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Recovered paper (RCP) pricing over the past two weeks has seen mixed developments in key Asian markets, with sellers generally holding their ground against ongoing pressure from customers seeking price drops for RCP imports.
Major buyers in Southeast Asia (SEA) continued to slash volumes, as they took market-related downtime to cope with poor packaging material sales from the region to China. They anticipated price erosion in old corrugated container (OCC) imports, in view of Indian buyers pushing for cuts aggressively by holding back on buying for the past two months.
What’s more, there have been OCC price declines in the US market; and India is the world’s biggest importer of US RCP. Sister publication PPI Pulp & Paper Week reported last week that domestic OCC pricing in the USA just paused its eight-month decline this month, with the market reportedly now balanced in terms of the generation of OCC and of demand from mills.
But with the availability still limited due to reduced summer/monsoon collections in the USA, Europe, and Japan, instead of caving, suppliers pushed for increases, and their talks with SEA customers have ended up in a stalemate.
Meanwhile, China-based mills in the region have stepped up RCP purchasing, reportedly aiming to buy a combined 100,000 tonnes of (mainly) US OCC this month.
Sellers were encouraged by the shift. Sources indicated the China-affiliated firms are building US OCC stocks at their board and recycled pulp mills in SEA, especially Vietnam, due in part to growing packaging demand in the region. Vietnam, Thailand, Malaysia, and Indonesia have seen surging orders of general goods for export to North America and Europe, as that business shifts from China.
On top of that, the China-affiliated producers are preparing for a potential pick-up in packaging demand in China ahead of the usual year-end peak season. But in China, top packaging producers have been taking downtime to cut the domestic supply of recycled containerboard, while seeking price hikes.
With the country in an economic slump, downstream converters and distributors have reduced stocks of finished products to the minimum.
Contacts believed that the Chinese downstream customers would have to restock sooner or later, and when that happens, the packaging materials made from US OCC produced at the China-oriented mills in SEA will have a quality edge over most of the products manufactured in China, and can be shipped there for sale swiftly.
In the meantime, sluggish exports of packaging products to China have led to SEA oversupply. However, packaging demand in the individual countries has been picking up and prices for finished products in their domestic markets are higher than export levels. Sources pointed out that in Vietnam, Thailand, Malaysia, and Indonesia, recycled fluting fetches $650-730/tonne, compared to less than $500/tonne for export.
In Japan, the contrast is also dramatic, with the grade exported to China priced as low as $420-430/tonne but fetching $460/tonne in the Japanese market. Japanese suppliers can price the grade so low, thanks to cheap domestic OCC, which costs around $200/tonne – much less than OCC exports.
Japanese OCC prices have stayed flat at $260-280/tonne in Taiwan and SEA over the past two weeks.
US doubled-sorted OCC (DS OCC 12) has edged up $5/tonne to $270-275/tonne, and US OCC 11 has climbed to $265-270/tonne in the Taiwanese market. In SEA, both the US DS OCC 12 and OCC 11 are steady, at $290-300/tonne and $280-290/tonne.
European OCC 95/5 levels have been affected by distressed tonnage diverted from India to SEA. Sellers cut prices for the goods to find new clients in SEA after Indian buyers cancelled orders when cargoes were on the water. European OCC 95/5 levels have been dragged down $10/tonne at the top end of the spread to $260-270/tonne.