Surging demand and prices in India boost the cost of recovered paper imports in SEA

Major RCP suppliers are relocating tonnage from SEA to India, sapping the availability in the SEA market

Prices for recovered paper (RCP) have continued to be driven up in Southeast Asia (SEA) by restricted availability resulting from ongoing supply-side constraints and by escalating competition from Indian buyers.

The problematic logistics are seen as the core issue, hitting both the supply and demand ends of the market.

Suppliers have been straining to meet buyers’ requests for more tonnage while working on backlogs and facing difficulties booking vessel space. On the other hand, customers are constantly being notified of late deliveries of their RCP cargoes by shipping lines.

Several big-volume clients reportedly hold low RCP stocks and are keen to replenish them. “We asked sellers to increase the volume they offered and were willing to pay more. None could make that happen,” said a major buyer in the region.

Vendors said that limited availability of empty containers and restricted vessel space has led to shipping companies placing RCP cargoes at the bottom of the priority list, and volatile freight rates varied depending on the destination.

That has led to widened prices in Asia, with US double-sorted old corrugated containers (DS OCC 12) fetching as little as $265 per tonne in Taiwan for cargoes from the US West Coast and as much as $365-375 per tonne for the supermarket DS OCC 12 grade in India.

India’s RCP market is booming

India is now the world’s largest importer of US RCP after China’s total ban of RCP intake last year.

In Q4 last year, RCP imports from the USA to India hit almost one million tonnes, soaring 22.6% from Q3 and 11.1% compared to the same period of 2020.

RCP demand has kept on rising since then, and the growing appetite is not just for imports, but also for domestic collections, said an Indian contact. The contact indicated that the country has been moving beyond the impact of the Covid-19 pandemic and is seeing improvements in the economy.

Paper and board (P&B) demand is growing strongly in the domestic market, but mills are facing a shortage of RCP supply,” the contact explained.

Local OCC now fetches around $320 per tonne. Prices for OCC imports have soared much higher.

Besides the above-mentioned lofty levels for US supermarket DS OCC 12 grade, standard DS OCC 12 fetches $330-345 per tonne, Select OCC 11.5 from the US East Coast $320-325 per tonne, and OCC 11 $310-315 per tonne.

Indian mills have also gobbled up mixed paper imports, forking out as much as $290-300 per tonne for the premium grade from Europe.

Rising P&B levels in India prompted by RCP costs

Rising RCP costs have driven up domestic P&B levels by $30-50 per tonne, indicated the Indian source.

He pointed out that prices for RCP intake have hit a historical high in India, but that is expected to be short-lived, not sustainable.

“Mills that previously manufactured recycled pulp for export to China have either shut as business stalls, or restarted the production of P&B, whose quality is usually poor,” he explained.

“What has seen demand growth is good-quality P&B manufactured by a handful of mills. They are bidding up prices for RCP imports and they will stop buying as risks increase when prices go up.”

The Indian boom has prompted major RCP suppliers to relocate tonnage from SEA to India, sapping the availability in the SEA market.

OCC climbs in SEA

Benefiting from its Pacific Rim location, buyers in Taiwan have enjoyed the lowest US OCC costs in Asia. In Vietnam, Thailand and Malaysia, US DS OCC 12 has been sold at $300-320 per tonne, and it fetched $330-340 per tonne in Indonesia.

In the end, the benchmark US OCC 11 that Fastmarkets’ PPI Asia assesses has clocked in at $260-320 per tonne, climbing $20 per tonne at the top end of the spread over the past two weeks in SEA and Taiwan.

European OCC (95/5) is up $5-10 per tonne to $280-300 per tonne. Japanese OCC has risen by $5 per tonne to the top end of the range to $280-295 per tonne.

However, sources find that, apart from the boost from India pricing, Malaysia has been dragged into the bidding war after the country implemented a new RCP import regime in January.

Several vendors have imposed extra $5-10 per tonne charges when giving offers to Malaysian mills, while buyers complained that some sellers were trying to use the pricing of RCP imports in Indonesia as a benchmark.

Moreover, a contact said sellers have also pointed to pricing in India, saying that it is expected to set the precedent for Asian prices in the future.