SINGAPORE, 20 May 2022 (Fastmarkets RISI) - Customers have continued to seek price cuts for recovered paper (RCP) imports in Southeast Asia (SEA), Taiwan, and India, but their push met resistance from sellers.

Suppliers reported decreasing collections and solid demand in their home markets in the USA, Europe, and Japan, and declined to cave in.

According to US government data, India is now the biggest buyer of US RCP in the world, importing almost 1.1 million tonnes during Q1, of which 48% were old corrugated containers (OCC) and 45% were mixed paper.

With Indian clients paying top dollar to get such volumes, suppliers have used prices in the country as the benchmark for SEA.

Indian customers have, however, been pushing for price drops since late March, ahead of the European Union’s (EU) lifting a ban on the export of RCP to India on April 1.

India had been prohibited from importing RCP from the EU due to an error in the Indian government’s response to the EU’s ban on exporting self-adhesive label waste to non-OECD countries. The prohibition was lifted after regulators fixed the error.

Over the past two weeks, Indian buyers have aimed to haggle down US OCC prices by $20/tonne.

Major suppliers gave the effort the cold shoulder, but other sellers made concessions.

In the end, prices for US double sorted OCC (DS OCC 12) have slipped $10/tonne to $310-320/ tonne, and US Select OCC 11.5 is down $5/tonne to $290-300/tonne.

European OCC (95/5) has dipped $5/tonne to $285-290/tonne.

Late this week, contacts indicated that Indian buyers have been seeking US tonnage in numbers, and prices could be driven back up soon.

Decreasing availability: Sources indicated that the price drops in India were helped by mills in SEA slashing RCP purchasing volumes to cope with the region’s deteriorating exports of recycled pulp and packaging materials to China.

But while RCP demand in SEA and Taiwan remains sluggish, customers have taken aback by the decreasing availability of RCP from US, European and Japanese suppliers.

Suppliers ascribed that to low collections in the major exporting countries and warned generation is expected to get worse entering summer.

“We heard that buyers in Europe and the USA have continued to stock up on RCP to feed their new machines and prices they are paying are high enough to persuade sellers to keep volumes at home, rather than export to SEA,” said a major SEA buyer.

“As a result, even if we offered to pay more for more volume, suppliers couldn’t manage it, and we would still be unable to meet our target procurement volume this month.”

Nonetheless, shipping costs for RCP cargoes have come down, particularly for shipments from the USA and Europe to Malaysia.

Contacts said shipping companies lowered ocean freight rates from certain ports in Europe and the USA to Port Klang, as containers were needed at the Malaysian port.

Sellers have cut RCP prices accordingly for Malaysian customers, with European OCC (95/5) levels clocking in around $268/tonne.

Meanwhile, contacts pointed out that Indian buyers had asked suppliers to defer ordered RCP shipments, and sellers were forced to divert the distressed tonnage to SEA - mainly Thailand, Malaysia, and Vietnam.

“Sellers are always prepared to deal with such a situation, which is equivalent to a cancelation of orders and not uncommon in India,” said a major vendor.

“Most Indian buyers are traders, and they can cancel shipments when prices are volatile to prevent losses.

“Currently, the diverted European OCC (95/5), especially the tonnage from the UK, has been sold below market levels, for as little as $260/tonne. That explains where the low-priced offers are from.”

SEA OCC steady: In Taiwan, benchmark US OCC 11 has climbed $10/tonne to $250-255/tonne and the gap with US DS OCC 12 has shrunk from $5-10/tonne to $3-5/tonne.

“Sellers’ volumes on offer have been dropping and deliveries are also getting slower in the Taiwanese market,” said a vendor.

Theo Fastmarkets RISI