Corrugated Paper Market May Still Face Supply-Demand Pressure in H2 of April
Intro: In H1 of April, corrugated paper market prices showed a downward. With insufficient demand and increased supply pressure, the market bearish sentiment is aggravated. It is predicted that corrugated paper prices will continue to decline under pressure in H2 of April.
Prices trended under pressure
Since April, corrugated paper prices have trended under pressure, and the market trading has been insipid amid the supply-demand pressure. The sales in the Southern market outpaced that in the Northern market. According to SCI, as of April 15, China’s 120g AA-grade corrugated paper average price was RMB 2,720/mt, down 4.71% Y-O-Y and 3.75% M-O-M.
Supply was ample
Recently, the corrugated paper market has not seen downtime maintenance, and the overall operating rate has been relatively stable, leading to sufficient output. According to SCI, as of April 11, the weekly average operating rate of the corrugate paper industry was 60.45%, up 1.30 percentage points W-O-W. The output increased by 2.19% W-O-W.
Inventory pressure remained obvious. According to SCI, as of April 11, corrugated paper inventory inched up. The inventory of corrugated paper sample enterprises was 434.7kt, up 0.51% W-O-W. Inventory pressure in South China was alleviated somewhat, while trading in East China and North China was relatively insipid, and enterprise inventories showed an increasing trend.
Demand was limited
April is still the traditional demand off-season for the corrugated paper industry. As seen from the automobile industry, the end industry of corrugated paper and cardboard paper, according to data released by CPCA, the cumulative retail sales of passenger cars from January to March were 4.829 million, a Y-O-Y increase of 13.1%, which was mainly due to the consumption recovery after the holidays. As prices ramped up, market players intend to stay on the sideline. Coupled with attention to some new cars and expectations for the trade-in strategy, the market is relatively smooth. From April 1 to 6, the retail sales of passenger cars recorded 206,000, a Y-O-Y decrease of 8% and a decrease of 3% M-O-M. Orders from end users were lukewarm, and the downstream orders were mediocre. Some packaging plants mainly arranged production based on scattered orders. Downstream players were inactive in buying, and most of them still consumed early inventory and replenished stocks in an appropriate amount for rigid needs. The inventory days of downstream paper have recently reached around 15 days, which is relatively low.
In addition, the corrugated paper market was pervaded with wait-and-see sentiment. Since April, large-sized paper mills in Southern China raised offers, while paper mills in Northern China cut profits to sell and the price hikes of medium and small-sized mills were implemented below expectations. As a result, market players operated cautiously and stayed on the sideline.
The corrugated paper market may still trend under pressure in H2 of April
From the perspective of demand, April is still the demand off-season for the corrugated paper market. Demand is expected to be weak in the subsequent market, as orders from end users may be relatively limited, and downstream players may be inactive in buying. From the perspective of supply, supply is expected to be relatively ample in H2 of April. Although some paper mills have announced shutdown and maintenance plans, the scale is not large, which has a limited impact on the market. In the absence of high enthusiasm from the downstream players to purchase, paper mill inventories are expected to remain high. In addition, as the May Day holiday approaches, paper mills are more likely to offer holiday discounts before the holiday, aggravating the bearish sentiment in the market.
Overall, the tug-of-war between sellers and buyers continues amid limited demand and higher supply pressure, aggravating the bearish sentiment in the market. It is expected that the corrugated paper market will continue to trend under pressure, with the average price at a relatively weak level. However, some paper mills with low prices may hold prices stable.
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