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Gulf Cooperation Council (GCC) region prices for recycled fiber-based containerboard (RCCM) were a mix of increases, decreases and stable quotes, according to data reported for Fastmarkets’ PIX indices published on Tuesday September 2. The indices for locally produced brown testliner and fluting recorded minor changes, with both grades inching down in August.
Fastmarkets’ PIX Testliner GCC index fell by $0.70 per tonne, or 0.15%, to close at $474.99 per tonne, while the PIX Fluting GCC index slipped by $1.23 per tonne, or 0.27%, to stand at $451.27 per tonne.
Market participants located in Saudi Arabia described containerboard demand as better in August, compared with July, due to the seasonal uptick during the summer season.
“I think there is very good demand [in August]. It’s the summer season, the date harvesting season and the schools have started. Schools certainly have some effect on demand because they require juice, water and other foods which require cartons,” a buyer source based in Saudi Arabia told Fastmarkets.
However, a Saudi market participant told Fastmarkets that he had observed a change in the date palm harvesting production during August due to weather conditions.
“Most of our customers are not getting the right quantity from dates because it seems to me, we did not get temperatures that are hot enough to increase the date palm productions,” he said.
“I feel that this July and August isn’t [quite] similar to the same period in the previous year in terms of temperature. A high temperature is very important in helping our farmers to grow dates and then later on the [demand for] cartons will be increased,” he added.
Meanwhile, in the United Arab Emirates (UAE), sources told Fastmarkets that demand fell from a month earlier, with many citing the summer vacations as a reason for the dip.
However, one participant noted having slightly better demand in August due to the approaching date palm season in the UAE and schools reopening in late August.
“All the people who had left on holiday are coming back. Consumption has started to rebound slowly and that’s why the demand in August is slightly better than in July,” a buyer source said.
Recovered paper (RCP) prices continued to be stable in Saudi Arabia during August, according to the market participants.
However, one corrugator, which sells leftover containerboard back to containerboard mills as RCP, stated that the incoming additional RCCM capacities in Saudi Arabia will have an impact on RCP availability.
This is because Al Jawdah, which used to sell RCP to containerboard producers in the region, had entered the RCCM industry and will be using its RCP for its own paper mill. Red Sea is also planning to start up a new paper machine in the fourth quarter and will need to collect more RCP to feed its production.
“Now that the paper capacity is increasing in the Saudi Arabia market, the demand for RCP is high so people are fighting for it. It will impact the RCP prices moving forward,” the corrugator source said.
In the UAE, both producers and buyers reported seeing mostly increases of $5-10 per tonne in RCP prices, with some citing a lack of supply in the market during August.
In Saudi Arabia and the UAE, the presence of European suppliers increased in August compared to July. However, GCC-based containerboard producers continue to account for the largest share of the market in the region, contacts said.
Containerboard volumes typically fluctuate in response to the European domestic supply and demand balance, according to Fastmarkets’ packaging economist Tero Eerikäinen. The high level of overcapacity and sluggish demand had compelled European producers to increase exports of containerboard abroad, thereby enhancing their operating rates, Eerikäinen said.
Competition had also intensified this year, with multiple containerboard-producing regions competing amid considerable overcapacity and proactively seeking new markets for their products. The volume of containerboard exported from Asian countries to the Middle East had risen in the first half of the year, thereby intensifying the competitive landscape, according to Eerikäinen.
“We have seen better availability from Europe with competitive prices. Europeans were not able to compete with local players previously due to the stronger euro, but we now see some suppliers offering competitive prices,” a Saudi Arabia-based corrugator source said.
“Compared with July, I would say the offerings have increased and the supplier base has expanded in August. People have been offering more material,” the Saudi Arabia-based corrugator source added.
Meanwhile, in the UAE, imports from India maintain their usual presence in the Emirates, along with some limited offers from Far East mills. However, these offers were not considered as competitive enough, according to industry sources.
“We are facing more competition from European suppliers, compared with Indian suppliers. European paper is much cheaper than the local mills now,” a UAE-based corrugator said.
International freight rates had been on a decline since June, according to Drewry’s World Container Index. The index lost approximately 40% from the most recent peak in June 12 to $2,119 per 40-foor container on August 28. The US tariffs announced in April had earlier caused an increase of the freight rates in May and early June, Drewry reported.
Despite the declines seen on freight rates, most contacts in the GCC region continued to report fairly stable shipment costs.
Market participants also reported stability in both sea freight rates and inland transportation within Saudi Arabia.
Looking ahead, buyers and producers in Saudi Arabia were not anticipating any major changes in the containerboard demand, sources said, adding that there are expectations that demand will continue to be somewhat similar in September on a month-on-month basis.
Meanwhile, in the UAE, there are expectations for consumption to gradually pick up, sources said.
“Demand will increase. This is our season starting,” a UAE-based market participant said.
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