RCP Prices Continue to Increase in China

Let's dissect the fluctuations in recycled paper prices in China. Chinese demand for recycled paper materials was expected to decline during the run up to the Lunar New Year falling between late January and early February. Contrary to expectations, demand remained robust, causing manufacturers to compete for tonnage, even as US and Europe diverted exports from India* to China. While major mills can exert influence over recovered paper prices, persistent demand and tight supplies kept values high. Chinese authorities have also approved permits for 26.13 million tons of recovered paper imports, allowing domestic mills to purchase with ease and causing a hike in the price of foreign scrap paper. Domestic scrap prices, in turn, continued to rise to keep up with import prices.

Here are the scrap paper price changes seen in the major markets over the past few weeks: Japanese old corrugated container (OCC) increased, then decreased $2/ton, closing at $226-228/ton; old newspaper (ONP) fell $2 to $231-233; and mixed paper gained $2-3, closing at $223-225. US OCC increased $5-8 to $220-225; ONP went up $5 to $195-200; and mixed paper increased by $10 to $188-192. In Europe, OCC went up $5-8 to $200-210; ONP increased $5-10 to $180-190; and mixed paper gained $5, closing at $175-180. Finally, Chinese mixed paper and corrugated board increased by RMB 120 to RMB 1400-1870/ ton; post-consumer OCC rose 100-120 to 1640-2030; and pre-consumer and import OCC increased 90-120 to 1750-2070.

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*A quick note on India's demonetization: on November 8th, officials announced the government will no longer recognize the Rupee 500 and 1000 banknotes as legal tender, thus temporarily decreasing the cash flow as the public exchanges their banknotes. Since India's economy is largely cash-based, the local recovered paper (RCP) market was hit hard.

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