The price of American waste in the Asian market rose slightly, and the new pattern of the North American kraft paper market!

Despite the continued downturn in the downstream packagingmarket in Asia, the price of used corrugated cartons (OCC) of US origin in South East Asia (SEA) and Taiwan has risen by $5 per tonne. Relevant people said the increase was due to the replenishment of recycled pulp mills operated by Chinese-affiliated producers in South East Asia and an increase in inquiries from India.

Inventories of OCC held by recycled pulp mills in South East Asia have been shrinking over the past few months as brown grades have the lowest purchases, most of which are imported from the United States. Pulp mills have cut imports of U.S. OCC in response to weak demand for recycled pulp in China. Current economic conditions in China have sent the packaging industry into a downturn, and Chinese economists say the economic recovery has been driven by deflation. Recycled pulp imported from South East Asia into China is considered to be at a low level and demand is sluggish. Meanwhile, most of the recycled pulp has been shipped back to its factories in China to produce finished products.

Over the past two weeks, some major Chinese recycled pulp mills have increased their purchases of U.S. OCCs and demanded immediate deliveries, while other regional mills have been placing orders and asking sellers to schedule arrivals after September to meet South East Asia's expected 2023 The pickup in packaging demand in the fourth quarter.

One trader said: "Clearly, due to misjudgment, some Chinese producers found that their domestic cardboard mills had insufficient recycled pulp intake in their production plans and took action to replenish their recycled pulp mills in South East Asia, especially Thailand. The move immediately prompted suppliers to increase their US OCC quotations by $5 a tonne from last week."

This illustrates how price-sensitive sellers are when the supply of OCC imports in the US is limited due to low summer receipts and Asian OCC demand is even weaker. Similarly, Indian paper mills have avoided importing OCC for several months while shutting down for 1-2 weeks due to market reasons to address overcapacity in the domestic market. But according to an Indian businessperson, during the Indian monsoon season that started last month, OCC production was low and OCC inventories were depleted, leading to an increase in OCC import inquiries.

US dual-classified OCC (DS OCC 12) levels in South East Asia, India and Taiwan rose $5 per tonne this week. Buyers in Indonesia and India paid the top end of the price range, especially for large volumes. The benchmark No. 11 U.S. waste price in South East Asia and Taiwan has risen accordingly over the past two weeks, rising $5 per tonne.

Faced with higher prices, paper mills in Taiwan and Vietnam have said they plan to cut imports of US OCC and use the Japanese brown grade as an alternative. "The supply of Japanese OCC in the regional market is increasing, and the price of the grade fell slightly last month. After months of holding its ground and refusing to lower prices by restricting export tonnage, I believe Japanese suppliers can't hold on anymore. This may just be the beginning of the decline," said a large customer in Taiwan.

Japanese OCC prices have remained stable after falling by $5 per ton two weeks ago. European OCC 95/5 prices have also remained stable. As the price gap between the US and European OCCs widens, paper mills in South East Asia have been cutting imports of the former and increasing imports of the latter. In addition, Chinese mills in South East Asia have launched recycled pulp products made from premium European brown grades. Chinese customers use recycled pulp instead of domestically collected OCCs. But demand has been lukewarm.

Another big thing in North America is that European giant Mondi is considering spending 400 million euros to build a new 200,000-ton-per-year unbleached kraft paper machine at an unbleached coniferous kraft pulp mill in Hinton, Alberta. The company has previously reached an agreement to buy the pulp mill from West Fraser for $5 million. The machine will produce native unbleached kraft paper and start up in the second half of 2027, Mondi said in a press release.

Mondi said the acquisition is expected to be completed by the end of this year. Pre-engineering work and permits are also required for the kraft paper project, as well as Mondi's final decision before the project is completed. 400 million euros are used for the paper machine and installation, as well as other related plant improvements. If the 200,000 ton/year equipment project is completed, Mondi will rank third among North American kraft paper producers based on current total capacity. Viselok and George Pacific are currently the two largest kraft paper producers in North America.

In addition, Mondi said, "The acquisition of factories and investment in paper machines will fully integrate the Americas business, allowing Mondi to ensure a long-term supply of high-quality, cost-competitive kraft paper from its network of 10 paper bag factories in the region, thereby better supporting Mondi to meet the growing market demand for industrial and mailing bags."

Currently, there are two companies producing kraft paper in Canada - Canfor in British Columbia and Canadian kraft paper (CKP) at the MB Pass plant. According to estimates, the combined capacity of Canfor and CKP is about 325,000 tons/year. Mondi will start its native kraft capacity, and at least four unbleached kraft capacity in the US over the past five years are machines for producing recycled unbleached paper. Starting around 2018, companies such as Norpac, Bio-Pappel, Midwest and ND Paper have started new capacity for recycled unbleached kraft paper.

As of this month, North American unbleached paper packaging capacity is about 2.29 million tons. Root estimates that ND Biron's startup and if Mondi continues to advance in Hinton, barring any shutdown, North American kraft paper capacity will increase by 15% in 4 years to about 2.63 million tons/year. With its global presence in kraft paper, Mondi has maintained close ties and business positions in the unbleached kraft wrapping paper segment of the US market for many years.

According to AF & PA, U.S. shipments of unbleached wrapping paper and specialty packaging in May 2023 were 163,500 tons, down 3.7% from May 2022 shipments and down 3% year-to-date.