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The demand for recovered paper (RCP) has been restrained this month due to a startling price drop on recycle-based packaging products in the Chinese market, according to an article by Nick Chang on risiinfo.com.
The slump has followed a price surge for the domestic recycled packaging board which began last year. Because of the slump, demand for old US corrugated containers has risen. This ultimately resulted in a major increase in pricing per ton within just five short months. The prices continue to increase month over month.
China’s demand for old corrugated containers has suddenly subsided. Speculation, in part, drove the recent price sprint. In the meantime, downstream converters and distributers received mass amounts of corrugated materials with the belief that the prices would continue to rise.
The packaging cost jump in China was fought by end-users, while converters and distributors were left overstocked. In response, these firms cut upstream orders and began selling off their board stock piles late last month.
The traditional low season for the Chinese packaging industry usually begins in March and lasts through the summer. Therefore, board members who have overseas RCP purchasing arms were able to see the decline coming.
Attempts to slow down the decline resulted in a small spike on the prices for recycled containerboards in the domestic market. Volumes continued to be slashed by downstream clients, while medium-sized mills have drastically cut prices on recycled containerboards. These medium-sized mills not only decreased the prices for recovered paper collections, but they have stopped importing them as well. This caused the drop off of domestic RCP levels.
Brown grades and mixed paper has been most affected by these actions. Over the past couple of weeks, they were hit by a major price drop. Old corrugated containers (OCC) imports in China have plunged, compared to US OCC.
Chinese mixed paper and corrugated board prices have doubled causing the buying activity to quickly decline and many suppliers have discontinued offering RCP imports in China. The article further explains that RCP shipped from Europe and Japan are being taken as a substitute for Chinese collections.
Customers have been trying to bargain with the Japanese OCC prices, but the Japanese suppliers are not accepting the counter offers. As of right now, there are no offers on old newspapers in Japan. The prices for mixed paper in Japan have decreased as well.
Due to the decline in OCC and RCP prices which have caused demand to decrease, suppliers have decided to hold back on offers for European grade altogether. Sellers whose cargo is already on the way to China are forced to sell for less.