While most of buyers in Southeast Asia (SEA) and Taiwan were trying to haggle down prices for old corrugated container (OCC) imports to tackle slumping packaging demand in the region, a big-volume customer reportedly paid $195 per tonne for US-origin double-sorted OCC (DS OCC 12) this week for delivery to Vietnam.
The client, a China-based producer who has bought some tens of thousand tonnes every week, apparently paid top dollar to get tonnage of the US premium brown grade, shocking regional buyers but motivating sellers to lift prices.
The US-origin OCC the customer imported has been used as furnish to produce good-quality containerboard at their mill in SEA, and the product has been shipped back to China for sale.
As a result, suppliers have increased offer prices for US DS OCC 12 this week in Taiwan and most SEA countries. Offer prices for the grade in Indonesia and Malaysia, both countries require pre-shipment inspections, as well as India, have been nudged up accordingly.
Vendors pointed to two driving factors behind the uptick – buying from China-based firms and India.
A major China-affiliated overseas purchasing arm has continued to pay a premium to get DS OCC 12 volumes in the US and ship them back to feed their own recycled pulp and board plants in SEA and sell the surplus to other China-based buyers.
Moreover, that company has stepped up purchasing volumes of recycled pulp at the plants it contracts in the region, especially Thailand, contacts pointed out.
Perplexed buyers
“We are confused by the big Chinese buyer’s persistent buying of OCC not only in the US, but also in Europe and Japan. There is no sign of recovery in packaging demand in China for the fourth quarter. Why does the company keep buying and inflate OCC prices?” said a regional manufacturer.
“Big regional producers are having trouble exporting packaging materials to China and are forced to slow production at their machines or even to shut them altogether. As far as we know, these customers have been pressing down prices for OCC imports, while slashing volumes substantially, us included,” the contact added.
Vendors pointed out that even some China-based recycled pulp mills stopped buying DS OCC 12 when prices for the grade exceeded $190 per tonne.
But customers in Vietnam and Taiwan lamented that, despite their resistance, they were compelled to pay higher prices for the US grade during their weekly purchasing.
“We project prices for OCC imports from the US, Europe and Japan will creep up across the board next week and made the buying decision this week,” said one of the buyers.
Suppliers also attributed the upturn to strong buying from India.
“Indian mills have big appetite currently, buying from low to high [OCC and mixed paper] grades with premium prices. The demand [the quantity they are asking for] is bigger than our current supply,” said a European supplier.
Another vendor concurred, saying Indian buyers have intended to gobble up available tonnages in the market. But the two sources are cautious, indicating that it is risky to divert too much of their volumes from SEA to India.
“Indian buyers tend to jump on the bandwagon and place orders when prices are climbing. However, once the tide changes and prices fall, customers likely decline to proceed to make payments even if they have confirmed orders,” said one of the sources.
“I was stuck in such an awkward situation several times in the past and learned the hard lesson. Indian customers usually stop buying recovered paper imports in October when the country celebrates a series of festivals. I am skeptical about how long the Indian buying will last,” the contact added.
OCC levels all climb
US DS OCC 12 has climbed by $5-10 per tonne over the past two weeks. Prices for benchmark US OCC 11 have gone up accordingly, rising by $5 per tonne.
European OCC 95/5 have ticked up by $5-10 per tonne, while Japanese OCC levels have been nudged up by $5 per tonne.
A major buyer said that sellers have managed to raise prices for the grade by slashing offer volumes.
“We accepted the hike in the belief that Japanese OCC prices would climb next week. But that’s all. OCC demand remains poor across Asia and prices are volatile. Prices may decline after next week. We have to play by ear.”
This article was taken from PPI Asia, our newsletter for pulp, paper and packaging market news and prices for Asia. Speak to our team to learn more about our news and market analysis, prices, forecast and more.
