Delays in Tissue Capacity Expansion in Q3 Due to Ineffective Price Hike
In Q3 2023, the newly added tissue capacity totaled 240kt/a, 25% lower compared to the same period last year and 41.89% lower compared to Q2. The Q-O-Q and Y-O-Y declines were mainly due to delays in the launch of planned capacity. As the tissue price may edge down, further delays are expected in Q4, and the Y-O-Y capacity growth rate may continue to drop.
The annual rate of tissue capacity expansion declined both Q-O-Q and Y-O-Y
In Q3 2023, the newly added tissue capacity totaled 240kt/a, down 25% Y-O-Y and 41.89% Q-O-Q. Therein, August saw the biggest expansion of around 125kt/a, while that in July was the smallest at only 50kt.a.
In terms of regional distribution, the newly added tissue capacity was mainly in Jiangxi, Liaoning, Anhui, Hubei, and Guangxi. Among them, Jiangxi has the biggest increase in capacity, accounting for 42%, mainly from integrated players. Liaoning ranks second with a share of 25%, mainly coming from the expansion project of a medium-sized player. Anhui ranked third with a 17% share from integrated capacity expansion. Hubei ranked fourth, accounting for 10% of the total. Guangxi ranked fifth with a 6% share, and the expansion was mainly from small-sized tissue mills.
As seen from tissue machines, both Chinese-made and imported ones were installed in Q3. Therein, 8 Chinese-made tissue machines were added, accounting for 75% of the total, and imported tissue machines made up the rest 25%.
The release of new capacity was delayed, and the industry operating rate increase Y-O-Y.
In Q3, the operating rate of tissue mills increased Y-O-Y during the traditional peak season mainly driven by tissue price hikes, downstream restocking demand and delays in capacity expansion. In specific, the highest tissue monthly operating rate appeared in September supported by downstream stock preparation before the Double 11 shopping fest. Tissue mills maintained decent production with plenty of new orders. The lowest operating rate appeared in August affected by the international spot game in Southwest China and continuous rainy weather.
Tissue price barely increased in Q3 restricted by abundant supply
In Q3, the average tissue market price was RMB 6,271/mt, down 1.40% Q-O-Q and 16.96% Y-O-Y. The highest price appeared in late September at RMB 6,513/mt, while the lowest one appeared in mid-July at RMB 6,150/mt. The gap between the highest and lowest prices was RMB 363/mt. The market supply was relatively loose in July and August, so the tissue price edged down. In September, due to constant hikes in the pulp price, the tissue market rose gradually driven by the cost factor.
The tissue market is expected to edge down in Q4, which may delay new capacity expansion
In October, the supply of finished tissue products was abundant, and the market consumed stock built previously. Converters showed less purchasing appetite, so the operating rate at tissue mills started to drop. But because of potential delays in new capacity expansion, the operating rate of the tissue industry may still be higher Y-O-Y in Q4.
As for tissue market price, because of falling pulp prices and weaker seasonal demand, the tissue market is more likely to edge down.
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