European OCC prices tumble in Asia and bring down Japanese and US imports along the way
Demand for old corrugated container falls in Southeast Asia and triggers sharp price drops for imports from Europe, Japan and the US. Have the prices hit rock bottom?
The tumbling of European old corrugated container (OCC) prices in Southeast Asia (SEA) and India has in turn sent levels for OCC imports from the USA and Japan into a tailspin.
Triggered by a massive wave of order cancelations in India, coupled with blowback from the ongoing economic slump in China pummeling regional packaging markets, European OCC 95/5 levels in SEA and India had already swooped down from $260-270/tonne in mid-June to $175-185/tonne in late July.
Since then, prices for the premium European brown grade in SEA have continued to fall, clocking in this week at $160-170/tonne. The decline seems to have come to a halt in India, with the grade’s levels closing at around $185/tonne. Mills in SEA ascribed the European OCC descent to their own high inventories of brown grades and finished products.
Contacts reported that board markets in Indonesia, Malaysia, Thailand, and Vietnam were robust during the past two months, with prices for recycled fluting commanding more than $700/tonne in June in the individual countries, shored up by their domestic economies.
But the regional packaging engine has apparently run out of gas this month, as demand falls and board mills take downtime to cope; local recycled fluting prices have dropped to $480-505/tonne this month.
Crashing US and Japanese OCC prices
With European OCC melting down, customers have moved to seek aggressive price cuts for OCC imports from elsewhere.
Suppliers under stock pressure were forced to cave last week, selling US double-sorted OCC (DS OCC 12) in SEA at $220-230/tonne. Then they got the wind that Indian buyers were coming back to the market and snapping up OCC imports to meet growing packaging demand in the lead-up to the traditional peak Q4 season in India.
Major sellers have thus dug in their heels this week and declined to make further concessions.
In the end, US DS OCC 12 is clocking in at $220-230/tonne in SEA, $210/tonne in India, and $180/tonne in Taiwan.
Prices for benchmark US OCC 11 have been assessed at $175-210/tonne in SEA and Taiwan, plunging $40-65/tonne from three weeks ago.
Japanese OCC is down $30/tonne to $180-190/tonne.
Are OCC prices hitting rock bottom?
Both sellers and buyers are assessing whether OCC levels are near or even at bottom after the sharp drop-off.
Buyer contacts indicated that despite prices dropping so low, many mills haven’t picked up any signs that recovery in regional packaging markets might come by the end of this year, and they are reluctant to build OCC stocks.
Customers have, however, stepped up volumes of OCC imports, while reducing local OCC tonnage. Prices for domestic OCC collections in SEA are still lingering around $200/tonne.
Board producers are reluctant to press down local OCC prices too aggressively, due to concerns that the move could drive down domestic prices for packaging materials, and that it could sabotage their relationships with local suppliers.
On the other hand, sellers believe prices are hitting bottom as suppliers have declined to offer volumes priced below current levels. Buyers have been asking for US DS OCC grades for less than $200/tonne, and European OCC 95/5 and Japanese OCC for around $150/tonne.
“We have got preliminary orders for 9,000 tonnes of European OCC from SEA customers who demanded to pay below $160/tonne. No suppliers have responded to me,” said a Singapore-based trader.
Collections everywhere in the world are dropping and the costs of labor and logistics are rising, the contact explained, adding that suppliers will stop selling once prices are too low to allow any profit.
In Japan, prices for local OCC sold to domestic mills have been steady at around $200/tonne, indicated a Japanese trader.
“Japanese mills have continued to gobble up domestic OCC at the same pricing level to support local suppliers, even though its export prices are falling. That’s due to the unique system in the country, different from the USA or Europe.”
“Despite poor business, major Japanese producers have announced price hikes for major paper and board grades for September or October. The move is to reflect high raw material costs, and such moves usually work in the Japanese market.”
This article was taken from PPI Asia, the industry’s most trusted pulp and paper market news and prices for Asia. Join paper industry executives, buyers, industry suppliers and financial institutions around the world and keep up to date on the latest market prices and information from Asia. Speak to our team to find out more and subscribe to our newsletters.