European Markets Look Strong Moving into 2000

The Bureau of International Recycling reports the quarterly update for the European paper stock industry.

Baltic countries. The short and mid-term future looks reasonably good for mixed paper, old corrugated and the higher grades. After producing very little and enduring long idle periods, board mills are now operating at a good pace.

Prices in all three countries - Estonia, Latvia and Lithuania - have been generally stable, although there have been some increases.

Improved export potential to neighbouring countries has stimulated collection in Estonia and will continue to do so.

Czech Republic

Following a fundamental improvement in the third quarter, sales of all grades are progressing well. Average prices have risen by 15% to 20%, but have not reached the level of those in Austria and Germany.

Exports to traditional outlets have risen - especially to the Slovak Republic, and trade is continuing with Austria and Germany.

Although the volume of paper recovery next year will depend to some extent on the weather, the sales position is expected to be favourable.

France. The final quarter of 1999 was quite stable, and although OCC prices failed to rise, those of mixed did improve. Both home and export demand for these qualities is still strong, and in contrast to past years domestic mills have been running without interruption. It is expected that export demand will increase early in the New Year.

News grades have been in good demand and the start-up of Chapelle Darblay, which will raise consumption of news by around 10,000 metric tons a month, makes a higher price possible.

French consumption of recovered paper in 1999 was up by 5.4% while output of new paper and board rose by 3.9%. Mill orders for printing and writing papers increased by 44.6%, for wrappings by 36.1% and for domestic grades by 15.4%. There was a 14.5% decline in orders for industrial papers. The general order position for the first quarter of 2000 is good.

Germany. Supply and demand have been generally stable since October when a good domestic market supported by increased orders from South Eat Asia ensured that most bulk grades could be sold without difficulty. The sole exception was deinking material which suffered a slight price reduction. Following the rising trend of the pulp market, higher grades were more profitable.

Despite a seasonal rise in collection in November, there was hardly any increase in merchants' stocks as sales continued at a very satisfactory level. The paper industry, however, diverted a proportion of its purchases into stock. Prices of virtually all grades were stable - perhaps because the mills were not planning a complete shutdown during the holiday period. Further strengthening of the pulp market brought a modest improvement in prices of better grades.

The established trend continued in December with supply and demand still in balance despite the availability of slightly more material. There were no price changes.

Italy. The start of the final quarter of the year brought an increase in prices, reflecting the general trend in the international market. At the end of November, however, apparent pressure from major consumers resulted in reductions for low and brown grades, although smaller mills tended to maintain higher price levels. This situation continued in December, even though supplies of recovered paper were somewhat slack and the mills continued to operate at a time when seasonal closures were to be expected.

Paper producers complain that domestic demand for their products is inhibited by unsatisfactory economic conditions, and thus exporting proves attractive. In view of the prices obtainable for recovered paper on the international market, Italian merchants could well decide that exporting is in their best interest. Even so, deinking materials and higher grades are responding to the pressures of the pulp market, with demand and prices rising.

Against this background, there is a wish by mills and merchants to avoid counter-productive speculation and maintain a reasonable level of stability. With increases in collection balanced by a parallel rise in consumption, the current position indicates that stability is likely for at least the first couple of months of 2000.

The Netherlands. Most mills are oversold and it is expected that prices of bulk grades of recovered paper will remain relatively stable. Exports to the Far East continue steadily at prices above those of the domestic market. As more and more Dutch recovered paper is being exported, mill groups are increasingly buying larger top-up tonnages outside The Netherlands at premium prices.

In view of the strength of the market, the Intervention Fund continues in abeyance.

There is still some concern for the level of activity in the first quarter of 2000, especially over the possible clogging of the paper supply line and the market effects of the millennium. But 1999 can be viewed as a good year for the recovered paper market in The Netherlands.

Spain. The domestic market is strong with prices stable for the last two months. It appears that this strength will continue into the New Year, with the second quarter showing particular promise. Against a background of sustained demand and a high level of generation, merchant stocks have fallen while those held by mills are at mid level.

After some turbulence in September and October with prices rising, the low grade sector is gaining stability. Stocks at processors' plants are very meagre. Imports from France and Germany are continuing at an appreciable level, and after a particularly bad period for transport the position has recently improved. New consumption capacity will come on stream next year, helping to keep the market tight or even stronger.

While general demand for deinking grades is good and merchant stocks low, demand for overissue news is becoming week. A slight decrease in price is expected, but this sector should rebound strongly in March or April.

No significant change is expected in the firm market for high grades.

The order position of Spanish mills is good and all new product prices have been increased.

Switzerland. As most paper and board mills are well supplied with the majority of grades, activity has slowed for the turn-of-the-year holiday period. Prices of some mid qualities have eased a little, but this should be no more than a temporary phenomenon.

From being one of Europe's exporters, Switzerland has become a net importer of recovered paper, mainly from neighbouring countries.

During the past few months there have been substantial ownership changes in the Swiss paper and board industry. With the exception of Altpapierwerk Utzenstorf, which is integrated with Papierfabrik Utzenstorf, the recovered paper sector still consists of private family-owned companies. Recovery totals about 1m tonnes a year, with an annual rise of around 2%.

Turkey. A combination of high demand and rising raw material costs brought a steady increase in paper prices in the final quarter of 1999, which levelled-off in mid-December. Paper and board producers felt the effect of positive developments in the world market, and benefited from millennium-influenced demand from the printing and packaging sectors.

Demand for recovered paper accelerated during the quarter and expanded to include all grades. Insufficient imports of mid grades resulted in higher prices for these materials.

Economic growth last year was behind that of 1998, and had a negative impact on the paper and board industry, especially in the initial six months.

United Kingdom. With strong domestic demand for all grades and arisings in many cases below seasonal expectations, mill stocks are much lower than normal and those held by merchants are minimal. One outcome of this situation is the continued necessity for many packaging mills to import KLS from the near continent. The export market remains very strong, with traditional continental demand being supplemented by orders from Asia which are being placed well into the New Year.

The final quarter of the year has seen much increased paper and board industry activity. Most mills have been running full and predicting continued production during the Christmas/New Year holiday period. Full year figures for 1999, however, are likely to show little growth in paper production or recovery.

While 1999 has seen the closure of a number of mills and further consolidation, some new capacity came on stream, mainly in the tissue sector.

The PRN (Packaging Recovery Note) producer responsibility system for packaging materials continues to give concern. An abundance of Notes is available at low prices, and there is little confidence that the system can survive in the coming year without legislative changes.