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Understand how GCC containerboard price stability and trade disruptions are shaping regional supply chains and short-term demand conditions.
Prices in the Gulf Cooperation Council (GCC) region for recycled fiber-based containerboard (RCCM) were mostly stable in June, with some increases and decreases also featuring. Fastmarkets’ PIX indices, which cover locally produced brown testliner and fluting, showed minor changes on Tuesday July 7.
Fastmarkets calculated its monthly PIX Testliner GCC index at $500.97 per tonne on Tuesday, up by $0.26 per tonne (0.05%) from $500.71 per tonne on June 2.
Fastmarkets calculated its PIX Fluting GCC index at $475.69 per tonne on Tuesday, down by $0.33 per tonne (0.07%) from $476.02 per tonne on June 2.
Containerboard demand in June was described as quite stable in some markets, while declining in others. This primarily depended on geographical proximity to shipping routes, with the Middle East conflict continuing to disrupt trade flows through the Strait of Hormuz.
In Saudi Arabia, containerboard demand was mostly stable in June. This was driven by the seasonal upswing due to higher temperatures boosting beverage consumption and demand for carton boxes, but capped by the partially blocked Persian Gulf. Saudi Arabia also has the advantage of access to the Red Sea.
One Saudi Arabia-based containerboard market participant reported stable to slightly weaker demand during the month, which he attributed to customers holding excess inventories from previous months, and uncertainty surrounding imports and trade disruptions caused by the conflict.
“In May, the majority of our customers were preparing for the Hajj [pilgrimage] and summer season, which is why they built large stocks,” the market participant told Fastmarkets.
He noted that some companies had also started receiving materials that had been delayed at sea and diverted earlier in the year. These were shipments originally expected to arrive in March.
“The arrival of the diverted materials has also impacted [warehouse] space and storage conditions,” the market participant said. “[Maybe] that’s why customers did not order.”
In the United Arab Emirates (UAE), demand remained low. As a market that is driven by trade- and re-export, local containerboard demand has been significantly affected by the disruptions in export trade flows.
“Lots of people export from here – not only corrugators but people who buy the cartons,” a UAE-based source told Fastmarkets. “That’s one of the main reasons [activity] is down.”
Another source reported a slight uptick in demand in June, citing the higher number of working days compared with May, when week-long Eid holidays limited business.
But downward pressure is expected to persist over the coming months, according to sources. The summer period is typically slower in the UAE, with school holidays set to begin in early July, further dampening market activity.
“The challenge will start from next month for July-August as a large chunk of the population will move out of the UAE because of the vacations,” an Emirati source said in June.
Market participants in Saudi Arabia reported mostly flat prices month on month for recovered paper (RCP) in June.
In the UAE, it was more mixed, with some reporting slight increases in RCP prices due to Star Paper’s containerboard mill starting trial production, while others observing no price movement.
UAE RCP prices dropped by 40-50% over March and April after the partial closure of the Strait of Hormuz at the end of February caused trade disruptions.
In June, the US and Iran agreed to end hostilities. The two parties signed a memorandum of understanding (MoU) on June 17, which launched a 60-day negotiation process with a target to reach a broader peace agreement.
The agreement also included the reopening of the Strait of Hormuz to commercial shipping and the gradual removal of the US naval blockade on Iran, according to news outlet Middle East Eye (MEE).
Maritime traffic resumed in the strait shortly after the signing of the MoU, according to MEE, but disagreements soon surfaced regarding what part of the strait should be used, with Iran and Oman announcing two different routes.
On June 25, a cargo ship was reportedly struck while using the Omani-approved route, which led to renewed tensions. After that, the US and Iran have exchanged strikes and both sides have accused the other of violating the ceasefire, according to the BBC.
Meanwhile, recent reports indicate that negotiations have restarted and are progressing between Iran and the US.
Shipping data showed that commercial traffic through the Strait of Hormuz has partially resumed, although volumes remain well below pre-war levels.
Before the conflict, an average of 120-140 vessels transited the strait each day. According to an Al Jazeera report citing shipping analytics company Kpler, confirmed crossings stood at 70 vessels on June 24.
But the fragility of the ceasefire and whether or not passing via the Strait of Hormuz is possible has left market participants confused and has done little to restore confidence in regional supply chains.
According to one GCC-based producer, shipping companies are not willing to take the risk of transiting the Strait of Hormuz, even if it were to reopen, until stability has been observed over a period of two to three months.
“Last week, we were under the impression that Strait of Hormuz will reopen and everyone started preparing and communicating with their suppliers, but shipping lines were not ready to book any quantities,” the producer source said.
“Not long after, there were some attacks [between the US and Iran]. Nothing is clear,” the producer added.
It was also noted that the MoU is only valid for 60 days and what happens afterward remains unclear, further highlighting the fragility of the situation.
As a result, market participants have remained cautious and continue to plan for prolonged disruption.
“In our calculations, we are considering that the Strait of Hormuz will remain closed for another few months. We are not optimistic and even if it opens next month, we will be happy but will not plan anything based on that,” a GCC-based corrugator told Fastmarkets.
Moreover, market participants do not expect the war-related surcharges and additional logistics costs to be removed immediately, even if shipping through the Strait of Hormuz were to normalize.
Sources expect it to take multiple months or even until the end of year. Given low inventories of goods overall this would increase purchase activity, supporting demand for shipping services.
“The shipping companies will not come back to original prices [just] because a ceasefire is applied and Hormuz is open,” a corrugator said.
Global energy markets reacted immediately to the news of progressed peace talks, with oil prices falling to levels not seen since the start of the war in the Middle East.
Brent crude oil futures declined to $72 per barrel on June 6 at 10.00 CET, from a spot price of $94 per barrel on June 1. This represents a decline of roughly 23% month on month, returning the international benchmarks to pre-war levels.
Fuel prices in Saudi Arabia remained flat, with current diesel prices only reflecting the 7.8% year-on-year increase implemented at early January.
Meanwhile, in the UAE, diesel prices declined to 3.60 dirhams ($0.98) per litre in July from a peak of 4.69 dirhams per litre in April, reflecting the sharp decline in global oil prices in June. Diesel prices had surged by 72% between March and April following the outbreak of the conflict and the resulting increase in crude oil prices.
Diesel is the main form of fuel for road transportation in the region.
Shipping lines have increasingly re-routed vessels serving GCC countries through Saudi Arabia’s Jeddah Islamic Port following the disruption to trade flows through the Strait of Hormuz. As a result, several GCC-based market participants reported delays in clearing and receiving cargo at the port.
“Jeddah Port is congested and clearance times are not normal. Normally, [clearance] takes three to four days to complete order formalities and now it is taking more than 10 days,” a Saudi-based corrugator said.
While larger ports along the Strait of Hormuz remain operational but are being largely avoided by shipping lines, GCC countries have become increasingly reliant on Saudi Arabia’s Jeddah Islamic Port.
Cargo arriving through Jeddah is cleared and transferred onto trucks for inland transportation within Saudi Arabia and to neighboring GCC countries. This has increased demand for trucking services, particularly for cross-border routes, with transporters reportedly prioritizing higher-paying deliveries to destinations such as the UAE, Kuwait and Qatar. As a result, truck availability has tightened both locally and across the region.
“One of the challenges we face this month is with transportation,” a Saudi-based contact said.
Looking ahead, Saudi Arabia-based sources in the containerboard and corrugated board industry expect demand to increase due to the summer seasonal upswing.
Meanwhile in the UAE, demand is expected to drop further because the summer period there is often the low demand period, with school holidays starting in early July and people traveling outside the UAE for holidays.
The main challenge continues to be increased costs and lack of export activity across the whole GCC region.
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