China Paper Market | Weak demand, paper mills want to raise prices to prevent further declines!
Weak demand and oversupply in China's paper and packagingmarket have led to lower prices for recycled containerboard and color box cardboard. Some paper mills have opted to further reduce production in order to increase orders. At the same time, producers of grey-based whiteboard and high-end cultural paper, which use virgin fibers as raw materials, have raised prices to prevent prices from falling.
Typically, July is the start of the traditional peak season for China's packaging industry, as there are various festival-related domestic and foreign orders in the second half of the year. However, due to the slowdown in retail sales growth due to shrinking exports and a sluggish real estate market, packaging demand in the entire market is still low or even flat. This has led to a continuous reduction in the price of recycled containerboard, and some small and medium-sized paper mills have to follow the example of large paper mills to reduce production.
In East China, as of July 26, the average price of high-strength corrugated base paper fell by 88 yuan per ton from late May. The average price of imitation kraft cardboard fell by 102 yuan/ton from the previous month, and the average price of white kraft cardboard fell by 116 yuan/ton from the previous month, while the average price of white kraft cardboard fell by 100 yuan/ton from a month ago.
Paper prices in the Chinese market have continued to fall since business resumed after the Lunar New Year holiday, with sources at secondary and tertiary plants saying they "don't see the end of the tunnel yet". Deteriorating profitability has forced recycled containerboard plants to cut production. Some major recycled containerboard producers have announced plans to stop production.
Meanwhile, kraft cardboard based on virgin fibers is also under pressure from slowing packaging demand. The price of imported kraft cardboard fell by $20 a tonne in July compared with June, still at a high level.
Due to oversupply, the price of coated gray-based whiteboard based on virgin fibers fell sharply in the first half of 2023, and the price of the most common commodity grade fell by about 1,000 yuan per ton. In early July, the three major domestic base paper producers APP China, Sun Paper and Shandong Chenming Paper announced that they would increase coated white cardboard by 200 yuan per ton, and made the same price adjustment for orders in August.
While it is uncertain how the proposed rate hike will be implemented, the current move has temporarily halted the decline in prices. In East China, the average price of high-quality coated white cardboard remained stable, while the average price of commodity coated white cardboard with gray background rose slightly by 55 yuan/ton.
The oversupply problem has eased due to a long shutdown at Shandong Chenming's factory in Zhanjiang, Guangdong province. The factory suffered two fatal accidents and the government ordered a shutdown from early July. As of July 27, the factory had not resumed production.
The shutdown of the Zhanjiang plant partly supports attempts by producers of high-end cultural paper to raise prices. After prices fell sharply in the second quarter, China's leading cultural paper manufacturer announced a price increase of 200 yuan per ton for uncoated and coated cultural paper.
While most of the proposed rate hikes have yet to be implemented, the moves have slowed the pace of price declines. In East China, the average price of 100% chemical pulp uncoated cultural paper fell 234 yuan/ton this week from a month ago, and the average price of uncoated cultural paper mixed with chemical pulp and mechanical pulp fell 20 yuan/ton. At the same time, the average price of high-quality coated cultural paper fell by 150 yuan/ton, and the average price of commodity coated cultural paper fell by 87 yuan/ton.
According to market participants, orders for non-coated cultural paper picked up in July, and downstream customers began to replenish their inventories. "In the past few months, downstream customers have been affected by the rapid decline in prices and have cancelled orders. Now paper prices have shown signs of bottoming out, and fiber costs are rising, and they are starting to replenish their inventories," said one source.
In newsprint, domestic prices remained stable this month. China imported about 47,000 tons of newsprint in June, up 2.1% year-on-year. It is worth noting that while Russia remains the largest source of imports, Canadian newsprint imports surged to about 14,000 tons in June, accounting for 30.04% of total newsprint imports in **, reaching the highest level since July 2021.
Due to the rise of competitors, Russian newsprint suppliers have had to lower prices to maintain market share in China. New orders for Russian newsprint this month fell by about 300 yuan per ton from the previous month, according to traders.
To sum up, China's paper and packaging market is currently facing weak demand and oversupply. The price of recycled containerboard and cardboard for color boxes has fallen, causing paper mills to reduce production. At the same time, the price of kraft cardboard based on virgin fibers has fallen, while the price of gray-based whiteboard and high-end cultural paper has risen one after another due to the intensification of oversupply. Overall, the paper market is still in a period of adjustment, and all parties are trying to adapt to market changes.