Prices for OCC have fallen by between 80% and 90% over recent months, amid extremely low demand all around the world as well as high stocks at paper mills and also at collection plants. The problem does not relate to collection, which has not been increased, but to mills’ consumption as a consequence of low demand for their products.
The high cost of energy - and specifically gas - is one of the reasons for this as it has become by far the largest production cost for mills. They cannot pass on this cost in their sales prices because demand for their products is also low owing to the financial crisis, and neither can they reduce their energy costs. Therefore, the only cost they can manage somehow is what they pay for their raw material.
In the USA, prices for mixed paper have reached zero dollars in some locations, and thousands of tonnes are already being landfilled owing to oversupply (in Florida, for instance). Further downtime can be expected at a number of paper mills.
Europe is where prices have fallen fastest during recent months. Again, even more downtime is anticipated and so it is difficult to know where the bottom is. Exports could be a partial solution: domestic prices are getting closer to export values, there has been an improvement in container availability and freight costs, and the Euro is very weak against the US dollar.
The situation in Asia is really difficult too as demand is not at all strong. China is ordering neither recycled pulp nor packaging paper from South East Asia or India, and so production in these countries is also very low, thus negatively impacting OCC demand. Import prices used to be lower than local prices in South East Asia and India but now local prices are falling and pulling down import prices even further.
Maybe as a result of China’s ban on recovered paper imports, some mills are investing in new cartonboard capacity. In 2023, Nine Dragons is scheduled to launch new capacity amounting to 4.77 million tonnes per year, but its decision not to use recovered paper will further damage our industry’s market chances. It is to be hoped that this will not become the general trend.
Although the decline has not been as steep as for OCC, prices for the deinking grades have also fallen during recent months, with October bringing another huge drop of nearly 40%. For white grades, however, demand remains very high and prices have remained reasonably stable at healthy levels compared with previous months and years.
The extremely high cost of gas is not only a problem for packaging paper producers but also for mills in other segments. For instance, one of the leading tissue producers in Germany, Hakle, has permanently closed its plants and filed for self-administration insolvency proceedings. Other paper mills around the world are also on the limit.
In my own country of Spain, market conditions are totally aligned with the above observations, with OCC suffering a huge price crash and deinking grades falling to a lesser but still significant extent. High grades are remaining stable amid very high demand.
Unfortunately, the collection rate in Spain dropped by 3.1 percentage points last year to 63.8% - a figure quite similar to that of the pre-pandemic year but still lower than five years ago when 70.9% was achieved. Collection volumes totalled 4.4 million tonnes in 2021 while consumption climbed 4% to 5.35 million tonnes. Most of this consumption is from domestic sources (69.1%), with 1.65 million tonnes imported mostly from France and Portugal. Exports reached 0.7 million tonnes for a drop of 2.5% from the 2020 level. Leading destinations were India on 301,000 tonnes and South East Asian countries on 260,400 tonnes. Italy and France were also more minor outlets.
DOLAF Servicios Verdes S.L. (ESP)