Brown paper for recycling prices rise again across Europe in April

Low PfR stocks on both buying and selling sides drove mills to pay higher prices

After prices for the brown paper for recycling (PfR) grades started to rise in March following a period of stable prices of almost six months, the development continued in April. According to market insiders, prices for the bulk grades sorted mixed paper and board, supermarket corrugated paper and board and old corrugated containers (OCC) accelerated by some Euro 5-15/tonne in continental Europe, while UK market experts usually reported hikes of £5-10/tonne.

As with the previous month, the development was first and foremost attributed to low collection volumes. While demand from domestic paper mills was still limited as order intake in the paper sector remained weak, PfR stocks continued to be low on both the selling and buying side, and paper mills were willing to pay higher prices again, a move which also aimed to compete with export levels.

Pressure on prices in the deinking sector continued to be high in April and market players usually reported more drops of around Euro 10/tonne or some £5-10/tonne.

The same was true for the medium and high grades. Although arisings continued to be very low, demand was even weaker, and decreasing pulp prices added additional pressure. According to contacts, prices for the white grades, including the pulp substitutes, fell by around Euro 10-20/tonne or approximately £5-15/tonne in April.

“Regarding the high grades, the market is still adjusting prices downwards. Demand is very weak and although supply is also very limited, it exceeds the low demand, driving prices down month by month. In April we saw new reductions of Euro 10-20/tonne for all grades,” a market insider commented.

Brown grade prices rise again

Following the March increases, prices for sorted mixed paper and board, supermarket corrugated paper and board and OCC continued to accelerate in April. Market insiders attributed the development to low arisings and the need of domestic buyers to compete with export prices in order to safeguard volumes, although demand from domestic paper mills continued to be lackluster.

Exports started to cause some tension in the domestic European markets.

“While buyers were still relaxed in recent weeks, the combination of new recycled containerboard capacities starting up, low OCC generation and continuing exports at prices that are considerably higher than domestic levels has given way to some nervousness,” a market insider said in early April.

“Consequently, buyers are now trying to put a brake on exports by lifting domestic prices. Here and there, OCC prices have increased by Euro 5-10/tonne, and in southern Europe, where prices were at very low starting levels, buyers paid up to Euro 20-25/tonne more,” he added.

A contact in Spain confirmed the information. “Papermakers who did not move prices in March because they had healthier stock levels than many of their industry peers, were willing to pay up to Euro 25/tonne more [in April], and the ones who moved prices in March by Euro 10-15/tonne complemented those hikes with a new increase in April, bringing the total hikes since February to around Euro 25/tonne,” he explained.

He added that collection volumes in the country were slowly starting to improve as expectations of a very strong tourist season were fueling overall business activity. At the same time, demand from Spanish paper mills was reportedly on the rise as well, while exports remained weak but showed steady prices. “All in all, the market is very calm even though domestic paper mills have very low stocks after the Easter holidays, and I don’t expect this to change in May,” he noted.

“The European paper industry remains weak with high [finished goods] inventories and poor order books. PfR prices have remained stable or increased slightly solely because of low arisings and paper mills’ concerns that availability will get worse going forward,” another market insider commented.

According to him, the only way to reduce losses on the paper production side has been downtime, a move that has become very common in all sectors. “With the advent of a further 3 million tonnes/yr of [recycled containerboard] capacity in Europe this year, it is expected that the market will become even more saturated, that prices will continue to weaken and that there will be some casualties in this sector,” he added.

Prices for medium and high grades drop

Prices for the medium and high grades remained under high pressure in April, and market insiders reported that prices for all grades in this sector fell or continued to fall. “Practically all grades are on a continuous way down. Sometimes the drops are limited to around Euro 5/tonne, but there have also been decreases of up to Euro 25/tonne,” a contact noted.

Several market sources said in April that prices for the pulp substitutes, which had been largely immune to the decreases in the medium and low white grade sectors so far, started to head south as well, attributing the development to weak demand and decreasing pulp prices.

We are now also seeing lower prices for the pulp substitutes and it looks like more decreases are to come.

“This is strange because normally prices would rise during this time of year to prepare inventories for the upcoming bank holidays and the start of the summer vacation period,” one of them said.

“Prices and demand in this sector are very weak. Prices have dropped by up to £20/tonne and we anticipate more reductions throughout Q2,” a contact in the UK noted. He added that the reduced availability was a clear result of lower consumer spending and that the only hope for slowing down the current trend was that people start spending more with the onset of summer.

Price stability in May?

At the end of April, several contacts said that the PfR sector had become very quiet and that they were expecting stable prices in May, at least for the bulk grades.

“Arisings are low, demand is low and papermakers are still taking downtime and trying to run down inventories. Exports used to bring some life to business in recent months, but that is no longer the case either,” one of them said.

“Not that there are any dramatic price changes, but there is no or insufficient buying. The market has been at a standstill since the latest increases [for the bulk grades], and we don’t expect that to change in May,” he added.

A contact in Spain, where prices for the bulk grades saw the highest increases over March and April, shared a similar view. “We are not expecting any price movements for May. Spain is a big importer of material from France, and the May bank holidays in the country will make it difficult to import from there. So even if there is more supply and less export demand, low [domestic] inventories and the situation in France make everybody believe that prices will be unchanged,” he explained.

Regarding the medium and high grades, most contacts said in late April that they were expecting more decreases in spite of the upcoming bank holidays and the usual trend at this time of year.

This article was first published in our PPI Europe newsletter. Find out how you can access the latest market developments in Europe directly from your inbox by speaking to our team.

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