The recovered paper – or waste paper – sector is bracing itself for a turbulent April with a sharp decline expected in the value of mixed paper on the export market.
Prices are also heading downwards for used cardboard (known as OCC or Old KLS) and other grades could be hit as a consequence.
Market values for used mixed paper, a product which often comes from materials recycling facilities, could fall by 50% or more from the £100+ level seen at the beginning of March 2017, according to recovered paper sector sources.
Sector experts put the sudden fall in value and a reduced demand down to several factors. These include the fact that Chinese mills have been paying relatively high prices in recent months; weaker selling prices and slower demand for finished new product in China; higher freight charges and container shortages; and more waste paper being available on the internal market in China. Stocks of finished new product in China are also described as “good”.
And, quality of material also remains an issue – recently 103 containers of paper for export were returned from Rotterdam to Ireland. This comes against a background of an ongoing Chinese customs programme “Operation National Sword” which is targeting illegal waste exports to China, although this was not launched to target poor quality waste paper exports.
However, customs checks linked to the National Sword work are said to be slowing the movement of containers and could exacerbate the shipping situation.
Shipping rates have already increased dramatically in recent months with until now Chinese buyers largely absorbing the extra costs and continuing to pay higher amounts for material. Recently prices for containers have risen by about $500 towards the $2000-2,250 mark and further increases to as much as $2,500 per container are possible. These rises increase the shipping cost per tonne of waste paper for the exporting business.
Shipping lines are seen as trying to exert their muscles in the market and some observers see the April price downturn and potentially lower export order books as part of the fight between the lines and exporters over shipping rates.
China’s demand for waste paper has a massive impact on the UK more than half the material recovered is sent to China and other overseas destinations for recycling into new cardboard.
There were varying views within the paper industry on the impact that the price reductions for April will have, but the general view among those contacted by letsrecycle.com was that it was a “market correction” rather than linked to quality issues.
One waste paper merchant told letsrecycle.com: “We’ve been told that prices for mixed paper and OCC (used cardboard) are going to fall sharply and we are already seeing big reductions being signalled. And, at the end of March orders from Chinese companies were hard to find.”
Another merchant said that he expected material to keep moving but that he was alerting his customers to the fact that prices were going to reduce “a lot”.
One merchant in England said: “We have been told that mixed could go down to £42 a tonne and OCC to £82. We don’t produce a vast amount of mixed but it is any knock-on effect on other grades that will be more concerning for us. The MRFs would be very worried. Certainly the industry won’t want to store materials but it might be tricky if containers are stuck in China and overall I would say that logistics are in a bit of a mess.”
Another view was that UK mills might step in during April to buy tonnages in what is traditionally a quiet generation period because of Easter and that extra demand would also come from the Continent. However, this is expected to see waste paper prices reduced compared to March.
On the export front, Colin Clarke, managing director of Mark Lyndon UK based in Nottingham, a major exporter to China, said: “Markets do go up and down and prices will reduce in April. The market is correcting and resetting linked to the market demand and situation in China. This correction is nothing to do with quality and it should be remembered that it has been a seller’s market for eight to nine months.”
Mr Clarke explained that the price paid for used cardboard and mixed paper is linked to the situation with finished goods in China and to the significant recent increases in GRI shipping rates. “But, it has also to be remembered that quality is always on the agenda. Quality hasn’t pushed the price down although National Sword will put quality on the agenda even more.”
Craig Robinson, managing director at recovered paper exporter CycleLink UK, said: “The consensus is that there is going to be a drop in the value of mixed paper in April and also in some other grades. Shipping rates have been rising sharply and there are stocks of material in China and there is also the National Sword campaign.”
Mr Robinson added that some Chinese mills might not be buying. CycleLink, he said, has notified its UK customers of the likely price falls so that they can be better prepared for them in terms of agreements with others.
The Recycling Association, which represents many paper recyclers and mills, this week issued a statement about quality ahead of its quality conference next week in London.
Simon Ellin, chief executive of the association, said: “The UK competes with other countries around the world to provide China with fibre and plastics and we have to ensure that the material is not only legally compliant, but is the best available so that we will still have a market for material we cannot use in the UK. Our Quality First campaign is calling for the adoption of EN643 as the standard, which only allows for 1.5% out-throw. National Sword shows the need for this standard to be adopted.”
On the quality front, the identity of the company which was responsible for the containers of waste paper for recycling which were exported from Ireland and stopped at Rotterdam, and have since been returned on quality grounds, has not been disclosed because of commercial and legal considerations.
Ireland’s Transfrontier Shipment Office in Dublin told letsrecycle.com that 107 of the containers involved, after an inspection in Rotterdam, had been returned to the point of origin in Ireland. The TFSO added that it is still to be determined as to whether or what type of action will be taken as its investigation is ongoing.
Commenting on the need for inspections on waste shipments generally, senior European environment regulator, Allison Townley, Waste and TFS Expert Team Leader at IMPEL, the European Union Network for the Implementation and Enforcement of Environmental Law, told letsrecycle.com that inspections on exports are essential in helping to tackle waste crime.
“From an inspection perspective, waste crime is high up on all our agendas. We want to keep the work active with collaboration between authorities and regular checking of shipments. We can’t let up on this whether the exports are for China, India or elsewhere as there is a legal perspective and we are required to do this.”
Miss Townley, who works for the Department for Environment in Northern Ireland, added that: “All four UK agencies are working very closely with Defra. We have a link with Chinese customs and our first port of call on this through Impel is via the European Commission.”