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Rising Costs Unlikely To Reverse Soon
2021-08-23 09:30chinapaperonline.com
China's recovered paper market has returned to the rising track since early August. Though no dramatic leaps, price has climbed up week after week. On August 16th, price of almost all grades of domestically recovered paper gained another RMB30-50/tonne from 7 days ago. For example, price of OCC - the prime material in linerboard production – already reached RMB2,500-2,900/tonne depending on their grades in Eastern, Southern and Western China. And in upper China's Shandong province, price of Super Class-A OCC began to transact above RMB3,100/tonne. At the same time, aggressive sourcing by Chinese packaging paperboard production giants for their recycle pulp mills in Southeast Asia drove price of No. 12 Double-Sorted OCC (DOCC) to a historical height at US$350/tonne in the North American market!

Following the start of the high season for industrial packaging paperboard production and converting, which demands more fiber materials, price of recovered paper will have room to go up in the next couple of weeks and subsequently add to the cost in packaging paperboard production. Board manufacturers are bound to further push up the selling price of their products, thus spreading the increased costs to board converters, carton converters, and even end users. By mid-August, for example, offers at FOB mill terms of light-weight testliner already exceeded RMB4,600/tonne, gaining more than RMB100/tonne from the start of the month. Although all parties have difficulties, they can only bargain, or even wrestle, under the general economic environment to minimize the magnitude and speed of cost increase in the high-season market. Some people are counting on fiber cost decrease when low-season eventually comes with softened demand and fallen prices in fiber sourcing. But more market participants believe that, in view of the large shortage of raw materials, energy and transportation and other expenses are also rising, coupled with the epidemic and other factors, this year, the cost of production and conversion of paperboard will stay high inevitably. The only way to get through the difficulties is to make every effort to increase revenue and cut costs.

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