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Prices for US-origin old corrugated containers (OCC) have crept up $5 per tonne in Southeast Asia (SEA) and Taiwan despite an ongoing downturn in the downstream packaging market across Asia. Contacts said the increases were due to restocking at recycled pulp plants operated by China-affiliated producers in SEA and an increase in inquiries from India.
OCC stocks held by recycled pulp mills in SEA have been depleting following minimum purchases of brown grades, most of which are imported from the US, over the past several months.
Pulp mills slashed US OCC volumes to cope with poor recycled pulp demand from China, where the packaging industry hit a slump stemming from the country’s struggle to recover its economy, which Chinese economists say is being driven by deflation. Prices for recycled pulp imported from SEA into China are considered to be at a low level and demand has been sluggish.
Meanwhile, a large portion of recycled pulp has been shipped back to their owners’ mills in China for the production of finished products.
During the past two weeks, some major China-based recycled pulp plants have increased purchases of US OCC and requiring immediate deliveries, while other regional mills have been placing orders and requiring sellers to schedule the arrival after September to meet a projected pickup in packaging demand in the fourth quarter of 2023 in SEA.
“Apparently due to a misjudgment, some Chinese producers found a shortage of recycled pulp intake in the production plans for their board mills at home and took action to replenish the depleted OCC stocks at their own recycled pulp plants in SEA, especially in Thailand,” a trader said. “The move immediately prompted suppliers to raise US OCC offer prices by $5 per tonne from last week.”
This illustrates how sensitive sellers are about prices when the availability of US OCC imports is restricted due to low collection rates there in summer, while OCC demand is even weaker in Asia.
Similarly, mills in India have refrained from OCC imports for several months while they took market-related downtime for one to two weeks to tack overcapacity in the domestic market.
But during the monsoon season, which started last month across India, low generation kicked in and OCC inventories depleted, resulting in an increase of inquiries OCC imports, according to an Indian merchant.
US double-sorted OCC (DS OCC 12) levels have risen by $5 per tonne in SEA, India and Taiwan this week. Prices at the top end of the range were paid by buyers in Indonesia and India, notably for larger volumes. Benchmark US OCC 11 rose proportionally, up $5 per tonne over the past two weeks in SEA and Taiwan.
Faced with the price hike, mills in Taiwan and Vietnam said that they plan to slash US OCC tonnage and use Japanese brown grades as a substitute.
“Supply of Japanese OCC is on the increase in the regional market, and prices for the grade edged down last month. After several months of holding their ground and declining to lower prices by limiting available tonnage for exports, I believe Japanese suppliers couldn’t hold it up anymore. And this could be just the beginning of a downhill slide,” a major Taiwanese customer said.
Prices for Japanese OCC were steady after a drop of $5 per tonne a fortnight ago. European OCC 95/5 prices also remained flat.
With the price gap between US and European OCC widening, mills in SEA have been cutting volumes of the former and increasing volumes of the latter. Moreover, China-affiliated mills in SEA have launched recycled pulp products made from premium European brown grades.
The recycled pulp is used by Chinese clients as a replacement of OCC collected domestically. But demand, however, is lukewarm.
This article was taken from PPI Asia, our newsletter for pulp, paper and packaging market news and prices for Asia. Speak to our team to learn more about our news and market analysis, prices, forecast and more.