European PfR prices keep growing

Low inventories and transport issues plague major markets and cause hikes in September

By Daniela Wortmann, Deputy Editor, PPI Europe, Fastmarkets Forest Products

Paper for recycling (PfR) prices continued to increase in September. However, while contacts on all major markets reported hikes for the medium and high grades, comments on prices for the bulk grades sorted mixed paper and board, supermarket corrugated paper and board and old corrugated containers (OCC) differed depending on the region.

Market players in the UK typically said that prices there accelerated by up to £10 per tonne in September. Industry insiders in Germany and France also reported higher prices for the bulk grades, with most of them quoting hikes of around €10 per tonne.

As in previous months, the development was attributed to low inventories on both the buying and selling sides of the market, reduced PfR arising in several regions, good demand and ever-increasing transport issues.

Meanwhile, the southern European markets seemed to be more balanced in September. Contacts in Italy said that the month had started off with suppliers asking for hikes of some €10 per tonne, but that the final increases were lower, at around €5 per tonne. Market players in Spain generally said that prices for the bulk grades remained unchanged month on month.

Bulk grades rise in some places Prices for sorted mixed paper and board, supermarket corrugated paper and board and OCC accelerated again in September, at least in central Europe and the UK. While contacts in the UK reported increases of around £5-10 per tonne, most market sources in Germany and France said that prices rose by some €10 per tonne.

“Prices for the bulk grades grew by €10 per tonne in September. Demand was still strong for almost all grades, while collection volumes were weak at the end of the vacation period,” a contact in France noted in mid-September. He added that the hikes were mainly fueled by demand from central Europe, whereas the Spanish market seemed to be quieter.

Several market sources in Germany shared this view. “I would say that prices [for the bulk grades] increased by another €10 per tonne in September,” one of them said, adding that buyers were willing to dig even deeper into their pockets when it came to spot lots.

A source noted:

“At the same time, collection volumes are still relatively low and we have less material coming in from the UK due to Brexit and transport issues. All in all, this is the perfect playing field for more price hikes,” the source continued.

Some market players also said that the July flooding in some parts of central Europe was still affecting the supply/demand balance. “Public life is still far from normal in the areas that were most heavily affected, and it is more than understandable that peoples’ main focus in those regions isn’t on proper waste collection. Still, we are in a situation where demand is so high that every single tonne of paper we lose hurts,” one of them explained.

Transport continued to be one of the main issues on the UK market in September, with several market insiders saying that this was one of the main reasons behind the September hikes. “I guess everybody has heard about the huge lack of truck drivers in the UK, and the waste management sector is also feeling the effects. Councils have to cancel or delay collections, and it’s increasingly difficult to deliver the available material. Of course, this results in higher prices, as demand from domestic paper mills remains strong,” a contact noted.

However, transport issues did not only weigh on the domestic market but also affected exports.

The current petrol crisis in the UK is expected to further exacerbate the already difficult situation.

More stability in Italy and Spain Market players in southern Europe had a different story to tell in September. While several contacts in Italy reported only minor increases for the bulk grades, market sources in Spain said that prices there remained largely unchanged.

“September started with suppliers asking for increases of €10-15 per tonne [for the bulk grades] as well,” a buyer in Italy commented in late September. However, according to him, those demands were mainly speculative in nature and not backed by market fundamentals. “The flow of material was absolutely normal and we resisted and continued to pay August prices to most of our suppliers,” he noted.

However, the selling side was reportedly still able to lift prices for the bulk grades somewhat in September. “Logistics costs kept rising and we had to pass part of that on to our customers. All in all, I would say that buyers had to pay around €5 per tonne more in most cases, with some higher increases in case of urgent deliveries or spot lots,” one of them commented.

“We haven’t seen any price movements for the ordinary grades in September. It seems that the €15 per tonne hikes at the end of July anticipated what happened afterwards in the rest of Europe,” a market source in Spain reported this week. “Prices in Spain haven’t moved since then, but we saw hikes of €10 per tonne in France in both August and September,” he added.

Others confirmed the information. “August was a very calm month in Spain and the same was true for September. Paper mills had good stock levels while merchants’ inventories were lower, but overall, supply and demand were quite balanced, and export volumes, as limited as they were, helped maintain this balance,” one of them said.

Medium, high grades rising Prices for the deinking, medium and high grades continued to increase across Europe in September. As in previous months, market insiders attributed the development to low availability due to, among other things, the ever-decreasing amount of newspapers and magazines in household collections and high demand from the paper industry. While contacts in continental Europe generally said that prices for deinking material accelerated by some €10-15 per tonne, contacts in the UK reported hikes of £5-10 per tonne.

September price quotes for most medium and high grades were also higher than the previous month in most cases. Driven by high demand, limited availability and pressure from the deinking sector, levels accelerated by some £10-15/tonne and €10-15 per tonne in the UK and continental Europe, respectively.

“A lack of supply and increased demand from the tissue sector due to the reopening of bars, restaurants and hotels have turned the market and we are facing a demand-driven situation now. Consequently, we saw more price increases in September, with prices for the pulp substitutes rising by around €15 per tonne,” a market player commented.

What do market players predict for October?

“October will bring no change for paper mills, which will still need to feed their machines, and I expect demand to remain strong until the end of the year. Collection volumes should increase and the logistics situation should improve somewhat. Still, the balance of supply and demand will remain very fragile,” a contact in central Europe noted.

Several of his industry peers shared this opinion. “It is quite possible that prices will rise again next month. Several paper mills have already signaled their willingness to pay more in October as they expect that available collection volumes will be insufficient for their needs and hope to secure larger tonnages than less proactive buyers,” one of them noted.

Some contacts in Italy also said that they were expecting the bulk grades to rise in October. “I’m convinced that October’s music will be somehow different and that we will see another round of increases of around €10-15 per tonne for all grades,” one of them said.

Market insiders in Spain, however, frequently said that they were expecting another month of stability. “In general, the market is not anticipating any price movements in October. The only factor that could change the current balance would be the revival of exports, but right now, we don’t see this happening either,” a contact noted.

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