An assessment of the year past and what we can look forward to in 2020 – by Highlander Director, Stephen Duffy.
We have been writing to Highlander customers throughout the year with updates on the waste paper market and invariably, informing of the falling waste paper values. We understand that there can be some doubt and perhaps some suspicion whenever someone is contacted with price reductions and this market assessment is designed to provide some basis and background, as to why the prices dropped so dramatically last year.
Cardboard / packaging grades:
This sector has been hit hardest in 2019 with price reductions of up to £50-£60 per ton experienced, taking the actual sales value of baled OCC to as low sub £10 per ton. In a nutshell, this whole issue is China driven in that they have been gradually reducing their reliance on waste materials imports since the start of the last decade, from a peak of 30m tons imported to around 9m tons in 2019, and projected 6m tons for 2020 at which point it is RUMOURED, that China will cease imports altogether (although this remains to be seen). Because of this reduction in China imports and the capacity reduction in the country, plus the development of their own internal recycling processes and further use of pulp within their paper-making industries, as a result there currently exists a structural capacity deficit for waste paper consumption of around 9m million tons in Europe and while there are new paper mills being built as we speak in Europe and in Asia (Reports of up to 25m tons of new non-china capacity) which will reduce / eliminate this deficit, this will take time and estimates are that we could experience a period of around 6-9 months, where prices are depressed.
Tissue / printers / office grades:
This market sector has experienced price reductions of up to £40 per ton and while prices still remain relatively attractive in comparison to cardboard prices and historical values for these grades, needless to say a drop of about 25% in the value of any commodity – never mind waste paper – is always a difficult pill to swallow for the commodity producers (although great news of the consumers of course). The explanation for the price reductions are quite simple in this case – pulp prices have been falling significantly since their record highs in 2018 / 19 and as waste paper prices more often than not follow the price trends in the pulp markets, it was only a matter of time before waste paper prices fell in tandem. 2020 unfortunately started with another reduction of £8 per ton, however there is some light on the horizon – pulp prices do seem to have plateaued in the last month or two so we are hopeful that waste prices will shortly bottom out here also.
(Source – Lets Recycle: https://www.letsrecycle.com/prices/waste-paper/)
2019 UK domestic mill
£ per ton
January
February
March
April
May
June
Mixed papers
30 – 38
20 – 30
15 – 25
15 – 25
15 – 24
10 – 27
Old KLS (cardboard)
60 – 67
50 – 65
45 – 65
47 – 65
40 – 60
35 – 50
Multi-grade
165 – 170
165 – 168
165 – 168
160 – 165
160 – 165
150 – 156
2019 UK domestic mill
£ per ton
July
August
September
October
November
December
Mixed papers
10 – 24
*10 – 25
*10 – 20
*5 – 15
*0 – 10
-VE 5 – 5
Old KLS (cardboard)
35 – 45
40 – 55
38 – 50
28 – 40
20 – 32
10 – 15
Multi-grade
150 – 155
145 – 150
145 – 150
145 – 150
138 – 142
130 – 137
2020 outlook:
Outlook for Quarter 1 is grim – January is traditionally a quiet month for paper mills anyway, however with a lot of waste paper volumes on the market and with reduced orders expected from our mill buyers, the chances of any substantial price recovery is highly unlikely and we are expecting a similar trading environment for Q2 – 2020 also. There are some small rays of sunshine for the industry in 2020, mostly from the introduction of new capacities / paper mills, restrictions on the export of mixed paper grades to export destinations such as India and Indonesia which in theory will make cardboard grades more attractive to these countries and the inevitable loss of some paper grade volumes from the supply chain, as their recycling becomes too expensive due to their significant reductions in values (this applies predominantly to mixed paper and cardboard grades). We also anticipate that the PRN system may kick in to the advantage of packaging waste paper grades, in that if there is less material being bought by mills ergo less PRNS generated, the PRN value will rise and as such increase the price of cardboard and to a lesser extent, mixed papers.
2021 outlook:
While things may pick up in Q3 – 2020 it is more likely that Q4 will be the start of a proper recovery for prices and we predict that 2021 should be a much better time for the industry as new mills will be in place, PRN / recycling targets will have increased, RDF and landfill disposal will be more expensive and general economic outlook will be brighter. While this doesn’t help much with the here and now, it does at least provide hope and a realisation that things will in time get better – in the meantime, the best advise we can give is to keep calm and carry on!
We thank you sincerely for your support in 2019 and hope to be of service to you in 2020 and beyond. If you require any further assistance or information here, please feel free to contact us directly at 01355 524 215 or recycling@highlanderinternational.co.uk and one of our experienced recycling experts will be glad to discuss this with you!
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