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OCC – raw materials for the production of industrial packaging paper

In the context of the COVID-19 epidemic breaking out in most Asian countries, the supply of RCP in the region is in short supply, the demand for RCP tends to decline, but the price of RCP is increasing.

India and Malaysia are the two countries that have issued blockade orders since the end of March 2020, packaging paper manufacturers from RCP have also stopped importing. India is the second largest importer of US RCP after China, but Indian recycled packaging paper companies have stopped placing orders since the last week of March 2020, due to having to stop operations until the 14th. /4.

Meanwhile, the Malaysian government extended the blockade until April 14. Currently, packaging paper factories in Malaysia are allowed to operate at 50% capacity, as their production is considered essential. However, domestic logistics is stagnant and RCP transport vehicles must have a special license, which has also affected consumption.

In Malaysia, the 50% capacity operating level is also applied to recycled pulp mills, mainly the recycled pulp facilities of Nine Dragons Paper (Holdings) and Lee&Man Paper Manufacturing with total capacity. 800,000 tons/year.

RCP supply is short, prices are increasing but the price of exported recycled packaging paper is decreasing in Southeast Asia and Taiwan, recycled medium paper decreased to 340 USD/ton in the first week of April, compared to 380 USD/ton. 410 USD/ton at the end of last month.

From mid-March 2020, in preparation for the increase in demand for packaging paper from China, when the country returns to normal operations after COVID-19, Southeast region manufacturers Asia is increasing purchasing and importing RCP, increasing production.

But now the Chinese market situation shows the opposite fluctuation, when demand from other industries declines. Chinese manufacturers are blaming the drop in demand on canceled orders to export consumer goods to North America and Europe. Furthermore, the demand recovery of the domestic market is also very weak, exacerbating the decline in exports. The downturn in the Chinese market is affecting other Asian markets, causing packaging paper prices to gradually decrease.

OCC in Asia remains bullish: On the supply side, sellers continue to seek price increases due to a decline in RCP collection in Europe and the US.

In Europe, lockdowns have led to a shortage of workers for RCP collection and sorting operations. RCP in residential areas is mixed with household waste and sent directly to landfills or incinerators. While most paper mills in Europe are still operating and increasing RCP purchases from stores, supermarkets and industrial parks, RCP prices increased in Europe and the amount of RCP available for export to Europe. Asia is cut.

Logistics is contributing to reduced supply, shortages of international shipping containers and ship cuts taking place everywhere in Europe and the US. In the US, the supply of RCP for export has also decreased.

US OCC (11) in Taiwan and Southeast Asia costs about 175 USD/ton (CIF), while OCC (12) costs up to 185-195 USD/ton (CIF), DLK costs 200-210 USD /ton in the first week of April 2020. OCC (95/5) in Europe costs 165-170 USD/ton.

Despite the decline in supply, buyers are thinking that price is too high but are still reluctant to buy and stockpile RCP. Due to the decrease in OCC supply from Europe,  buyers have turned to Japanese OCC, with an increase from  10-15 USD/ton to 155-160 USD/ton./.

RISI Fastmarkets (April 4, 2020)