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Gulf Cooperation Council (GCC) region prices for recycled fiber-based containerboard (RCCM) were mostly stable to down in November, with few upward quotes, according to pricing data received for Fastmarkets’ PIX indices published on Tuesday December 2. The indices for locally produced brown testliner and fluting recorded minor changes, with both grades inching down in November.
Fastmarkets’ PIX Testliner GCC index fell by $1.27 per tonne, or 0.27%, to $467.35 per tonne and the PIX Fluting GCC index lost $0.53 per tonne, or 0.12%, to $444.81 per tonne.
Overall containerboard demand was described as stable to down during November compared with the prior month, according to market participants across the GCC region.
In the largest market in the region, Saudi Arabian demand was reportedly lower in November, with several participants noting that this decline was both expected and planned for, because it reoccurs annually with the onset of winter. The colder weather leads to reduced consumption of water and beverages, directly affecting packaging demand.
“We don’t have a problem with the demand dropping [in November]. That was what we expected,” an RCCM producer told Fastmarkets. “We expect this every year for the last two months of the year,” he added.
In addition to the usual winter slowness, typical of the industry, many corrugators have deliberately started to minimize their inventory levels to maintain lower stock ahead of year-end, further reducing purchasing activity and thus containerboard demand during November.
“All the customers need to minimize their stocks, so they don’t need to purchase, except for the urgent orders. Because of this, paper mills are fighting to take their orders from the customers and offering lower prices,” another producer source told Fastmarkets.
In the United Arab Emirates (UAE), demand remained stable, with many not observing any major changes in the containerboard demand this month, according to sources based in the UAE.
“Demand is not really crazy, but it has not gone down [either], because we are in date [consumption] season and we are okay,” a UAE-based corrugator said.
Recovered paper (RCP) prices remained mostly stable in Saudi Arabia in November, according to most sources.
In the third week of November, a source reported that some corrugators selling leftover containerboard back to RCCM mills as RCP, planned to implement an increase equal to approximately $8 per tonne in RCP prices going forward, anticipating higher demand which typically starts two to three months prior to the Ramadan season.
“Corrugators know that all the paper mills need to collect the raw materials for the season, producers need it right now,” the source said. “We still have contracts with [RCP] suppliers at the same price, but corrugators have already informed us that they have increased [RCP] prices,” he added.
Meanwhile, a Saudi Arabia-based corrugator reported stable RCP prices in November due to having quarterly contracts. He did not notice any increased requests from RCCM producers, because containerboard demand remained on the low side during November.
The incoming additional RCCM capacities in Saudi Arabia are also expected to affect RCP availability. Al Jawdah, which became fully active in October, has started using its RCP for its own paper mill rather than selling it to other RCCM producers. Also, Red Sea is planning to start up a new paper machine reportedly at the end of the fourth quarter and will need to collect more RCP to feed its production.
“Overall, the [RCP] demand in this quarter is on the low side, so producers are also not pushing much but I am sure from January [in preparation for Ramadan] that they will come and start asking for RCP and we might get better prices,” the Saudi Arabia-based corrugator said.
In the UAE, there were a couple of reports of stable and decreased RCP prices in November. One source reported a big drop of $30-35 per tonne in RCP prices during November. According to the contact, a possible reason for this decline is China’s move away from the use of dry-grinding recycled pulp.
Starting October 10, all Chinese importers of recycled pulp under the HS code 47062000 must specify in their customs declaration whether the pulp was produced using either the “dry method” or “wet method”, according to an announcement by China’s General Administration of Customs (GACC).
Since China banned RCP imports in 2021 for environmental reasons, Chinese manufacturers have actively sought alternative sources of recycled fiber. Dry-milled pulp gained market dominance due to its cost advantages. But the dry-milling process often produces lower-quality pulp compared to wet milling and may leave behind contaminants such as plastic fragments and metals, industry experts have told Fastmarkets.
The move led recycled pulp plants in Thailand, which produce most of the recycled pulp that China imports almost exclusively through the dry method, to nearly suspend operations, pause RCP procurement and delay confirmed orders.
Following the Chinese decision, prices of old corrugated container (OCC) imports to Southeast Asia from Europe, Japan and the US declined throughout October to mid-November and have rebounded in the second half of November. Meanwhile, prices of OCC imports to India have fallen through October to November.
The effects have also been seen in the GCC region.
“[As a result], RCP quantities got diverted to India and other countries and automatically there was the dropping of demand. This has affected the pricing,” the UAE-based participant told Fastmarkets.
European containerboard suppliers continued to have a strong presence in the UAE and Saudi Arabia in November. The main competition on the brown testliner and fluting market continued to come from the regional GCC market participants and from European suppliers in November, according to most participants.
There were mixed opinions on the effect of European mills offering material with lower prices to the region. Some corrugators noted a small price difference between regional and European testliner and fluting, which was not tempting enough to accept the European offers.
“We did not accept any offers [from Europe] because we don’t have any demand and we don’t want to order now and store it. It will take three months [for the shipment] to come,” another Saudi Arabia-based corrugator told Fastmarkets. “The price difference is not significant [enough] for us to order three months ahead and build stock,” he added.
But another corrugator based in Saudi Arabia reported receiving and accepting more competitive offers from Europe.
“Earlier we got offers from Italy, which was giving most of the offers, but now we are also receiving offers from Germany and France. Their landed-cost prices were still lower than the local Saudi Arabia market,” he reported.
One producer in the region blamed European mills for removing their chance to increase prices ahead of their high-demand Ramadan season.
“Europeans are selling lower than our prices in the market, which is the main reason we are not able to implement price hikes even though we are [approaching a] seasonally [high demand] period,” he stated.
In the UAE, Indian containerboard mills had a small but insignificant presence because local prices were more competitive than Indian prices, according to sources. Additionally, offers from some RCCM mills from the Far East were reported, but to UAE-based corrugators they were not attractive enough.
“If I import, I need to save some money and I don’t see much benefit there. If it is the same price as locally, why would I import, why should I buy,” another UAE-based corrugator said.
In terms of international freight rates, Drewry’s World Container Index (WCI) lost approximately 8% from its recent small peak on November 6, dropping from $1,959 per 40-foot container then to $1,806 on November 27.
Meanwhile, land-based shipment costs remain fairly stable. But there was some speculation among Saudi Arabian RCCM industry experts that diesel prices may rise again early next year, like they did in January 2024 and January 2025.
“As of now fuel prices are stable but the government wants to bring the diesel prices to the same level as gasoline and there is still a gap so we can expect an increase maybe in January,” the first Saudi Arabia-based corrugator said.
Looking ahead, GCC-based producers and corrugators are reducing containerboard inventories toward the end of December. Demand for packaging materials is expected to rise immediately after the New Year as preparations for Ramadan begin.
“Being the year end, people will go a little slow so they don’t have high inventory and immediately after the New Year, people will start booking and filling up their inventories and supermarkets. So, in the first or second week in January, we will see the requirements shooting up,” the first Saudi Arabia-based corrugator said.
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