Packaging / Advertising & Office

Waste paper has become a scarce material in Vietnam, and the price continues to rise, rising by about 60% year-to-date!

Due to the Vietnamese government's control and restrictions on the new crown epidemic, the amount of waste corrugated cardboard in Vietnam's domestic factories and households continues to decline, so Vietnam continues to increase its imports of waste paper. From the beginning of 2021, so far, the price of waste corrugated cardboard exported from various countries to Vietnam has soared by about 60%.

As a necessary raw material for the production of corrugated boxes, due to the increasing shortage of sources of this product, the price of waste corrugated cardboard has risen by about 20% since April. In addition, Vietnam's imports of waste corrugated cardboard in various markets around the world are also increasing. Among them, Japan's exports to Vietnam increased by about 60%.

Vietnam used to be a typical country and representative of the Asian region that successfully responded to the new crown epidemic, but now this country is adding an average of 10,000 new coronavirus infections every day. This continuous growth rate has put severe pressure on the medical system and infrastructure in Vietnam. .

Therefore, as the more contagious Delta virus swept the area, Ho Chi Minh City and other areas in southern Vietnam implemented stricter lockdown policies. In late August, the Vietnamese government began to deploy troops to Ho Chi Minh City and distribute food and other necessities to domestic residents.

As part of the new crown epidemic control policy, factories in Ho Chi Minh City and other southern regions are close to being unable to operate, unless workers do not go home, food and lodging are in the factory. Some companies currently have only 30%-50% of their regular employees. Many other factories have completely stopped production, which has also greatly reduced the total amount of waste corrugated cardboard.

Waste corrugated cardboard may also come from the family. However, individual recyclers who usually recycle waste corrugated cardboard and sell them to waste paper recycling stations have been banned from entering areas where the new crown virus exists. It is estimated that the supply of households in southern Vietnam has fallen by about 80%. "There are no more cardboard recyclers on the streets," said an industry insider.

At the same time, Vietnam's entire country's demand for waste corrugated cardboard remains strong. Although China bans the import of all types of waste paper on environmental grounds, it has increased its imports of pulp. In recent years, many facilities have emerged or expanded in Vietnam to process waste corrugated cardboard into pulp and export it to China.

The supply of these so-called waste corrugated boxes is currently in a very tight state. Due to the new crown epidemic, the output of newly produced corrugated boxes in southern Vietnam has also fallen by 30%-40%. The material is now priced at about 7,000 VND (31 US cents) per kilogram in the region, which is a 20% increase from April before the current wave of infections.

A trading company said: "Even if we pay more, we are working hard to ensure that we provide customers with high-quality corrugated boxes." The company is now sourcing more materials from northern Vietnam because northern Vietnam has not been severely hit by the pandemic . Another option is to import materials. According to statistics from the Vietnamese government, in 2020, Vietnam imported 2.91 million tons of waste corrugated boxes, which is about 13 times more than in 2016. Most of the waste corrugated cardboard that China no longer imports has now entered the country.

In the past few years, about half of the shipments came from Japan or the United States. In 2018 and 2019, imports of waste corrugated cardboard from the United States accounted for 30%-40% of total imports. In 2020, each company exported approximately 790,000 tons to Vietnam.

Vietnam's demand is a boon for Japanese exporters affected by China's waste paper import ban. In July, the price of goods shipped from Japan to Vietnam was 27 yen (25 cents), about 60% higher than the beginning of the year. "The export price to Vietnam is often higher than the export price to other countries," said a wholesaler.

Goods destined for Vietnam are also consuming waste paper stocks across Japan. Waste paper wholesalers in Tokyo are now paying 22% more for waste corrugated boxes than in April. But it remains to be seen how long the current boom can last. The operating rate of Vietnamese manufacturers is at a historically low level, while China's containerboard production is also sluggish due to restrictions related to the new coronavirus and concerns about economic slowdown. "It is not clear whether the price of waste paper in Vietnam will rise further," said a wholesaler.

The price of waste paper in Europe and the United States continues to rise, and the price of cardboard/cow cardboard also rises.

Let’s take a look at the US market. The average price of waste corrugated cardboard in the US has risen by about US$20 since August, to US$183/ton, which is a difference of US$90 from last year’s average price. This also makes many people wonder if this will continue. how long.

As the global blockade for the prevention and control of the new crown epidemic has stimulated a large increase in online shopping in the first quarter of 2020, the demand for corrugated packaging has also increased. Although this change in purchasing mode is largely enforced by the government, as consumers become more accustomed to or even prefer online shopping, consumers' purchasing habits have undergone structural changes. According to the US Bureau of Labor Statistics' Corrugated Box Manufacturers Producer Price Index, the index measuring the price of corrugated packaging rose to 369.4 in May from 342.1 in the same month of 2020.

Rising corrugated packaging prices may squeeze many companies that rely on packaging to deliver goods to online consumers, especially when demand remains high and subsequent rounds of lockdowns are developing globally. In the United States, from the first quarter of 2015 to the first quarter of 2020, container board production capacity has generally grown at a slow and steady rate. However, the latest data show that paper manufacturers are increasing production capacity at an unprecedented rate to cope with the surge in demand for corrugated boxes, which will then be processed into corrugated cardboard.

The increase in demand for corrugated packaging products has caused prices to rise to record highs, which have now surpassed the highs reached in the fall of 2020. These price increases coincided with record waste paper prices. More and more global economies are implementing import regulations that directly affect the industry. China’s ban on imports of waste corrugated cardboard at the beginning of this year is a good example.

However, the increase in raw material prices and increased demand ultimately promoted the increase in the price of cardboard paper. We can see this from the change in the average price of benchmark ratings last month at approximately US$153/ton. The index rose by approximately US$20 to an average of approximately US$183/ton. Another price pressure comes from transportation, which increased by approximately 15% between the first quarter of 2019 and the fourth quarter of 2020.

In Germany, the supply of the cattle cardboard market continues to be tight, so sellers are considering raising prices from October and have already begun price negotiations for New Year's delivery. In view of the tight supply in the cattle cardboard market, price negotiations for the coming year have begun, and the corrugated cardboard industry and its customers hope to ensure reliable supply in early 2022.

In the UK, packaging paper and cardboard market prices continue to rise due to strong demand and waste paper prices are already high and sometimes rising. In France, during the August holiday period, strong French demand for packaging paper and paperboard dominates. In the context of good demand but limited supply, cattle cardboard manufacturers once again increased the prices of brown and white cattle cardboard. Manufacturers are hoping to increase prices for deliveries in September and October.

Why does the OCC price remain high and what is the future trend?

Observing the raw materials used in the production of boxboard, it can be seen that it is particularly affected by the rise in the price of recycled fibers. This is mainly due to the fact that the recycling rate of waste corrugated cardboard has declined during the pandemic. Large stores cannot produce waste corrugated cardboard on the same scale as before the new crown epidemic, and the price of recycling from consumers is even higher, and the amount of waste paper recycled is completely different.

The global market is still extremely uncertain and fluid. As countries adapt to new regulations and continue to respond to the evolution of the pandemic, the global price of waste corrugated cardboard is likely to remain high in the short term. However, the growth rate of corrugated packaging will be much slower than in 2020, and the price of waste corrugated cardboard is not expected to remain high for a long time. Fisher International expects that prices will peak before they start to fall in the next few months.