Russian recycled containerboard prices rise by more than a third in September

Improving demand for packaging and high paper for recycling costs pushed prices upwards in the Russian market

Russian recycled containerboard (RCCM) prices rose in September and kraftliner prices remained on hold, while kraftliner producers announced price increases for October.

Despite western sanctions and Russian citizens’ worries about the future, demand for packaging improved slightly in both August and September compared to the first two summer months. This demand, together with expensive paper for recycling (PfR), provided support for price levels of all containerboard grades, contacts said.

In September, RCCM manufacturers who were on the brink of unprofitability the previous month, announced price increases of Rouble 11,000/tonne on average. The price gap between RCCM and the virgin grades became extremely narrow as bleached kraftliner and semi-chemical fluting prices stood in the Rouble 38,100/tonne-42,650/tonne range. White-top kraftliner prices remained stable at around Rouble 74,000/tonne.

The demand for packaging rose by some 10% during August/September compared to June/July.

It looks like the market has slightly recovered. There is also traditionally an increase in demand for corrugated packaging once the vegetable season begins, and this will be followed by the grain harvest and winter holiday shopping,” a contact on the production side said.

Several contacts agreed that the policy of import substitution was also influencing consumer activity and containerboard demand. Locally produced goods require packaging, which drives demand even during an economic downturn, they noted.

RCCM prices bounce with high PfR costs

The pressure from high PfR costs has been pushing prices for RCCM up, and in September, price increases for RCCM ranged from Rouble 8,000/tonne to over Rouble 14,000/tonne, with an average of around Rouble 11,000/tonne. Meanwhile, old corrugated containers (OCC) traded at around the Rouble 18,000/tonne level, the same as the last week of August. However, prices sometimes reached Rouble 20,000/tonne at the auctions of supermarket chains, according to market contacts.

While high PfR prices were still one of the main reasons behind the RCCM price increases, a lack of stock was also said to be a contributing factor to the rebound in demand and the price rise of over 35%.

“Packaging manufacturers have a very small supply [of paper on hand]. While prices were falling, nobody wanted to buy extra volumes in the hope that they could buy it at even cheaper levels later. Their stocks are low now, which also contributes to demand,” a packaging source explained.

The situation was quite difficult at the beginning of September, as producers were struggling to source enough containerboard, a converter said.

Prices for virgin grades remain flat

Prices for the virgin grades remained stable in August, however, producers had already announced to their clients in September plans to increase prices beginning in October, and sources expect the upward trend to continue through November. With a narrow price gap of less than 10% between the recycled grades and unbleached kraftliner, it is possible that some packaging producers may consider making a switch between grades.

“The switch may be particularly beneficial for producers of packaging for products that require moisture-resistant packaging, for example, for meat,” a corrugated packaging producer said.

However, producers said that they were not aiming to take away market share from RCCM manufacturers, and that their current strategy was simply to increase prices and secure profitability.

The demand for white-top kraftliner was also reportedly good in September, with demand coming from locally manufactured beverage packaging as well as domestically produced disposable cups.

In September, producers of the virgin grades continued to face logistical difficulties with exports. Because of the Russian-Ukrainian war, some trains have been rerouted, which can lengthen delivery times.

The Chinese market, which has been very attractive for exports in the past, remained slow, and some producers reportedly had to take downtime. In theory, containerboard under the Russian customs code 4805, which includes kraftliner made from semi-chemical sulfate pulp, may be exported to Europe, but in addition to the complicated logistics, the lack of Forest Stewardship Council certification makes it unattractive for European buyers, a contact said.

“Should energy prices drive European containerboard prices up further, the situation may change,” he suggested.

Future expectations

Limited foreign travel possibilities continued to result in more people remaining inside the country, a development which was cited as another reason helping to maintain consumer activity and containerboard demand. However, the Russian government announced the first partial military draft since World War II on September 21, and many male residents were leaving the country.

Contacts in the pulp and paper industry said it was too early to predict how the situation will unfold and how containerboard markets will be affected. According to local press reports, industries may request government permission to exempt employees from the military mobilization.

In this special report, “How paper packaging buyers are managing procurement risk”, we will look at how big multi-national FMCG companies across Europe and North America are being affected by and responding to this complex set of procurement risks.
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