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Recycled packaging board producers in Southeast Asia have been sandwiched by high recovered paper costs and sluggish demand for their finished products, especially from their key export destination China, in the second quarter of 2024, while prices for fine paper imports have edged up in the region due to higher shipping costs.
Following the slight price upticks in the first quarter of this year, the top fine paper producers in Southeast Asia rolled out new hike proposals, typically of $30-50 per tonne, for April orders, citing continuous increases in prices for raw materials, especially pulp.
The attempts were brushed aside by buyers due to ample supply. Fine paper prices in the Chinese market slipped south in April and May despite that it was the traditional high season for paper orders for school materials. The unsatisfactory prices in their domestic market encouraged Chinese fine paper producers to seek more orders from overseas markets, including Southeast Asia.
In late May, the top fine paper producers in Southeast Asia announced new plans for mark-ups, typically of $50 per tonne, for June orders. This time the proposed adjustments were mainly attributed to higher shipping costs.
Trader contacts reported that container freight rates for outbound cargo from China took off around mid-April, and later in May the spot rates of almost all Asia outbound routes skyrocketed have continued to climb or remained at elevated levels in June.
A trader contact told Fastmarkets that the rate for a standard 40-foot container from Indonesia to Latin America used to be around $2,000 but suddenly tripled to $6,000 in late May.
“Previously we paid only around $100-200 [per container] for shipping from China to Vietnam, but now the rate can be anything between $500 and $1,000 [per container] and occasionally as high as $1,250 [per container]. It’s almost impossible to offer quotes on CIF term,” said a contact from a major Chinese fine paper producer and exporter.
While shipping within Southeast Asia has been subject to less drastic jumps in costs, shipments have often been delayed or cancelled by shipping companies due to a lack of vessel space.
The shipping chaos has helped marginally push up fine paper prices in the last month of the second quarter of this year. The prices for coated fine paper (CFP) imports edged up from $720-830 per tonne in March to $740-830 per tonne in June, up $20 per tonne at the bottom of the spread. The prices for uncoated fine paper (UFP) imports climbed from $790-860 per tonne in March to $790-880 per tonne in June.
“Paper mills have been absorbing the majority of the extra shipping costs instead of passing them onto customers, as customers could hold back from ordering or turn to other suppliers,” said the Chinese exporter contact.
Following the slight gains in the first quarter of this year, the prices for major recycled packaging board grades in Southeast Asia were weighed down again in April and May due to excessive supply and weak demand, in particular the slack demand from China.
The prices for old corrugated container (OCC) imports, especially those from the US, continued to trend up in the Southeast Asian market in April and the first half of May. The high price tags for OCC imports also drove up the prices for local recovered paper in the region, putting the board mills there under tremendous input cost pressure.
Southeast Asian board producers attempted to hike prices for their board products in April and May, but their efforts mostly went in vain.
While the prices for kraft-top liner imports remained in $460-560 per tonne in April and May, unchanged from the level in March, the prices for recycled fluting imports shifted down from $350-420 per tonne in March to $330-410 per tonne in April and slipped further south to $325-410 per tonne in May. The price levels for testliner imports moved from $370-430 per tonne in March down to $360-420 per tonne in April and stood still in May.
Market contact attributed the vulnerable fluting and testliner prices to the fact that mills of these grades in Southeast Asia rely heavily on exports to China. The weak pricing and demand in the Chinese board market forced the Southeast Asian mills to leave more supply within the region or curb production. The depreciation of major Asian currencies, including the Vietnamese dong, the Thai baht and the Indonesian rupiah, against the greenback, also allowed Southeast Asian board mills’ more room for offering discounts in prices in US dollar.
As for recycled cartonboard, prices for grayback coated duplex board imports declined from $470-560 per tonne in March to $450-530 per tonne and were nudged down to $450-520 per tonne in May.
Some trader contacts reported an increased volume of low-priced grayback coated duplex board from India, but the key driver behind the downward pressure was ballooning supplies of virgin fiber-based coated ivory board from China and Indonesia.
Recycled packaging board mills in Southeast Asia have continued with their price hike efforts in June and have held firm on prices this time. Though prices for OCC imports have softened since late May, contacts from board mills told Fastmarkets that it would take two to three months to feel the ease from the lofty recovered paper costs.
The soaring container freight rates have also been a contributing factor to board mills’ stronger demand for price hikes.
“The surges [in the shipping costs within Asia] are negligible compared to those for long haul destinations, but for business with such small margins, our shipping cost rising from $1 per tonne to $4-5 per tonne is already a big deal,” said a trader contact.
As a result, the price levels for recycled fluting imports have gone up from $325-410 per tonne in May to $335-410 per tonne in June. Testliner imports have edged up from $360-420 per tonne in May to $360-430 per tonne in June.
Kraft-top liner imports have remained steady at $460-560 per tonne.
Grayback coated duplex board imports’ prices have climbed up from $450-520 per tonne in May to $470-550 per tonne in June. Higher ocean freight rates appear to have slowed down the arrival of virgin fiber-based coated ivory board imports, especially those from China.
Contacts from board mills in Southeast Asia told Fastmarkets that they are gearing up for more price increases in July, as the traditional peak season for packaging is coming. What is more, recycled containerboard prices have showed signs of recovery in China, which may prompt Chinese buyers to place more orders at Southeast Asian board mills next month.