Friday, January 13, 2012

October scrap paper export numbers surprisingly strong

By Ken McEntee

Recovered paper export statistics from the U.S. Department of Commerce fly in the face of reports of a weak export market in October. Traders in October cited declining exports as a partial cause of eroding prices, including a massive drop of $100 per ton for Sorted Office Paper (SOP) within a month and a milder drop in Old Corrugated (OCC) prices.

October trade data from the Commerce Department’s Census Bureau show a 30 percent increase exports of chemical deinking grades compared to September shipments, along with a flat month-to-month average price.

Overall, exports in October were up almost 4 percent, to 1.9 million tons, while the average price for all grades were up 2.6 percent, to an average of $165.68 per ton. For the first 10 months of the year, exports were up 13.4 percent, to 19.3 million tons, while the average price was up 4 percent. Sales for the year were up 18 percent, to almost $3.2 billion.

October surprise

While the October free-fall was mainly attributed to domestic markets, a weak export market also was cited.

Traders in October attributed the whopping drop in SOP prices mainly to Georgia Pacific, which first announced at mid-month that it was dropping its SOP and Coated Book Stock (CBS) prices to $150 a ton, representing a drop of about $100 per ton within a four-week period. Other mills followed. Canadian buyers like Kruger and Cascade were the only holdouts, reportedly holding their prices closer to $200 per ton until later in the month. Up to the GP announcement, other mills were already buying at levels $30 to $50 below their September prices.

Mill inventories were reportedly very high, but traders also noted that lackluster overseas demand was contributing to declining prices.

Traders also reported weakness in Chinese buying of OCC in October. Reportedly, after placing orders early in the month Ralison International, which buys for China’s Lee and Man Paper, reportedly has told suppliers not to ship any more tonnage. Meanwhile, America Chung Nam, which supplies China’s giant Nine Dragons Paper, was reportedly issuing purchase order with the price “to be determined.”

Commerce statistics show a 2 percent decline in OCC exports to China during October, along with a 4 percent increase in the average price of OCC shipped to China. Judging by traders’ reports, November trade data should indicate a much larger reduction in exports to China, along with a heavy drop in price.

Traders reported that OCC was moving to China from Los Angeles for about $245 per short ton, delivered to major Chinese ports. After a weeklong Chinese holiday at the beginning of October, the price was reported at about $220 per ton including shipping.

According to what appear to be undervalued prices reported by the Commerce Department, OCC exports to China averaged $130.81 per ton in September and $136.07 per ton in October. Commerce trade data indicates FAS value, including the value of recovered paper to the dock and transportation to the dock, but not including costs of loading and handling at the port, nor ocean freight.

October exports

According to Commerce Department data, all major grade categories of recovered paper improved from September to October except old newspapers (ONP). Meanwhile, prices were up for all grades except mixed paper, which dropped 2.6 percent, and chemical deinking grades, which remained just a quarter dollar below September levels.

* Despite chaos in the U.S. market, commerce reported a 30 percent increase in exports of chemical deinking grades, from 41,000 tons in September to 54,000 tons in October. The average price if deinking grades was at an average of $254.25 per ton in October. A 42 percent, 4,300-ton drop in deinking grade exports to China was more than offset by a 136 percent gain in shipments to India, from 6,100 tons in September to 15,000 tons in October. Exports to Canada were up 56 percent, from 6,000 tons in September to 9,300 tons in October. Exports to Mexico were relatively flat, falling 1.4 percent in October, to 3,800 tons. Among moderately-sized markets ranging between 2,300 and 3,300 tons, exports to the Netherlands were up 109 percent; El Salvador up 116 percent; South Korea up 68 percent, Italy up 31 percent, and Japan up 37 percent.

* Along with the 30 percent increase in deinking grade exports, October shipments of pulp substitutes were up 2.2 percent, with a 1.2 percent increase in price, to an average of $232.92 per ton. Exports to Mexico tanked, dropping 20 percent, from 44,200 tons in September to 35,400 tons in October. However, that 8,900-ton drop was offset by an 8,900-ton improvement in shipments to China, from 85,300 tons in September to 94,200 tons in October. Exports to El Salvador were up 78 percent, from 2,800 tons in September to 5,000 tons in October.



* OCC exports in October were up 1.2 percent, with a 5 percent improvement in price, to an average of $155.09 per ton. Exports to China were down 1.7 percent, from 696,000 tons in September to 684,000 tons in October, a difference of 12,000 tons. However, that loss was offset by increased exports to India, Indonesia and Vietnam. Exports to India were up 10 percent, or 5,000 tons, to 56,000 tons. Exports to Indonesia were up 79 percent, or 3,400 tons, to 7,800 tons. Shipments to Vietnam were up 97 percent, from 3,100 tons in September to 6,100 tons in October.

* Following deinking grades, mixed paper exports showed the greatest improvement in October, at 13 percent above the September number. Mixed paper prices, however, were down 2.6 percent, to an average of $158.80 per ton. Shipments boomed in October to China, India and South Korea. Exports to China were up 10 percent, or 20,000 tons, to 218,000 tons. Exports to India were up 52 percent, or 12,500 tons, to 37,000 tons. Exports to South Korea were up 39 percent, or 11,500 tons, to 41,000 tons. On the downside, exports to Indonesia were down 41 percent, or 7,700 tons, to 11,200 tons.

* Exports of groundwood, overall, were down less than 1 percent in October. While ONP exports were down 6.4 percent, exports of other groundwood grades were up 4.2 percent. ONP prices were up 3.8 percent, to an average of $163.45 per ton, while prices of other groundwood were up 1.8 percent, to an average of $151.86 per ton.

* ONP exports to China, the dominant market for the grade, were up less than 1 percent, to 120,000 tons. Shipments to Mexico strengthened in October, improving by 28 percent, or 3,400 tons, to 15,000 tons. However, the grade was hurt by a 23 percent, 7,900-ton decline in exports to Canada.

* China’s imports of other groundwood grades were up 7 percent, or 14,000 tons, to 216,000 tons. After China, the next largest market was South Korea, at 14,600 tons, a 12 percent decline compared to September. Exports to Canada were down 26 percent, or 2,400 tons, to 6,900 tons.

* Improved shipments to China and India were responsible for the overall improvement in October exports. Exports of all grades to China were up 2 percent, or 28,000 tons, to 1.3 million tons. Exports to India were up 24 percent, or 24,000 tons, to 125,000 tons, making India the second largest market for the month. Canada showed the largest September-to-October reduction in tonnage, at 7,600 tons, an 8 percent decline to a total of 88,000 tons.

Year through October

At almost 19.3 million tons shipped, the annual record of 20,975,455 tons shipped in 2009 may have been surpassed during November. The average FAS price of $162.63 per ton for all grades will most likely top last year’s record of $157.99 per ton. Through October, exports of all grades were up significantly except for mixed paper and ONP. Meanwhile, prices were better for all grades except OCC and groundwood other than ONP.

* Led by China, OCC exports were up 34 percent in 2011 relative to the same time in 2010. Shipments to China were up 54 percent, or 2.3 million tons, to 6.7 million tons for the year, representing 78 percent of all OCC shipped, and equating to 29,000 shipping containers per month. Through October 2010, China accounted for 67 percent of all OCC exports. Subtracting tonnage to China, OCC exports to all other markets through October would be down 9 percent.

The next largest market after China was India, at 538,000 tons, representing a 1 percent increase compared to the same time in 2010. Following China, the strongest growth has been in exports to Vietnam, which were up 69 percent, or 24,000 tons, to a total of 60,000 tons. On the downside, OCC exports to Ecuador were down 76 percent, or 71,000 tons, from 93,000 tons through October 2010 to 22,000 tons through October 2011. Exports to Mexico were down 12 percent, or 53,000 tons, to 400,000 tons, while shipments to Indonesia were down 50 percent, to 46,000 tons. Shipments to Argentina and Chile were down about 18,000 tons each. OCC accounted for 44.6 percent of all scrap paper exports, up from 37.9 percent a year earlier.

* Mixed paper exports through October were down 10 percent, while the average price jumped 14 percent, to $159.11 per ton. The drop was due to a 16 percent, 384,000-ton reduction on mixed paper shipments to China, from 2.6 million tons through October 2010 to 2.1 million tons in 2011, as Chinese mills tended to buy more OCC instead of attempting to sort contaminated residential mixed paper. Exports to Italy also were down heavily for the year – a drop of 62 percent, from 91,000 tons through October 2010 to 34,000 tons. Exports to South Korea, the second largest market for mixed paper, were down 6 percent, or 31,000 tons, to 501,000 tons. Shipments to Mexico were up 18 percent, or 27,000 tons, for a total of 176,000 tons, while exports to Thailand were up 36 percent, or 26,000 tons, for a total of 97,000 tons. Mixed paper accounted for 19.6 percent of all exports, down from 24.6 percent a year earlier.

* ONP exports were down 13 percent through October, with a 10 percent increase in price, to an average of $159.43 per ton. ONP exports to China, the largest market for the grade, were up 11 percent, to almost 1.2 million tons. But that 114,000-ton gain was a fraction of the reduced volume shipped to Mexico, Canada and Indonesia. ONP exports to Mexico were down 63 percent, or 351,000 tons, from 555,000 tons through October 2011 to 204,000 tons through October 2011. Exports to Canada were down 32 percent, or 119,000 tons, to 251,000 tons, while shipments to Indonesia were down 73 percent, or 92,000 tons, to 34,000 tons. ONP accounted for 10 percent of all scrap paper shipped, down from 13.1 percent a year earlier.

* Meanwhile, exports of groundwood other than ONP were up 30 percent, with a 1 percent drop in price, to an average of $144.99 per ton. Like for ONP, China is the dominant market for other groundwood, pulling in 83 percent of the total. Exports to China through October were up 45 percent, from 1.5 million tons through October 2010 to 2.1 million tons in 2011. Exports to South Korea were up 77 percent, or 76,000 tons, from 98,000 tons to 173,000 tons. Shipments to Mexico were down 57 percent, from 201,000 tons through October 2010 to 86,000 tons, while exports to Canada were down 27 percent, from 120,000 tons to 88,000 tons. Groundwood grades accounted for 13.3 percent of all exports, up from 11.7 percent a year earlier.

* Exports of chemical deinking grades through October were up 15 percent, while showing a 2 percent gain in price, to an average of $259.80 per ton. India, Italy and Japan mainly led the surge. Deinking grade exports to India were up 37 percent, or 27,000 tons, to 99,000 tons, making India the leading market for the grade. Shipments to Italy were up 126 percent, from 12,000 tons through October 2010 to 27,000 tons. Exports to Japan were up 86 percent, from 12,000 tons to 22,000 tons. Exports to Canada, the largest market for deinking grades at the same time a year earlier, were down 15 percent, or 15,000 tons, to 86,000 tons. Exports to Vietnam and the Philippines also were down significantly. Deinking grades accounted for 2.8 percent of all exports, the same as a year earlier.

* Exports of pulp substitutes were up 10 percent through October, while the average price was up 7.8 percent, to $216.12 per ton. Like for deinking grades, shipments to India were the main driver. Exports to India were up 145 percent, from 73,000 tons through October 2010 to 178,000 tons. Shipments to Italy were up from 10,500 tons to 92,000 tons. While deinking grade exports to Mexico were down through October, shipments of pulp subs south of the border were up 15 percent, or 51,000 tons, for a total of 400,000 tons. Improved volumes to those markets more than offset a 5.4 percent, 55,000-tons reduction in shipments of pulp subs to China, the largest market for the grade, at 958,000 tons. Exports to Canada were down 51 percent, from 49,000 tons to 24,000 tons. Pulp subs accounted for 9.6 percent of all scrap paper exports, down from 9.9 percent a year earlier.

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