Nov Tissue Market Outlook
Intro: In October, the tissue market maintained a slight bearish trend affected by falling pulp prices and slower tissue sales. The market demand is expected to soften further as downstream distributors show insufficient purchasing interest. In addition to falling pulp prices, the tissue market may continue to drop.
As of late October, the average tissue price fell by 0.81% from that in late September to RMB 6,300/mt. Due to shirt maintenance at downstream converting plants, below-expectation new orders from e-commerce channels and the influence of newly added tissue capacity, some tissue mills offered discounts of RMB 100-200/mt to stimulate sales, which dragged down the market price. In mid-October, prices of some wood pulp tissue also dropped by RMB 100/mt, driving the market price further downward. In late October, new orders from e-commerce channels improved slightly, but the demand support was still limited. In addition to the falling pulp price, the tissue market trend stayed bearish.
As seen by different regions, the wood pulp tissue jumbo roll price in Hebei was RMB 6,150/mt as of October 30, down 1.60% MoM, mostly due to competition from tissue resources inflow from other nearby regions. The wood pulp tissue jumbo roll price in Shandong was RMB 6,250/mt, down 1.57% MoM. As sales decelerated, tissue mills lowered prices to boost sales. The bamboo pulp tissue jumbo roll price in Southwest China was RMB 5,750/mt, flat MoM, mainly due to production curtailments at local players. The cane pulp tissue price in Guangxi was RMB 5,750/mt, flat MoM due to limited supply, but the local wood pulp tissue jumbo roll price fell by RMB 100/mt.
For the tissue market in November, it is advised to pay attention to the following aspects:
Production: Despite the supplement from cheaper Chinese-made wood pulp, tissue mills’ profitability fails to improve as tissue prices remain bearish. Low gross profit rates will continue to disincentivize production at small and medium-sized tissue mills. Besides, due to potential capacity expansion in November, the anticipated production drop from lowering the operating rate will require further observation. In general, the shrinking supply may impose a bullish influence on tissue prices.
Inventory: In October, the tissue enterprise inventory edged up. According to SCI, the enterprise inventory days have increased slightly by 0.33% compared to that in September, but the current enterprise inventory is still above the five-year historical average level. As market demand decelerates in November, further inventory accumulation may take place at tissue mills, which will create a bearish influence on tissue prices.
Demand: In November, downstream converters may stock up slightly after the orders for the Double 11 shopping fest are delivered, but the market demand still tends to soften as the market enters an off-season, and the demand factor will mainly be bearish.
Cost: The wood pulp import volume in November is expected to see 10% MoM increases due to better import purchases after August. Besides, around 2.25 million tons/a new pulp capacity is scheduled for start-ups between late October and November, which will intensify market competition and destabilize pulp prices. Therefore, the bearish pulp price will likely project a negative influence on tissue prices.
In conclusion, softening market demand and cost support both have bearish influences on tissue prices, while the supply may narrow. However, due to capacity expansion, the support from the supply factor is expected to be minor. Thus, the tissue market will most likely maintain a bearish trajectory in November.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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