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Clients in Southeast Asia (SEA) have pushed hard for cuts in prices for old corrugated container (OCC) imports over the past two weeks. Buyers in the region projected that there would be sellers under stock pressure willing to lower prices for the grade in the run-up to the Christmas and New Year holiday.
According to suppliers, clients in Thailand and Vietnam sought drops most aggressively. They were pressing for US double-sorted OCC (DS OCC 12) levels below $170/tonne, citing the premium US grade closing at $165-170/tonne in Taiwan.
They aimed for $130/tonne for European OCC 95/5, referring to an increase of availability of OCC from Japan, which is considered a viable replacement for the former. The target prices were far lower than sellers’ initial offers – $185/tonne for US DS OCC 12 and $145-150/tonne for European OCC 95/5.
Contacts indicated that buyers in SEA and Taiwan have generally slowed purchases of brown grades in large part due to gloomy prospects for the regional packaging market. They pointed to China’s lifting of Covid-19 restrictions, which has brought uncertainty to its own and the regional economies and packaging markets.
Vendors were similarly downcast, saying major clients slashed volumes to cope with the weak demand projected for the first quarter of next year. Several large mills in the region including in Malaysia, Indonesia, Thailand, Vietnam, and Taiwan have stopped production on some of their machines due to sluggish packaging demand.
Sellers reported that even buying powerhouse India has cooled down, despite a $10/tonne drop-in ocean freight rates for recovered paper from the US and Europe.
However, suppliers have seen a silver lining in the persistent OCC procurement from China-affiliated board and recycled mills in SEA, in particular in Malaysia and Thailand.
In Malaysia, leading Chinese packaging producers Nine Dragons Paper (Holdings), Lee & Man Paper Manufacturing, and Zhejiang Jingxing Paper are gearing up to commission large board machines and recycling pulp lines at their affiliated mills before the end of Q1.
In Thailand, Lee and Man and Dongguan Jianhui Paper have reportedly boosted recycled pulp output by building new facilities or via mills they contracted to convert OCC into recycled pulp.
The additional recycled pulp capacity is expected to amount to up to one million tonnes per year by April next year.
Those buyers have paid top dollar for US and European brown grades. They have also bought out OCC collections in Malaysia and Thailand, as well as the grade’s imports from neighboring countries. Fierce competition has prompted other regional mills to snatch up available OCC imports when prices were considered fairly low before Christmas. They believe prices are likely to climb after the holiday.
Major suppliers concurred, saying collections are expected to be low in the US and Europe going forward, as paper and board consumption there dwindles. Several have cut volumes on offer to Asia and held back on offers to buyers who target prices below market levels.
We are still working through backlogs. The orders we pick up now are for tonnage to be collected in the next few months. With collections expected to remain poor, we do not want to oversell at present.
However, contacts said that as mills in the US and Europe have been taking downtime to combat inflation and high energy costs, the tonnage they are expected to consume has dropped and RCP has forced to stay in the home markets, with some being diverted away to Asia.
Sources pointed out the offloaded tonnage was usually lower-quality grades, such as US OCC 11, European OCC 90/10, and mixed paper, and they were mixed up with premium OCC or mixed paper for sale to Asia at lower prices.
In Taiwan, US DS OCC 12 has fetched $165-170/tonne in Taiwan, down $15-25/tonne from a fortnight ago. Buyers in SEA used the pricing in Taiwan to seek price cuts during talks. Sellers did not cave in, though. They reduced offers to Taiwanese customers, while pushing back on buyers’ low-priced counteroffers in SEA.
In the end, the premium US OCC grade has gone for $175-185/tonne to non-inspection countries in SEA. Indonesia and Malaysia, which both require pre-shipment inspections in the countries of origin, have seen prices around $5/tonne higher.
Prices for benchmark US OCC 11 in SEA and Taiwan have been assessed at $160-180/tonne, slipping $10/tonne at the low end of the spread over the past two weeks.
European OCC 95/5 has seen prices falling the most, clocking in at $135-145/tonne, down $15-20/tonne.
There have been small volumes of the grade sold below $135/tonne, which are not included in the assessments, as they are outliers.
Buyers in Vietnam have put pressure on European sellers by threatening to slash buying due to an increase of available Japanese OCC. A major Japanese vendor explained that the supply of the grade for export has indeed edged up because domestic mills in Japan have cut intake by 10% over the past month.
“They cut volumes, but prices remain intact,” said the contact, adding OCC levels in Japan have remained unchanged at $180-190/tonne, much higher than those for export.
“With domestic collections dropping and prices for exports relatively low, Japanese recyclers are still not keen to offload tonnage overseas.
“They have opted to store extra tonnage at warehouses, hoping domestic demand may improve after the New Year holiday.”
The source indicated other Japanese sellers did give low-priced offers in Vietnam, but volumes were tiny. Japanese export OCC prices have still headed down $10-15/tonne, though, now going for $160-170/tonne in Taiwan and SEA.
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