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The Chinese government’s surprise announcement in December that it is slashing import duties for most paper and board grades to zero has thrown a wrench in Asian buyers’ push for lower prices for recovered paper (RCP) imports.
The implementation of the provisional zero import tariffs on recycled-based packaging products, such as recycled containerboard and duplex board, has motivated producers in Southeast Asia (SEA), Taiwan, and even India, who are expecting to benefit from the new policy. Their expectations are based in large part China’s total ban of RCP imports, which has been in place since the beginning of 2021.
The RCP ban policy was announced as early as 2017 and began to impact China’s intake from then, driving Chinese manufacturers to build or acquire mills to produce packaging materials and recycled pulp in SEA and the US.
With RCP being recycled repeatedly within China without much fresh input over the past six years, Chinese mills have found the quality of local collections poor and have stepped up investments in board and recycled pulp mills overseas, with Thailand, Malaysia, Vietnam, and even Batam, Indonesia, prioritized as the main locations.
Top Chinese producers lead the pack, such as Nine Dragons Paper (Holdings), Lee and Man Paper Manufacturing, Shanying International Holdings, Dongguan Jianhui Paper, Zhejiang Jingxing Paper, and XSD International Paper, who together have built new capacity in the region amounting to several million tonnes per year, and more is coming on stream.
Towards the end of last year, in the belief that collections would increase after the Christmas and New Year holiday while packaging and RCP demand in Asia would remain sluggish, Asian customers sought price cuts for RCP imports.
At that time, levels for the US premium brown grade, double-sorted old corrugated containers (DS OCC 12), was haggled down to as low as $160-165 per tonne in SEA, Taiwan, and India.
A nasty winter snowstorm hitting across the US last month led to disruptions in RCP exports to Asia and stemmed the decline.
And last week the demand tide has changed, with China-affiliated firms snapping up the premium US OCC grade available on the market.
Led by China-based buyers, US DS OCC is fetching $165-175 per tonne in Thailand, Vietnam, and Malaysia; it has been sold for as much as $190 per tonne to recycled pulp plants in Batam.
RCP prices in Indonesia are usually $15 per tonne higher than other SEA markets due to the country’s requirements for pre-shipment inspections of RCP cargoes in the countries of origin, and higher ocean freight costs.
Other mills in the region have been taken aback by the uptick, driven single-handedly by China-affiliated buyers. Many of them plan to begin purchasing from next week.
One big-volume customer has come to accept that the tide has turned. “I believe US OCC will grow more expensive going forward as pricing is now dominated by market sentiment rather than fundamental supply and demand,” quipped the contact.
In the end, prices for benchmark US OCC 11 have been assessed at $160-170 per tonne, down $10 per tonne at the top end of the spread from three weeks ago.
The effect has not yet been felt in the import of European and Japanese OCC. Sellers reported that clients have continued to push for cuts relentlessly in view of abundant offers of the grades.
A major European vendor indicated that production stoppages at mills across Europe have led to an increase of spot tonnage available for export. “I even saw RCP coming from Germany and Croatia for export to Asia. That is very unusual,” said the source.
Availability is expected to drop later this month, after suppliers finish collecting RCP from Christmas and New Year. Prices might firm up soon.
European OCC 95/5 has clocked in at $125-135 per tonne, down $10/tonne. Japanese RCP supply has also seen an increase, as Japanese mills reduced RCP intake in the domestic market and traders have more tonnage for export. OCC imports from Japan have fetched $150-155 per tonne, slipping $10-15 per tonne.
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