Middle East: Domestic containerboard prices on the rise in the GCC area

Testliner and fluting prices head north after more than year-long period of declines

Prices for locally produced containerboard rose in the Gulf Cooperation Council (GCC) countries in January. In late December, the Middle East Paper Company (MEPCO) announced a price hike of $70 per tonne, starting January 1. Several other producers in the region have also demanded increases of various magnitudes from their customers. Generally, our contacts reported higher price increases in Saudi Arabia and lower hikes in the United Arab Emirates (UAE). Some sellers expected it would take time for the increases to become progressively more visible in their data while some buyers said they had yet to agree to any hikes.

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The price data reported to us for January included mostly increases, along with a few unchanged price quotes. As a result, PIX Testliner GCC rose by 20.59 dollars, or by 5.04%, and closed at 429.35 USD/t. PIX Fluting GCC moved north by 21.22 dollars, or by 5.53%, and settled at 404.75 USD/t. The increases are linked to the Red Sea shipping crisis, limited import options, a seasonal upswing in demand and, some sources said, rising costs of recovered paper.

Red Sea crisis strains containerboard shipments

Our sources largely agreed that the logistical difficulties brought on by the Houthi attacks on ships off the Yemeni coast, which have made shipping companies limit or stop their use of the Red Sea, was the main driver behind the hikes. The number of ships transiting the Suez Canal has fallen by 39% from the beginning of December until late January, dragging freight tonnage down by 45%, according to the United Nations agency UNCTAD. Spot market freight rates have jumped significantly, with the Shanghai-to-Rotterdam subset of Drewry’s World Container Index soaring by some 223% from mid-December to $4,661 per 40ft container last week.

This has impacted the availability and cost of local road transport as well since the usage of the Saudi Arabian port in Jeddah on the Red Sea coast has gone down, with many firms increasing their reliance on the east coast port in Dammam instead.

The logistical commotion has limited or delayed imports of containerboard, but also pulp, from other regions and led shipping lines to add substantial upcharges to their bills. Corrugator contacts reported problems with imports of kraftliner, white-top grades, as well as testliner and fluting. For the recycled fiber-based grades, shipments from Europe have, of course, been impacted, but several buyers also said they were unable to use Indian containerboard to push back against the local price hikes. “Indian market prices are not workable. Their recovered paper costs are high, some don’t even have wastepaper, and they cannot match the local price,” a corrugator in the UAE said.

Egypt still an option for buyers

Egypt remained an option for some buyers, as Egyptian mills have been keen to collect cash from abroad, but also here there are problems relating to product quality and logistics. However, some shipments can go between the ports in Ain Sokhna in Egypt and Jeddah, both on the Red Sea coast.

As for demand, the time before Ramadan, which will begin in March, tends to drive consumption of corrugated boxes and thus containerboard up in the region. Some contacts said they felt this impact already in January, while others said it was still limited and they were expecting more of an effect in February. Comments about demand were usually more positive in Saudi Arabia than in the UAE.

PIX indices covering the two main recycled fiber-based containerboard grades, produced in and delivered to the GCC, were launched in June 2023. The GCC countries include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE.

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