Southeast Asia-bound wastepaper prices slump on weak demand

For cardboard waste exports from the U.S., Europe and Japan, prices plunged 40% to 50% last autumn and have since remained low.

Cardboard waste from the U.S. is trading around $150 to $160 per tonne, down from about $170 in late 2022. This is down sharply from the roughly $300 high marked in the spring of that year, when materials prices were surging around the world.

Exports from Japan and Europe are following the same trajectory. Wastepaper from Japan has dropped to about $150 from a recent peak of around $280, while prices of shipments from Europe have fallen to $120 to $130 from $270, and these have stayed down for more than half a year.

The U.S., Europe and Japan ship wastepaper to such destinations as India and Southeast Asia, where the materials are recycled into corrugated board and sent back to the exporters.

Southeast Asian paper mills are no longer eager to buy wastepaper. Exports of electronics and other products from the region to the U.S., Europe and China have slowed, sparking concerns about an economic slump. As demand for cardboard is linked to goods distribution and other economic activities, wastepaper demand is also declining.

Economists are seeing a cloudier outlook for the five major economies of the Association of Southeast Asian Nations. The 2023 growth outlook for Indonesia, Malaysia, the Philippines and Singapore and Thailand was cut to 4.2% in a survey published in early July by Nikkei and the Japan Center for Economic Research. It was 4.4% in the previous survey, published in April.

"There were times when hopes of a recovery in demand rose" -- such as with the end of China's zero-COVID measures in early 2023 -- but "they all ended up not materializing," an official at a trading house said. In Vietnam, corrugated board factory operations have been affected by shutdowns of hydropower plants over low water levels.

Meanwhile, wastepaper exports from industrialized nations are on the rise. Japan shipped 1.1 million tonnes of wastepaper between January and June, up 9.7% on the year. With demand for corrugated board sluggish, raw material production has been declining here. Domestic manufacturers are cutting back on wastepaper purchases, sending surplus stock overseas.

Similar trends are seen in a Europe hit by economic downturn concerns. By country, paper and cardboard production fell on the year in the January-March period, while wastepaper exports from the European Union doubled. Production of delivery boxes is "not strong" in the U.S., either, according to a wastepaper trading company, meaning that more is being shipped to the ASEAN region.

Low wastepaper prices mean lower costs for paper manufacturing, but paper companies in Japan face a dilemma. They are working to maintain price increases implemented before spring amid higher energy prices. Facing downward pressure on pricing, they are closely following the markets in Southeast Asia.

Source: Nikkei Asia