Used cardboard prices fall as low demand bites

Paper recyclers have warned that the price paid for used cardboard is falling sharply due to a lack of demand globally, but they stopped short of describing it as a crash.

waste paper prices
DS Smith has called for mandatory separate collections of paper and board from households and businesses (picture: Shutterstock)

In recent weeks, paper recyclers say prices have fallen by around a third, driven by falling demand recorded in South East Asia, India and Europe, the largest markets for UK recyclers.

High energy prices and changing consumer habits leading to less cardboard being required for packages mean many mills have also decided to take extended summer downtime as running costs soar.

Those open and running are also offering lower prices for material as the knock-on effects of low demand and higher running costs run through the supply chain.

One recycler in the south of England said that, since the turn of the month, prices for exported mixed paper have fallen by around a third to £90, while old KLS (OCC cardboard) has followed a similar pattern to around £100.

Others have also described prices as falling from anywhere between 15-35%.

On a more positive note, the value of the paper PRN has risen to as high as £17 in recent days, helping to making up some of the margins lost, though how much of this extra revenue reaches recyclers is debated.

Markets

However, despite the downwards trend, the general view from the paper recycling industry is that things will pick up later this year, “when mills eat through current stock and more capacity comes back online.”

waste paper prices
A looming recession is changing consumer demands, leading to lower demand for packaged goods from China, having a knock-on impact on the wider region (picture: Shutterstock)

“It’s frustrating but it isn’t the end of the world. When more mills come online, there will be scrap for material next year,” explained one reprocessor in the south east of England.

Others have indicated that the situation will be rectified by the beginning of Q4, while somehave tipped demand to take “three months minimum” to return to where it was earlier this year.

Demand

Dr Simon Ellin, chief executive of the Recycling Association, said: “Prices of brown packaging grades have fallen by around a third from their high point in July.

waste paper prices
Dr Simon Ellin said low demand will pick up again later this year

“This has been driven by a multitude of factors. On one hand, there has been a slowdown of demand from South East Asia, driven by China.

“India considers the price too high at the moment so isn’t as involved as before, and the war in Ukraine and the subsequent gas fall out is hitting demand from German factories too, the largest EC buyer of UK material.

“However, I don’t think it is Armageddon, providing the prices don’t drop too much further. Have we reached the bottom? Or, as I would suspect, at the end of Q3/beginning of Q4 we will begin to see demand come back in India, plants will have finished shutdowns during summer months and things will revert back slightly.”

High point

A recycler in Scotland explained that a downwards trend was always anticipated, as prices “couldn’t stay as high as £170 for ever”.

They warned that while demand for tissue grades remains high, he would not be surprised to prices for these grades to fall too, as mills seek lower prices with fears of a recession growing.

It is concerning to hear of mills taking downtime to cope with high energy prices

They said: “The fall in prices for used cardboard basically boils down to a drop in demand for material across Europe and Asia. There is a real potent concern in the industry about the effect of any upcoming recession, and people don’t want to be stuck with material at higher prices.

“It is concerning to hear of mills taking downtime to cope with high energy prices and, as a result, demand for cardboard is falling. Prices have dropped by around 25%, I’d say, and will continue to do so for a little while until the situation sorts itself out, which I think will be later this year.

“In the meantime, I wouldn’t be surprised if prices fall for other grades too as a knock-on effect. Mills will realise an opportunity and look to take full advantage.”

Europe

One paper recycler in the south said there had been trends indicating a fall in demand in Asia for a while, but the market was being “kept alive” by demand from Europe, in particular Germany.

“We now see the situation in Ukraine and the knock-on effect on energy prices and mills are slowing right down. I’d estimate around 500,000 tonnes of production has been curtailed recently, and this naturally has a knock on effect. They are pushing back on material now, and I’ve seen them asking to pay around €60. The market is beginning to crash.”

They added: “I think this will be the case for a minimum of two months, demand won’t rebound instantly. US, UK and European markets are all pretty weak at the moment. I would say export of mixed is around £80 at the moment, with cardboard at £100.”

Overheads

Waste paper merchants say that they are being hit not only by the falling rates but by rising costs.

waste paper prices
Cost of fuel, baling and processing have all risen, which recyclers say is impacting the rebate they can pay (picture: Shutterstock)

Whereas in the past it was estimated that the baling of waste paper might have cost £10 per tonne, this price has soared in recent years. Some merchants say the per tonne cost for baling has now jumped to around £20 per tonne, with energy costs rising and even the cost of baling wire more than doubling.

And, like others, the sector has faced the diesel cost increase, as well as the ending of the use of red diesel on mobile plant.

The costs, one merchant explained to letsrecycle.com, are significant in terms of the rebate offered to customers for the material, with an element of the rebate needing to be removed or at least shared to cover the extra costs involved in handling the waste paper.

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