While customers in Southeast Asia (SEA), Taiwan and India have continued to seek lower prices for old corrugated container (OCC) imports over the past two weeks, some have now started to snatch big volumes of Europe-origin brown grades.

The uptick has motivated suppliers to raise their offer prices this week for European OCC 95/5 by $10 per tonne in Indonesia and by $5 per tonne in Malaysia.

Indonesia and Malaysia require pre-shipment inspections to be carried out in the country of origin for inbound recovered paper (RCP) cargoes and prices are $5-15 per tonne higher than in other SEA countries. The price difference has narrowed from $20-30 per tonne due to a drop-off in ocean freight rates.

Sellers’ offer levels for premium European brown grade have increased by $5 per tonne in non-inspection SEA countries, mainly Thailand and Vietnam. Buyers in the region pushed back, however, citing sluggish demand for finished products amid OCC price declines in Europe and lower ocean freight costs.

Conversely, suppliers pointed to falling collection rates in Europe during the summer and refused to cave in last week when major buyers in Thailand and Vietnam sought to purchase European OCC 95/5 at less than $120 per tonne.

The stand-off eased this week, however, following major Vietnamese mills coming in to snap up tonnages. Sources said that client restocking reflected a potential pick-up in packaging demand in SEA after September when the traditional peak period starts.

Buyers in SEA and India have flocked to get European brown grades, while slashing their US-origin volumes, with prices kept stubbornly high by US suppliers.

India withdrawal

India and China-based mills were previously the two major importers of US RCP in Asia. Their purchasing power shored up the price of US RCP when regional demand was weak, and occasionally drove prices up to unprecedented levels.

Mills in India gobbled up large amounts of US OCC and mixed paper for manufacturing recycled pulp destined for China. The exports included finished products used as recycled pulp by Chinese producers.

It was a gold rush for Indian manufactures, who subsequently made investments in building new capacity - much of it in the form of small machines with a capacity below 100,000 tonnes per year - with the intention of meeting strong demand from China.

The exports peaked in 2021 following China’s outright ban on RCP imports at the beginning of that year.

But the tide began to change at the end of 2021, when top Chinese producers flocked to SEA, in particular to Thailand, to build massive recycled pulp plants and board mills with the aim to shipping the products back to China.

In India, demand for recycled pulp destined for China began to wane in late 2021 and continued to slip after that.

But new machines in the country have been coming on stream since then, leading to overcapacity in the Indian industry, with recycled pulp orders from China largely disappearing and unlikely to return.

As a result, since March this year, mills in north and west India have been taking market-related downtime in a collective effort to tackle the declines in finished product prices stemming from overcapacity in the domestic market.

In the meantime, Indian buyers have turned to cheaper European tonnages while reducing their US RCP intake.

US, Japanese OCC levels flat

China-affiliated producers have bought US RCP consistently, despite reducing volumes because of the ongoing economic downturn in China.

But other regional buyers have slashed US RCP volumes significantly and have been pushing sellers for price cuts. But the effect has apparently been offset by decreasing availability, with collections in the US also in decline, in line with US consumers cutting back on spending.

Major suppliers have held firm on the prices of US double-sorted OCC (DS OCC 12) in SEA. But traders under stock pressure have caved in and made concessions. In the end, prices for US brown grades have been kept intact across most of SEA and in Taiwan.

In a similar fashion, with suppliers holding firm on pricing, Japanese OCC prices remain steady.

Source: Fasmarkets Risi