When the European Common Market (predecessor to today’s EU) was formed in 1957, the United Kingdom was not part of it. Throughout the first half of 2016, a 23 June referendum over the future of the U.K.’s participation weighed on some forms of economic activity in that nation.
Voters ultimately decided the U.K. was better off leaving the trading and legislative bloc, and the back-and-forth momentum of the Brexit campaign rattled enough nerves in the financial and trading markets prior to the vote to make a difference in some sectors.
“We’ve been taking a ‘wait and see’ approach in the U.K. with Brexit, which has created some volatility in the exchange rates [and] in part may have slowed some economic activity in that market,” says one recovered fibre trader as of mid-June.
By other measures, the lead-up to the Brexit vote may have been primarily a conversation starter.
The same trader says the old corrugated containers (OCC) grade was generated in sufficient amounts in Europe in the spring of 2016, even to serve a “robust” export market. “Things seem to be in relative balance,” he says of the OCC supply and demand situation in Europe.
Industrial production figures for the EU, as measured by Eurostat, also point to a relatively healthy manufacturing sector. Figures for the EU for the month of April 2016 showed a 1.1% increase in industrial sector output compared with the month before and a robust 2.5% increase compared with April 2015.
Strong production figures continue to emanate from Central and Eastern European countries, such as Slovakia, Romania and the Baltic nations. Countries with rebounding figures in 2016 include those bouncing back from the financial crisis, including Ireland, Portugal and Spain.
Perhaps more problematic for recovered fibre packers and traders are the collection levels attached to residential and local government recycling programmes.
The continuing reduction of newspapers, magazines and mail collected through these programmes is “creating some tight situations in the mixed paper markets,” says the trader, who adds that the selling price of mixed paper in Europe has risen from $30 to $40 per tonne since the first quarter of 2016 as a result.
At the Bureau of International Recycling (BIR) Paper Division Meeting in Berlin in early June 2016, declining scrap paper volumes was on the mind of division President Reinhold Schmidt of Germany-based Recycling Karla Schmidt, and other speakers.
Schmidt said the continuing decline in graphic paper volumes was a foremost concern. He also said that in his home country of Germany, bidding conditions for municipal contracts often are now “hostile” to private recycling firms, contributing to a regulatory discrimination that he says is hindering fair competition.
BIR Paper Division Vice President Francisco Donoso of Alba Servicios Verdes in Spain remarked that International Paper’s agreement to buy Holmen Paper Madrid and to convert the newsprint machine into one involved in packaging production by the second half of 2017 was expected to create an additional annual demand for nearly 400,000 tonnes of OCC grades in Spain.
Spain’s domestic demand for deinking grades was likely to be cut by more than half after the newsprint machine is taken offline.
Guest speaker Bill Moore, president of USA-based consulting firm Moore & Associates, referred to a number of similar developments in the U.S. during his presentation. In the last two years alone, he commented, newsprint machine conversions to containerboard production had amounted to some 2 million short tons.