Global sellers, led by US suppliers, have pushed aggressively for price increases for recovered paper imports across Asia, intending to fully use the tailwind from China’s policy changes.
China’s imports of packaging materials and recycled pulp manufactured in Southeast Asia (SEA), Taiwan, and India began to pick up in early December when purchasing converters and traders spotted opportunities following China’s reopening. At that time, prices for the products were low and the importers anticipated an improvement in packaging demand in the Chinese market in line with the country’s post-Covid-19 economic recovery.
The pace of the intake accelerated in late December after the Chinese government suddenly dropped of import duties on most paper and board. As a result, mills in non-China Asia ramped up production and bid up RCP prices, while chasing volumes.
RCP suppliers felt the pinch at home when the overseas purchasing of top producers in SEA, Taiwan and especially China became willing to pay higher prices for RCP in the US, Europe, and Japan. They lifted prices for RCP exports to Asia accordingly.
Two weeks ago, US double-sorted old corrugated containers (DS OCC 12) were offered at as much as $210 per tonne and European OCC 95/5 $175 per tonne in SEA, besides Indonesia and Malaysia. Both of those countries require pre-shipment inspections in the country of origin and so their prices are higher. The new levels indicate steep rises, after $175-185 per tonne for US DS OCC 12 and $140-155 per tonne for European OCC 95/5 just a fortnight ago.
OCC prices up
Buyers pushed back, pointing to the cooling export of finished products to China. But US sellers are not relenting much, in the belief that China-affiliated mills in SEA prefer US brown grades for their recycled pulp and finished products.
Prices for US DS OCC 12 have ended up clocking in at $190-200 per tonne in non-inspection countries in SEA and in Taiwan. Assessed levels for benchmark US OCC 11 have closed at $180-190 per tonne in the region, creeping up $10 per tonne over the past few weeks. European OCC 95/5 has seen an increase of just $5 per tonne to $145-160 per tonne, due to customers’ push back.
The twin earthquakes that hit Turkey on February 6 have got European suppliers worried that the country’s robust RCP imports will pause, and that volume will need to be diverted away to Asia. Contacts indicated that Indian customers have reduced buying US brown grades in view of hefty prices ($210 per tonne for DS OCC 12) and declined offered tonnage.
Japanese OCC levels have edged up $10-15 per tonne, though, clocking in at $165-170 per tonne, due to declining availability.
China party likely over
Two weeks ago, a major packaging producer in SEA counterbid European OCC 95/5 at $160 per tonne against an offer of $165 per tonne, said the supplier who made the deal. Last week, while the seller worked on the deal, ready to accept the buyer’s price, the customer cut it to below $150 per tonne, quipped the seller contact. “It just illustrates how quick the situation changes.”
Contacts pointed out that China’s leading producers are waging a price war against the influx of low-priced recycled containerboard and duplex board imported from SEA. Top Chinese producers have been driving down prices for both RCP collected domestically and finished products, despite an expectation of a demand pickup for packaging materials. The move is believed to be aimed at stifling the import of the cheap finished products arriving in China.
Meanwhile, Chinese producers have also driven up the cost of RCP imports in SEA via their overseas purchasing arms, which can suppress production at SEA mills and redirect their exports to China.
“SEA customers have suddenly changed from chasing RCP volumes aggressively to cutting purchases whilst pressing down prices this week, citing stagnant prices for finished products,” said a major RCP supplier.
So while packaging demand may be picking up, prices have softened, stalling out the RCP hikes being pushed by sellers.
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