European brown paper for recycling prices remain steady in February

Slow demand and high inventory levels are balanced out by low collection volumes and kept the prices stable for PfR grades

February did not have any big surprises in store for the European paper for recycling (PfR) market. Following continuous price increases for all grades throughout the first half of 2022 and the drastic turnaround for the brown grades in August that began to affect the deinking and medium grades the following month as well, the phase of price stabilization that began in November continued.

According to market insiders, prices for the bulk grades sorted mixed paper and board, supermarket corrugated paper and board and old corrugated containers (OCC) were largely unchanged for the fourth consecutive month in February, at least in continental Europe. UK market experts said that mixed paper and OCC levels there rose by around £5/tonne due to good export demand and a growing gap between domestic and export prices.

In continental Europe, contacts reported decreasing export volumes. At the same time, demand from domestic paper mills remained limited as order intake in the paper sector remained on the low side, while PfR stocks were high. However, low collection volumes helped stabilize the supply/demand balance and contributed to price stability.

As in previous months, pressure on prices remained high in the deinking and medium grade sector, and contacts reported decreases of around Euro 10/tonne in February. However, higher drops were also mentioned in some cases.

European buyers of middle grades are continuing to sharply lower prices. In some cases, levels fell by up to Euro 30/tonne.
Market insider

Prices for the lower range of white grades were once again also affected by the development, with market players reporting decreases of around Euro 10/tonne. Price levels for the pulp substitutes saw another month of price stability.

Low collection fosters stability

Prices for sorted mixed paper and board, supermarket corrugated paper and board and OCC were once again mostly stable in continental Europe in February. Most contacts continued to report high inventories at paper mills, which were still suffering from low demand for their products.

At the same time, exports reportedly started to ebb in comparison to previous months. However, low collection arisings counterbalanced the development and helped set the scene for steady prices, with only a few contacts reporting slight upticks towards the end of month.

“The market for the ordinary grades presented the same picture as at the end of January. Demand from paper mills was still low, but not as low as in the final quarter of 2022, and export demand is still healthy, with prices around Euro 20-30/tonne higher than on the domestic market, but not as demanding as in previous months,” a market insider said.

He added that inventories at paper mills were still high, while inventories in the waste management sector tended to be low. The latter was attributed to limited generation, as collection volumes traditionally are on the lowest level of the year in February.

“Market players quickly agreed on stable prices in February and have been keeping a close eye on market developments,” another one noted.

If there are no fundamental changes in the short term, another month of stable prices would be the most likely option for March.
Market insider

Others, however, reported slight price increases for the bulk grades towards the end of February. “Some packaging producers have raised their purchase prices slightly. Not because they don’t get enough material, but simply to keep the gap between export and domestic prices from getting too big. Depending on the destination, export prices for OCC are Euro 30-50/tonne higher than local levels,” one of them explained.

He added, however, that taking paper mills’ order books into account, there was no need to safeguard more PfR supplies. “There is sufficient OCC around, at least for now. So most mills don’t fret about it and stay where they were price-wise in January,” he noted.

Some market sources in the UK also reported slight price increases for the bulk grades in February. The development was attributed to good export demand, low collection volumes and the growing gap between domestic and export prices. However, the hikes reportedly did not exceed an average of around £5/tonne in most cases.

Exporters demand lower prices

While market insiders generally agreed in February that exports were weaker than in previous months, some of them also said that buyers from Southeast Asia were asking for lower prices or stopped buying in Europe at all.

“Buyers from Southeast Asia are demanding lower prices. Apparently, the expected boom in demand for finished paper and board from China is not yet there,” a market insider said.

“Things have also gone very quiet in India. We haven’t heard any talk of lower prices for the low grades on that front yet, but no orders are being placed either. Mills are apparently taking a wait-and-see approach all of a sudden,” he added.

Interesting months ahead? At the end of February, market insiders’ thoughts on what might be in store for the market and prices in the coming months differed considerably, with the range of expectations spanning dropping, stable and rising prices.

“It is hard to predict what lies ahead. Generation is limited, but so is demand in Europe. Exports keep the market in balance, but if the excitement in that sector has really faded, we will move towards a market that needs to be more locally focused, and that would not be a positive development for now,” one market insider said.

Others shared this view, and some of them warned that the effects of the February 6 earthquake in southern Turkey, although still largely unknown, had to be taken into account. “We still don’t know exactly which paper mills in the area have been affected and to what extent. What we know for sure, though, is that a good chunk of the volumes that are usually exported to Turkey won’t go there any time soon. The challenge will be to find new outlets for those volumes,” a contact noted.

A few market insiders said they were expecting stable prices or even some hikes.

“Order books for finished goods in Europe remain weak, but with the added pressure of good demand from the Far East plus low collection rates throughout Europe, it is anticipated that there will be upward pressure on [PfR] prices as supply and stocks come under pressure,” one of them said. “We anticipate that the European mills will defend their supplies and production and will be willing to accept higher prices. It looks like March and April will be an interesting couple of months,” he added.

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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