Quarterly Report – September 2020

As we enter the fourth quarter, recovered fibre exporters to China and other parts of Asia are pondering the answers to several questions in light of the Coronavirus pandemic: How strongly will we be affected by the second wave? Will demand for fibre exports to Asia continue to be robust after December 31 2020? What will be the new markets? Will fibre prices suffer from reduced collections over the winter? Will shipping lines continue supporting the recycling industry or will they tighten controls on container availability? Will sea freight rates start increasing once again? And when will collection volumes normalize in the wake of the pandemic?

China’s economic growth has been slowing over the last decade and has now registered its smallest gains in 25 years. Economists are talking of China undergoing a V- rather than a U-shaped recovery following the recessionary trends imposed on the country owing to the effect on exports of cooling global demand.

The China/US trade war continues, with the USA having imposed three rounds of tariffs of 25% on goods totalling US$ 50 billion, and 10% on goods valued at US$ 200 billion which will also be increased to 25% next year.

Changing market conditions have continued to create spikes both in prices and demand. Overall, the industry can be expected to enjoy strong growth during the course of this decade, influenced by increasing demand for both packaging and graphics as a result of 600 million people being added to the global population over the period. At the same time, paper consumption is expected to increase by around 30 million tonnes.

In the third quarter, fibre exports to China continued at around the same levels as in the previous three months as buyers tried to fulfil their import allocations. Prices for OCC strengthened slightly at the start of the quarter but some cooling took place by its end. Total fibre imports this year will be around 5 million tonnes, falling to zero next year with the possible exception of imports of very high-grade fibre usable as pulp substitutes.

The markets have anticipated a future with no fibre exports to China from January 1 2021 and the industry has been successfully building both new domestic and export outlets. Demand from other Asian markets, including India, grew strongly over the third quarter, with OCC closing at around US$ 155-165 per tonne while good-quality mixed continued to be in demand at prices fluctuating between US$ 80 and US$ 90 over the course of the quarter. Demand for deinking has continued to grow over the last two quarters.

European exporters were continuing to face challenges in completing export registration with the Indonesian authorities. However, demand from Indonesia for quality OCC remained strong.

As we enter the final quarter of 2020, we should be in a better position to answer our questions and together continue to drive our fibre exports globally to help build a strong and sustainable circular economy.

Ranjit Baxi - Ranjit Baxi (India)

Ranjit Baxi

J&H Sales International Ltd (GBR)

Quarterly Report – September 2020