Poor board market and mill downtime in China send OCC import prices down in SEA and Taiwan

OCC price spikes that came with China’s covid-19 restriction removal have taken a turn as demand drops

Prices for old corrugated container (OCC) imports have plunged across the board in Asia over the past few weeks, with the grade from the US and Europe seeing drops of $10-20 per tonne in Southeast Asia (SEA) and Taiwan.

The erosion came right after rises of $20-30 per tonne for those products in the region from the beginning of January to early February.

During that period, regional OCC purchases spiked, triggered by a surge in China’s imports of packaging materials and recycled pulp manufactured in SEA and Taiwan on the back of China’s post-covid-19 reopening and the Chinese government’s removal of import duties on most paper and board.

In the meantime, overseas purchasing arms of top producers from SEA, Taiwan, and China were chasing OCC volumes in the US and Europe, bidding up the brown grade’s FAS prices there.

However, unexpected announcements of massive downtime from top Chinese producer Nine Dragons Paper (Holdings) and from market second Shanying International have blown a hole in the market, likely proving the China-induced packaging uptick a fleeting illusion.

What’s more, prices for packaging materials have been declining in China, driven down by leading producers competing with the influx of low-priced imports.

Packaging demand takes a downward turn

Contacts reported that the sudden change from boom to bust in the Chinese packaging market has stalled the export of packaging products from SEA and Taiwan to China.

Moreover, sources pointed out that packaging materials shipped from China have been offered in India, while those manufactured by China-affiliated mills in Malaysia are being sold in Indonesia, rather than shipped back to China.

Mills in SEA and Taiwan have picked up on these negative signs showing the quick dissipation of China-driven packaging demand and are pushing for price cuts for OCC imports whilst slashing volume.

Major buyers are reportedly asking for US double-sorted OCC (DS OCC 12) prices as low as $165 per tonne against sellers’ offers of $175-180 per tonne and aiming for as little as $128 per tonne for European OCC 95/5 versus sellers’ offers of $145 per tonne.

Major US and European suppliers have held back offers, declining to cave in. They told Asian customers they have no stock pressures as they are working on backlogs, with large amounts of orders received during the past two months. These big-volume suppliers believe that China-affiliated firms will continue to get OCC tonnage to manufacture recycled pulp at their SEA plants.

A China-based producer concurred to a point, saying OCC demand from recycled pulp mills in SEA will persist, but buying is subsiding.

“We began to buy US DS OCC 12 when the grade was priced at $195 per tonne last month. Then we got wind of other China-affiliated firms cutting volumes and prices in the US and Europe, and we also reduced tonnage. Prices fell subsequently and we put a halt on buying,” said the source.

“We previously projected prices for the US premium grade would drop to around $185 per tonne and then linger around that level. Looking back now, we misjudged,” he added.

Speculative traders have borne the brunt of the volatility, though. They have been forced to sell the stocks they have sourced, leading to price declines.

OCC levels down

US DS OCC 12 has clocked in this week at $170-175 per tonne in Taiwan and SEA, besides Indonesia and Malaysia, compared to $190-200 per tonne a fortnight ago. Both of those countries require pre-shipment inspections in the country of origin and their prices are usually higher.

Assessed prices for benchmark US OCC 11 have declined accordingly, down $10-15 per tonne to $165-170 per tonne. European OCC 95/5 has slipped $10-20 per tonne to $135-140 per tonne. Japanese OCC is down $10 per tonne, closing at $155-160 per tonne.

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