NEW YORK, 13 May 2022 (PPI Pulp & Paper Week) - US exports for recovered paper in the first quarter of 2022 were down slightly year-to-date through March compared with 2021, yet major sellers told Fastmarkets' PPI Pulp & Paper Week in May that they continue to secure contracts in new markets, most especially in South America. Pricing for export US recovered bulk grade tons has decreased the last two months into May, after a three-month rise in pricing, and maintaining movement among continual shipping struggles at ports and on the water plays into overall demand for tons.

When China set its global ban on recovered fiber imports at the start of 2021, US suppliers had sought new buyers in Southeast Asia and India. Establishing relationships and contracts with countries such as the Asia-6 nations – India, Indonesia, South Korea, Taiwan, Thailand, and Vietnam – proved beneficial to US sellers, and OCC tons shifted from China's heavy buying arm to Asia-6 nations, as well as to Malaysia, and Mexico, among other countries.

At 3.88 million tonnes in first quarter 2022, US recovered paper exports were down 1.4%, or 54,885 tonnes, vs 3.93 million tonnes exported in the first quarter of 2021.

To Asia-6 nations, exports of US recovered fiber tonnes fell 6.8%, or 167,716 tonnes, with 2.23 million tonnes exported to Asia-6 nations in first quarter 2022 vs 2.46 million tonnes exported in first quarter 2021.

Another Southeast Asian country, Malaysia, has been a big buyer of US recovered paper tonnes in the last year, especially US OCC. At 244,617 tonnes imported in first quarter 2022, Malaysia's buying of US recovered paper increased 17.1%, or 36,419 tonnes, vs the 208,198 tonnes imported from the US the year prior in first quarter 2021.

Malaysia issued a two-year suspension on new manufacturing licenses within the country's paper manufacturing industry, and also has extra import restrictions that has US sellers tacking on a premium to tonnes shipping to Malaysia due to the extra time and work to get tonnes to that country.

Mexico demand up 20% in 1Q. Mexico, too, has had more demand for US recovered paper. At 563,218 tonnes in first quarter 2022, Mexico has increased its demand for US recovered paper by 20.6%, or 96,294 tonnes, from the 466,924 tonnes Mexico took in from the USA in first quarter 2021.

In recent months, contacts have told of back-and-forth demand from Grupo Gondi in Mexico, as well as changed dynamics as of late, including increased generation of OCC in Mexico, issues securing rail, and added costs, most especially on freight, that has added to some pushback in demand from mills in Mexico.

"More fiber is being offered than we can possibly consume," a contact with mills in Mexico said. "Their (Mexico) demand for OCC has dropped significantly. Part of that is because there have been times when they're able to find more locally. (They're) not having to pull as much from the US."

South America demand growth. As these established markets grow, so, too, has interest from South American mills. Sellers have told P&PW in the last year of the efforts to increase orders to countries in South America.

"Latin America has been a buyer for the brown grades," a major seller said.

In May, one major trader said their company had secured a new OCC contract in a new-to-them market in South America. The company identified to P&PW that Brazil was a steady buyer of US recovered paper tons, but would not acknowledge the new market in South America that they had secured.

The most recent data from the US government show that the South American countries where US recovered paper tons have shipped to in the first quarter of this year are in Argentina, Brazil, Chile, Colombia, Ecuador, and Peru. Brazil buys mostly only US OCC and mixed paper.

Like Mexico as of late, Brazil's domestic recovered paper supply has seemed to improve.

"Brazil is buying … (and) just trying to keep their feet in the market for when they need it," a seller said. "Domestically, they're getting all they need."

China's hand still strong. Even without China's demand, its influence absolutely remains. Recent lockdowns in China due to COVID-19 protocols, and added downtime at board mills through May, including Nine Dragons Paper and Shanying International, have caused a ripple effect for demand from Southeast Asian countries. As China demand slowed, so, too, did machine runtime in India and in Southeast Asian countries as production of recycled brown pulp curbed. India has taken over as the pricing leader for US recovered paper pricing.

"Slowdown from (the) India market has been impacting and cooling down the East Coast export market," a major buyer told P&PW on May 4.

India buys big off the US East Coast. This demand pull has pushed up recovered paper export prices higher than the West Coast prices out of the Los Angeles/Long Beach ports for the last two years. OCC pricing declined more off the East Coast in May vs the West Coast, according to buyers and sellers.

In May, with India's decreased demand, No. 11 OCC and exported No. 12 double-sorted old corrugated containers (DSOCC) dropped by $15/tonne FAS out of the New York/New Jersey ports, to a high side of $205/tonne for No. 11, and $215/tonne for No. 12.

Off the West Coast, OCC's price slipped by $5/tonne to a high side of $185/tonne for No. 11 OCC, and $195/tonne for No. 12 DSOCC out of the Los Angeles/Long Beach ports.

• Major ocean carrier alliances have announced cancellations of at least one-third of their scheduled sailings out of Asia through early June in a blanking effort to mitigate the impact of COVID-19 lockdowns in China, according to reports.

Theo Fastmarkets RISI