Quarterly Report – January 2021

At the start of 2020’s final quarter, recovered paper volumes were somewhat lower than normal for the time of year. In view of packaging manufacturers’ improved order books, there were good sales opportunities for the lower grades and no build-up of stocks anywhere. Nevertheless, and despite stable recovered paper export prices to the Far East, Germany’s paper and board industry chose to reduce October prices for the lower grades by a low double-digit amount. Combined with the sustained stability of the export market, this led to large volumes of the lower grades being shipped to countries outside of Europe, including India, Thailand and Vietnam.

Supply and demand were in balance for the medium and higher grades; incoming volumes of the woodfree grades were quite low. Small downward price corrections were made and the  peaks reduced, partly in line with price developments for pulp.

In the second half of November, renewed COVID-based government restrictions resulted in a drop in volumes collected from businesses, particularly catering and related sectors. This coincided with very high recovered paper demand from packaging manufacturers, which showed an increase over October. Part of this production was likely intended to build mills’ stocks in order to satisfy possible peaks in demand for packaging during the partial lockdown. Producers of graphic and hygiene papers also ordered recovered paper in large quantities, such that collection companies held practically no stocks. Among the lower grades, demand for recovered paper within Europe was supplemented by still-lively orders from India, Vietnam, Thailand and other Asian countries. Export prices climbed whereas domestic levels remained unchanged.

Many different factors determined recovered paper market developments in December. In the previous month, the state-decreed “light lockdown” had resulted in slight falls in collection volumes for one or other segment while the “hard lockdown” beginning on December 16 led to a further small decrease, with the majority of the material coming from households. Overall, however, recovered paper collection volumes in Germany were at a high level and availability could be described as very good.

In December, deinking, files, printing paper, woodfree grades, woodfree white and rotation enjoyed reasonable but subdued demand, and prices developed accordingly. In contrast, packaging drove the market as mills’ order books were again boosted by the lockdown and by the increased requirement for packaging. At the same time, packaging manufacturers in Germany and elsewhere in Europe were running at full capacity in order to satisfy the massively increased demand for new paper from countries further afield. The main trigger was the massive economic recovery and market revival in China, which bought thousands of tonnes of new paper from Germany to supply its packaging industry.

Given the positive and stabilizing influence of South East Asia and India, there were increased purchases of recovered paper by mills in Germany. Even though the limited availability of containers hampered exports, this demand from Asia contributed to a shortage of lower grades in Germany. Mixed paper, supermarket grades and used corrugated cardboard subsequently increased by up to Euro 30 per tonne.