China’s duty suspension effect short-lived following poor board demand and price drops in Southeast Asia

Packaging board prices in Southeast Asia begin to fluctuate with fading Chinese demand

China’s slashing of import duties for most paper and board (P&B) grades to zero sent prices up for recycled packaging board grades in Southeast Asia in early 2023, but the uptick proved to be short-lived. Local markets have seen most board prices come down this month due to a ripple effect from poor demand and pricing in China.

Initial ‘buying spree’ from Chinese traders

Southeast Asian board suppliers reported that they had already witnessed growing enquiries and orders from Chinese customers in early December last year when China shifted away from its zero-Covid-19 policy.

Later in January, the situation developed into an influx of orders from China, especially from Chinese traders, after the country made a surprise announcement that it would waive standard most-favored-nation tariffs of 5-6% on imports of many P&B grades, including recycled containerboard and boxboard, throughout 2023.

Some major Chinese traders even dashed to visit board mills in Southeast Asian countries to look for new suppliers and secure tonnage.

The buying spree is reflected in China Custom data. The country recorded nearly 496,000 tonnes of corrugating medium imports in the first two months of 2023, up 43% from the same period of last year. Recycled linerboard intake reached 447,000 tonnes, up 28.5%.

Market contacts reported that more board imports are arriving at Chinese ports this month. Enjoying abundant demand from China, many Southeast Asian board mills raised prices for their domestic customers as well as for exports to other parts of Asia.

Sharp drop in demand resulted in price erosion

But the tide turned again in February as board prices on the Chinese market began to decline right after the Lunar New Year (LNY) holiday (January 21-27).

The price erosions in China have been steeper in March, despite more board mills in the country opting to carry out production curtailments.

“Chinese customers’ attitude completely shifted after the LNY as they moved from chasing volumes to bargaining over prices, and demand from China has been almost mute since the beginning of March as prices in China have dropped sharply,” said an executive at a Vietnam-based board mill.

The sudden change has prompted many Southeast Asian board mills, especially those in Vietnam and Indonesia where the recycled containerboard market is highly reliant on exports to China to balance domestic supply, to cut prices.

In Southeast Asia, prices for testliner imports edged up from $370-450 per tonne in December last year to $380-450 per tonne in January. The range widened to $380-460 per tonne in February and has come down to $360-450 per tonne in March as cheaper offers emerged.

Recycled fluting prices have been on a similar trajectory. They rose from $355-430 per tonne in December last year to $380-430 per tonne in January as robust demand from China wiped out low-priced offers. The range was steady in February before a plunge at the bottom of the spread, to $340-430 per tonne in March.

Price for kraft-top liner imports moved from $440-600 per tonne in December to $440-580 per tonne in January. Most of deals were reported in the range of $460-580 per tonne in February and at $460-560 per tonne in March.

Grayback coated duplex board prices have seen different moves as the sector in Southeast Asia is much less exposed to trade with China than the recycled containerboard sector. Following steep price falls in the second half of 2022, major suppliers in Malaysia and South Korea started to push for hikes for coated duplex board in early 2023.

In Southeast Asia, price levels for grayback coated duplex imports edged down from $480-580 per tonne in December last year to $470-580 per tonne in January. Deals at the low end of the range disappeared in February, when prices were at $500-580 per tonne. In March, most deals have been reported at $510-580 per tonne, with a slight jump at the bottom of the spread.

Local packaging demand slows but offers from other regions increase

Meanwhile, market players described local packaging demand in Southeast Asia as mediocre or even slow this quarter as global economic headwinds and high inflation cast uncertainty over both exports and local consumption.

There was a mild pickup from the food and beverage industry in the run-up to the Ramadan, which began on March 23 and will last for an entire month, said a contact from a major board producer in Malaysia, but demand was still sluggish in other industrial and consumer goods sectors.

In spite of the lukewarm demand, Southeast Asia has seen an increasing amount of recycled containerboard offers from other regions.

“Lately we have received offers from board mills in Australia, Europe and even the Middle East. Many of them had not approached us for almost a year, as they enjoyed much better prices in other regional markets,” said a box plant contact.

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