The first quarter of the 2020/21 financial year saw the recycling industry in the midst of the global Coronavirus pandemic. The UK industry remains modestly optimistic despite the fact that government restrictions continue to impact demand, collection volumes and recycling rates.
The reporting period was a game of two halves: demand for recyclates increased initially owing to supply shortages in Europe but, once supply and demand came more into balance, there was a decline in interest from buyers. The absence of commercial arisings has helped to slow and then stabilize recent OCC price falls.
European mills are sitting on high inventories of OCC and finished product; some are looking at taking downtime later in July.
Mixed paper pricing has remained relatively stable. A high price delta at the peak of OCC prices helped to maintain demand for mixed paper, particularly from mainland Europe.
The tissue sector has also experienced declining demand following the peak of activity in April and May. Some UK tissue mills took market-related downtime in June.
High-grade material into mainland Europe remains problematic; mills are sufficiently stocked and are not consuming as much as previously. There is also little distinction now between pricing of white grades.
The pandemic is causing European haulage issues, with port checks and border restrictions likely to impact sales flows severely and to delay overall logistics.
Quality will keep material moving and must remain the area of focus for all UK waste management companies and recyclers alike.
The wider export market was already vulnerable and now finds itself in the middle of the COVID crisis. The impact of the virus has been felt across Asia’s recovered paper market, with the supply chain disrupted by a severe shortage of available containers; prices for recovered paper imports are increasing. The pandemic has significantly impacted general imports and exports; vessel omissions and container shortages are forecast to continue in July, with upward pressure on freight rates.
There are minimal opportunities to supply China directly owing to low import quotas and lower CIF prices from mainland Europe. At the same time, demand from South East Asia for the UK’s OCC has been stabilizing or growing as these markets slowly open up to supply China with finished paper and recycled pulp.
Political unrest in China/Hong Kong, port congestion in parts of Asia and regulatory uncertainty in South East Asia make market demand over the next two to three months difficult to forecast.
Viridor Resource Management Ltd (GBR)