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Rengo, other Japanese P&B firms hit with fines over corrugated board price-fixing

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Rengo, other Japanese P&B firms hit with fines over corrugated board price-fixing

July 03, 2014 - 18:05

MELBOURNE, Australia, July 4, 2014 (PPI Asia) -The Japanese Fair Trade Commission (JFTC) has unveiled fines totaling ¥13.3 billion ($136 million) on 61 corrugated container producers and converters there, including the subsidiaries of leading paper and board (P&B) firms.

The JFTC is using the fines to punish companies that attempted to control corrugated board prices by acting in concert with one another.

The firms have also been issued cease-and-desist orders, in the culmination of an investigation that saw dramatic office raids in June 2012 on Rengo, Oji Holdings and Nippon Paper Industry (NPI), among others.

On the production side, Rengo, Oji Holdings and Daio Paper have all been hit with the fines.

Rengo's share of the total is by far the largest at ¥5.7 billion.

¥3.9 billion of that is to be charged to the parent company, with the rest spread among six of its subsidiaries.

A market contact close to the case reported that Rengo saw such steep penalties relative to other firms because of its dominance of the Japanese corrugated board sector.

Oji and ten of its subsidiaries have been issued fines totaling ¥2.7 billion, and Daio faces a fine of ¥201 million.

On the converter side, NPI subsidiary Nippon Tokan Package got a ¥1.3 billion fine.

Tomoku was fined ¥1.6 billion, and Dynapac faces a ¥532 million surcharge.

Most of the companies facing the fines are still deliberating whether or not they will dispute them with the JFTC, and have 60 days from June 19 to make up their minds.

Tomoku has already moved to challenge it, as has Rengo.

However, Rengo has also announced that it will garnish the wages of the upper echelons of its management by 10-30% over the next three months in an act of "self-reflection".

The Japanese market contact reported that challenges of JFTC findings are rarely successful.

Furthermore, the JFTC gave notice to the firms concerned about the sanctions

they were facing several months previous to their public announcement.

Consequently, most of them, including Rengo, wrote down the value of the fines in the financial year ending last March.

Market suffering:The JFTC finding comes as the market faces hard times.

Prices for linerboard are currently clocking in around ¥59-60 per kg and corrugating medium for ¥53-54 per kg, down a respective 6% and 7% from the middle of last year.

Simultaneously, due to demand from overseas markets, the cost of recovered paper furnish has shot up by as much as 50%.

The market, which already shows signs of oversupply, will see further capacity come online soon.

Contacts report Daio's new BM at its Iwaki mill, whose size and timeline has not been officially announced, may be in operation within the next few months.

And Rengo will hike the capacity of one of the BMs at its Marusan mill by 130,000 tonnes/yr by January.

In the circumstances and in the wake of the JFTC's findings, market sources expect that the less well-positioned board mills in the country will find it increasingly difficult to survive over the next few years.