In the second quarter of 2024, recycled packaging paper manufacturers in Southeast Asia faced the dual challenges of high waste paper costs and sluggish demand for finished products, especially from China, its main export market. At the same time, import prices of high-grade fine paper in the region increased slightly due to higher transportation costs. Recycled packaging paper prices show signs of recovery After a small increase in the first quarter of this year, prices of major recycled packaging paper grades in Southeast Asia were hit by oversupply and weak demand, especially from China, in April and May. In the first half of these two months, import prices of old corrugated containers (OCC) in the Southeast Asian market, especially from the United States, continued to rise. High import prices of OCC also pushed up the prices of local waste paper in the region, putting huge cost pressure on local paper mills. Although Southeast Asian paper mills tried to increase paper prices in April and May, these efforts were mostly unsuccessful.
During this period, the import price of kraft paper remained at $460 to $560 per ton, the same as in March, while the import price of recycled corrugated paper dropped from $350 to $420 per ton in March to $330 to $410 per ton in April and further dropped to $325 to $410 per ton in May. The import price of imitation kraft paper dropped from $370 to $430 per ton in March to $360 to $420 per ton in April and remained unchanged in May.
Market observers believe that the instability in the prices of corrugated paper and imitation kraft paper is mainly due to the fact that producers of these paper grades in Southeast Asia are heavily dependent on exports to China. Weak prices and reduced demand in the Chinese market have forced Southeast Asian paper mills to keep more inventory locally or reduce production. The depreciation of major Asian currencies such as the Vietnamese dong, Thai baht and Indonesian rupiah against the US dollar has also provided Southeast Asian paper mills with more discount opportunities in US dollar terms. In terms of recycled paper, import prices for grey-backed whiteboard fell from $470 to $560 per ton in March to $450 to $520 per ton in May. Some traders reported an increase in India's production of low-priced grey-backed whiteboard, but the main driver of the price drop was a significant increase in the supply of virgin fiber white cardboard from China and Indonesia. Recycled packaging paper mills in Southeast Asia continued to raise prices in June, and prices remained firm. Although OCC import prices have fallen since the end of May, it will take two to three months for the high cost of recovered paper to be reflected. The sharp increase in container freight rates is also a factor in the paper mills' increased demand for price increases. "Although the increase in intra-Asian transportation costs is insignificant compared to long-distance transportation, the increase in transportation costs from $1 per ton to $4 to $5 per ton is already a big expense for companies with thin profits," said a trader. As a result, the price of imported recycled corrugated paper rose from $325 to $410 per ton in May to $335 to $410 per ton in June. Import prices for kraft paper increased from $360 to $420 per ton in May to $360 to $430 per ton in June. Import prices for kraft paper remained stable at $460 to $560 per ton. Prices for imported grey-backed white board increased from $450 to $520 per ton in May to $470 to $550 per ton in June. Rising sea freight prices appear to have slowed down imports of virgin white board, especially from China. Further price increases are expected in July as the traditional peak season for packaging approaches. In addition, recycled containerboard prices in China have shown signs of recovery, which may prompt Chinese buyers to place more orders with Southeast Asian paper mills next month. Fine paper prices rise slightly After a slight price increase in the first quarter of this year, Southeast Asia's top fine paper producers have introduced new price increases for April orders, generally $30 to $50/ton, due to the continued rise in raw material prices, especially pulp.
Buyers have rejected these price increase attempts due to ample supply in the market. Although April and May are traditionally the peak months for school orders, fine paper prices in the Chinese market fell during these two months. The sluggish domestic market prices prompted Chinese fine paper producers to seek more orders from overseas markets such as Southeast Asia. At the end of May, Southeast Asia's top fine paper producers announced new price increases for June orders, typically by $50/ton. The proposed price adjustment was mainly due to rising transportation costs. According to traders, container freight rates for outbound cargoes from China began to rise around mid-April, and by late May, spot freight rates on almost all outbound routes from Asia were soaring and continued to climb or remain high in June. Standard 40-foot container freight rates from Indonesia to Latin America were previously around $2,000, but suddenly tripled to $6,000 by the end of May. A large fine paper producer and exporter from China said: "We used to pay about $100 to $200 per container for freight from China to Vietnam, but now it can be between $500 and $1,000, sometimes as high as $1,250, making it almost impossible to quote on a CIF basis." Although the increase in shipping costs within Southeast Asia has been smaller, shipping companies often delay or cancel shipments due to tight shipping space. In the last month of the second quarter of this year, shipping chaos led to a slight increase in fine paper prices. Imported coated fine paper prices rose slightly from $720 to $830 per ton in March to $740 to $830 per ton in June, with the bottom of the spread rising by $20/ton. Imported uncoated fine paper prices climbed from $790 to $860 per ton in March to $790 to $880 per ton in June. "Paper mills have been absorbing most of the additional shipping costs rather than passing them on to customers, who may delay orders or turn to other suppliers," said the Chinese exporter.
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