European paper for recycling bulk grade prices driven up by exports

PfR prices rose with European buyers’ efforts to limit the gap between domestic and export prices

Following a very calm and quiet month with hardly any price changes in August, paper for recycling (PfR) prices started to move again in September, at least as far as the low grades were concerned. Market players in the UK and continental Europe reported hikes for the bulk grades sorted mixed paper and board, supermarket corrugated paper and board and old corrugated containers (OCC).

As in previous months, the development was first and foremost ascribed to European buyers’ efforts to keep the gap between domestic and export prices from getting too wide. Market fundamentals in Europe alone would not have provided sufficient grounds for higher prices. According to market insiders, demand from domestic paper mills continued to be lackluster as they were still struggling with overcapacity, low demand and high pressure on prices for their products.

Deinking, medium and high grade prices remain steady

Prices for the deinking grades were more or less unchanged across Europe in September. While market players in Germany, France, Italy and Spain usually reported stable levels, some contacts in the UK said that there had been small upticks here and there.

Some market players said that the fact that prices remained largely stable was due to slightly improved demand. Others, however, attributed the development to the increases for sorted mixed paper and board.

“The latest increases have further reduced the gap between prices for [sorted] mixed paper [and board] and the deinking grades. In some regions, deinking levels are now lower than those for the brown grades. Naturally, that makes sorting unattractive and reduces the available [deinking] volumes,” a contact noted.

Prices for the medium and high grades remained largely steady month on month in continental Europe in September. In the UK, market observers reported decreases.

Contacts in continental Europe attributed the price stability to different reasons.

Supply is still low, but demand continues to be weak and the market seems to have found a solid balance.

European PfR market contact

“There is more demand for woodfree grades from some destinations in Asia, and higher [export] prices are already being paid here and there as well,” a contact said.

“After both a few small price increases and drops at the beginning of the month, the market has stabilized. This might be due to the fact that pulp prices seem to have bottomed out,” anothere suggested.

In the UK, market insiders said that the decreases there were caused by weak demand and the fact that price drops on the domestic market had been lower than in continental Europe in the previous months.

Bulk grade prices on the rise

As mentioned above, prices for sorted mixed paper and board, supermarket corrugated paper and board and OCC rose in September.

Contacts in Germany and Italy usually reported hikes of around Euro 5/tonne, while market players in Spain said that prices there accelerated by Euro 10/tonne. In France the amount of the hikes differed according to the region.

“Prices in the areas closer to the German border were around Euro 5/tonne higher in September. However, paper mills in proximity to the Spanish border had to follow the price move there. All in all, I would say that prices rose by Euro 5-10/tonne,” a market insider commented.

According to market players in the UK, prices for the bulk grades there rose by an average of around £5/tonne.

The price increases were generally attributed to exports. Demand from European mills, on the other hand, remained subdued, but domestic buyers tried to keep the gap between export prices and European levels at bay in order to be in a good position in case of a possible change in trend in the packaging sector in the final quarter of the year.

Demand from southeast Asia was still there, but it was rather weak in early September, and domestic buyers in Europe were reluctant to offer higher prices. Then some buyers in India suddenly raised their prices by $10/tonne, and although demand was still weak in Europe, domestic buyers followed the move. It looks like they don’t want to miss the boat in case prices rise a bit further globally,” a market insider explained.

Others shared similar information. “The main driver of what happened was the high price difference between the export and the domestic market,” one of them said. According to him, the gap already amounted to more than Euro 30/tonne in August, whereas the normal difference would stand at approximately Euro 10-15/tonne.

The price difference forced small paper mills to increase prices during the month and, in the end, big players were forced to follow the move at the beginning of September.

European PfR market contact

However, the September hikes in Europe did little to narrow the gap between domestic and export prices, as the latter accelerated by some Euro 5-10/tonne in the course of the month, bringing the difference back to August levels.

Apart from the price increases, there was no big news from the European market in September. According to contacts, domestic demand was still low as paper mills across Europe continued to be haunted by weak demand and high pressure on prices as a result of the high overcapacity in the sector and the generally weak business environment.

As a result, inventories at paper mills remained high. Stocks in the waste management sector were low, though. Market insiders ascribed this to both good export demand and low collection volumes.

“Even after the end of the main vacation period, collection volumes continued to be low. It’s difficult to find a reasonable explanation for that. Maybe people are just consuming less than they used to do,” a contact in central Europe noted.

Some of his industry peers in the south were taken by surprise by the fact that arisings there were lower than expected during the summer months. “We had rather short supply as collection volumes dropped in August. This was a surprise as it was a record month in terms of visitors to our country,” a market insider in Spain commented.

More price hikes to come for European PfR?

Market observers found it difficult to tell what might be in store for the PfR sector in October. However, several said that the final week of September would be decisive for the development in the coming month and maybe even the entire fourth quarter.

“Domestic buyers in Europe are not yet moving, but prices are expected to rise in parts of Europe, especially in the south, after last week’s export price increases, and we are already seeing hikes of around £5-10/tonne in the UK. I think it’s fair to say that prices will certainly not drop, but then again, what is certain in this market these days?” one market insider noted.

Another one sketched two scenarios. “What can be expected for October? Nobody knows. The situation is very similar to the one in early September. Demand from paper mills is still very low and their margins have been eroding month by month. Stock levels at paper mills are still good and supply has been better in September than in August,” he explained.

“We have two options. Either domestic paper mills decide to propose stable prices for October as with good supply, healthy stock levels and low margins they don’t need to offer higher [PfR] prices, or they decide to once again try and close, at least partially, the gap with export prices in order to secure volumes at the beginning of the peak season before Christmas,” he added.

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


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