices increased from Euro 70-80 per tonne to Euro 150-170; one of the main reasons for this was the negative impact of pandemic-related restrictions on exports.
Market conditions changed completely during June. A decline in demand and capacity utilization instantly affected recovered and finished paper prices, both of which dropped by 30-40%. This had a major impact on the recovered paper market and sent collection rates even lower; domestic collection volumes have always been a problem in Turkey where they account for only 60-65% of mills’ demand when working at full capacity.
In June, the average OCC price was Euro 80 per tonne and no-one in the paper sector was happy. In short, market conditions were positive in the first half of the second quarter and then the complete opposite in the second half.
Entering the third quarter, paper mills are asking for a slight drop in fibre prices whereas the recovered paper sector is seeking an increase. As there are so many uncertainties, it is very difficult to be optimistic about the future. Domestic collection rates are not adequate for Turkey’s needs and so imports remain a must, such that the cost of imported recovered paper will affect domestic prices and bring about a balance. All investments have slowed but are proceeding as the pandemic allows.
