Crisis-like conditions for recovered paper
Market conditions are slow for recovered paper in Europe. Jean-Luc Petithuguenin, founder and CEO Paris-based Paprec and paper division chairman of the Bureau of International Recycling (BIR), Brussels, says packaging demand was strong last year, but he says that has calmed down. He says prices for recovered paper decreased steadily this year.
Petithuguenin adds that it’s valid to talk about a “crisis” in the recovered paper market, as prices have reached such low levels that it’s tough to sell some recovered paper grades anywhere.
“The papermakers select and take what they want,” he says.
Petithuguenin leads one of the largest recyclers in Europe—Paprec currently has about 9,000 employees across 200 sites in France and Switzerland. He has also been the paper division chairman at BIR for about two years. Recycling Today connected with Petithuguenin to get his perspective on the recovered fiber market in Europe and learn what the recycling industry can do in response to new low prices.
Recycling Today (RT): Looking at the past year, what has the demand been like for recovered paper in general? Is there demand for these products—why or why not?
Jean-Luc Petithuguenin (JP): In the European market, after a euphoric year of 2018, the packaging demand has calmed down. Reel price is tight as paper mills sometimes have trouble getting rid of their finished products. As they are facing a plentiful offer of waste papers and significant stocks, they are gradually decreasing prices. The abundant competition coming from USA or U.K. also disrupts the market. The delivered-to-factory prices in Europe are low and some papermakers do not hesitate to use it as a source of supply. The major problem to be managed this summer is the lack of space granted for our tons by papermakers.
As for the Southeast Asian market, it is overflowed with proposals from the USA, U.K. and other countries who are dumping their prices so much that even producing the highest quality is not enough anymore.
RT: Have recyclers had much luck this year with exporting recovered paper? If so, where is there export demand and why?
JP: Usually, at this time of the year, prices and demand are rising along together. This is just the opposite this year. There is not enough exportation. The demand is low, and some paper mills shut down their machines from time to time in order to control their stocks and lower the pressure. Prices are therefore dropping, and it is getting difficult to find buyers for some grades such as magazines.
Exportation to Asia is complicated. It’s not so easy to get orders. There are three markets: Indonesia, China and southeast of Asia. Demand to China is close to zero. We can export to Indonesia, but the new legislation is very difficult to be applicated. Demand to Vietnam [and] Thailand is normal. The situation for some grades, such as white heavily printed multiply board and newspapers, is getting more and more complex. Some grades are hard to sell, and prices are unstable.
Regarding high grades, prices have kept dropping for several months after reaching peaks in 2018. Pulp prices are lowering as well as its substitutes.
RT: You describe that it’s “valid to talk about a crisis” in the recycled paper industry. Why is that? How is the market for recovered paper different today than it has been before?
JP: Yes, we can talk about a real crisis. Prices have reached such low levels that it has become almost impossible to sell some kinds of grades or origins anywhere. Have we hit rock bottom? It is difficult to guess and anticipate what will happen in the second semester, but there are few positive signs for the moment. New machines are due to arrive on the market within a year and beyond.
RT: When would you say that a crisis for recovered paper started?
JP: July 2017—that’s the very precise beginning of the current crisis. China says it will drastically reduce its quotas for 24 materials, among which paper and plastics. We thought at first that this would only be true for a short time—as the demand for packaging starts there and is only growing, we expected China would reopen its borders. But it didn’t.
RT: Have conditions improved at all since July 2017?
JP: Before July 2017, China imported every year around 30 million tons of raw material from recycling industry. In 2018, it was 18 million [tons]. This year we expect 11 to 12 [million tons] as it is due to be reduced by another 50 percent next year. We can expect the border will be totally closed 2021.
New machines will arrive in Asia to produce reels for China. We expect the situation will be better after next year.
RT: What paper grades have been the toughest to move? What grades of paper have been the easiest to move?
JP: The situation can change. Last year, it was difficult to sell mixed paper; now it’s OK.
This year, OCC (old corrugated containers) and deinking are not easy to sell. Maybe tomorrow, the market can change another time. We have to adapt our business face to the situation.
RT: Do you think the crisis in recovered paper could alleviate this year?
JP: I hope so, but I’m not optimistic. The situation is not clear for the moment. Recovered paper stocks are full in Europe. There are some key points: order levels from Asia, consumption in Europe, low collection in August. I think we have to wait at least until October to know how will be at the end of this year.
RT: What advice would you give for recyclers across the globe on combatting the current challenging market conditions for paper?
JP: We have to produce quality grades. It’s an obligation. Always aim for quality. China’s quality and volume restrictions has pushed towards the production of cleaner grades of recovered fiber. Anything that can still enter China contains 0.5 percent or less off-spec materials. That is now the norm.
Regulatory climate in the European Union and beyond will continue to favor the collection and use of scrap materials. Carbon emissions reductions in using scrap versus virgin materials will continue to benefit recyclers.