Duplex Board Prices Likely to Inch Up in H2 of June
Intro: June is the traditional consumption slack season for the duplex board market, and end demand is insufficient. However, most paper mills announced price increase notices in H1 of the month, while a few paper mills and downstream players stayed on the sidelines. In H2 of June, end demand is likely to remain limited, but paper mills still actively push for price hikes, and distributors may slightly restock. So, it is predicted that duplex board prices may continue to inch up.
In early June, some paper mills adjusted the price discount in May to a price reduction. A few paper mills offered discounts of RMB 200/mt for duplex board in ultra-long-term inventory, leading to a slight decline in market transaction prices. On June 6, large-sized paper mills announced the price increase notice scheduled on June 12, and surrounding paper mills followed suit. But a few mills still cautiously held a wait-and-see sentiment and showed no price adjustment intention. As of June 14, some mills have pushed for two rounds of price hikes, up RMB 50-100/mt accumulatively. Nevertheless, the price hike implementation was below expectations due to weak market demand, According to SCI, as of June 14, the daily average tax-inclusive ex-works price of A-grade 250g gray back duplex board was RMB 3,526.25/mt, up 0.53% from the early June.
Paper mills reduced production and destock and were eager to raise prices.
In June, end demand remains insufficient, and downstream players are inactive in buying. Sales at paper mills are slow, and they tend to reduce production and destock. In H1 of June, paper mills lacked production enthusiasm, and a few mills shut down for maintenance or switched to produce other paper. Therein, a few large-sized paper mills in South China shut down for about 7-day maintenance from the end of May and shut down again for 7 days from June 11. Large-sized paper mills in North China shut down for 3 days on June 7. Large-sized paper mills in Southwest China mainly produce ivory board, and a few mills shut down for maintenance from June 10 to June 24. Some lines in East China also have maintenance schedules. Overall, the output of paper mills showed a declining trend. According to SCI, as of June 13, the weekly output of duplex board dropped by 4.85% from the end of May.
As seen from inventory, inventory at paper mills showed a trend of first rising and declining in June. In early June, paper mills faced sales pressure, and inventory pressure kept climbing. With paper mills’ maintenance downtimes and production reduction, a few grades saw a supply crunch. Besides, influenced by paper mills’ price hikes, distributors started to slightly restock, alleviating paper mills’ inventory pressure somewhat. However, overall market demand was still insufficient, and downstream players were cautious in restocking, so the destocking degree at paper mills was minor. According to SCI, as of June 13, the enterprise inventory decreased by 1.30% W-O-W and by 0.63% from late May. The inventory days were still around 21 days.
Duplex board prices are likely to inch up in H2 of June.
As seen from demand, market demand can hardly improve in H2 of June, and end orders may be limited. Printing and packaging plants may still restock on a need-to basis. Due to paper mills’ price hike enthusiasm, distributors become more active in restocking, so paper mills’ inventory gradually transfers to distributors. But downstream demand is limited, and overall demand in June is predicted to drop by 1.43% M-O-M.
As seen from supply, there will probably be more maintenance downtime at paper mills, and market spot supply may decline. In addition, amid paper mills’ push for price hikes, their inventory may show a downtrend. It is predicted that market supply will decrease by 0.70% in June M-O-M. Overall, in June, market supply and demand will both decline, but the supply-demand gap may narrow from 1,064kt to 1,060kt M-O-M due to the demand slack season.
As for cost, OCC market prices may weaken after rises in H2 of June, and old book paper prices are expected to drop, so the overall waste paper prices may show a downtrend, giving no cost support to the duplex board market. As for sentiment, ivory board prices linger at lows and may hardly continue to drop, so low-priced sales may decrease, which may push up duplex board prices. However, during the traditional slack season, most players may still hold a wait-and-see sentiment.
In general, the market supply-demand imbalance may slightly improve in H2 of June, and paper mills may still attempt to push for price hikes, so duplex board market prices may continue to inch up, but the growth may be limited due to insufficient demand. SCI predicts that A-grade 150g duplex board market prices may be in the range of RMB 3,520-RMB 3,550/mt in H2 of June.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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