Ivory Board Market Will Likely Bottom Out in H2 2024
Intro: In H1 2024, the ivory board market mainly headed down. Although downstream demand recovered somewhat, the supply increased simultaneously. Thus, the market oversupply and intensified competition are major factors pining the ivory board market. In H2 of the year, ivory board mills will mainly attempt to raise prices under cost pressure. In addition to better demand seasonality and holiday-related consumption in Q3, the ivory board market may rebound slightly.
Ivory board market dropped to a historical low in H1 2024
The ivory board market in H1 2024 mainly went down, which deviated slightly from SCI’s forecast in the 2023-2024 China Duplex Board and Ivory Board Market Annual Report due to high supply pressure and sloppy demand recovery. In H1 2024, the average ivory board market price was RMB 4,596/mt, down 4.13% Y-O-Y. As of late June, the ivory board market price closed at RMB 4,360/mt, down 8.98% from that at the start of the year. The highest price appeared in early January at RMB 4,790/mt, while the lowest price was RMB 4,350/mt in late May and early June.
In specific, from January to March, the ivory board market remained range-bound with limited price adjustments. Because some distributors promoted sales before the Chinese New Year holiday attempting to recoup cash, the ivory board market ticked down in January. However, affected by rising material costs and anticipated demand recovery, ivory board mills actively raised prices in March, bolstering the market price slightly. However, as the market demand fell below expectations, and some players offered low prices to destock, the ivory board market started to head down soon in mid-March. As market competition intensified, participants’ bearish sentiment fermented. In addition to the influence of the demand slack season, the ivory board market fell quickly in April and hovered at the bottom in May and June. Because the market price fell below the marginal cost line, ivory board mills started to shut down or produce other paper grades and announced price hikes in June to alleviate the downtrend, but the market generally lacked upward momentum.
The ivory board supply and demand both increased. Although the supply increase was lower than that in demand, the market was still apparently oversupplied. Besides, the bullish pulp prices failed to provide sufficient support to the ivory board market, and the market sentiment was generally bearish.
Ivory board supply increased as production ramped up
SCI estimates that the total ivory board supply will be 7.51 million tons in H1 2024, up 13.23% Y-O-Y. In H1 2024, the ivory board (commodity-grade) capacity increased by 1.6 million ton/a compared to that in H1 2023, laying the foundation for notable output growth in 2024. The ivory board output in H1 2024 was 5.69 million tons, up 18.70% Y-O-Y. Due to relatively lower opening inventory and limited imports, the increase in market supply was mainly driven by higher domestic production. The abundant market supply put downward pressure on the market. Ivory board mills lowered prices to compete for market share and ease inventory pressure. Some players lowered ex-works prices by RMB 600/mt in April, leading to a notable decline in market prices.
In H1 2024, the total ivory board market demand is estimated to be 5.78 million tons, up 19.80%. With the improvement of the consumption environment in China, the fast-moving consumer goods sector saw a rapid rebound, boosting the consumption of ivory board. In addition, the basis consumption was relatively low last year, so the consumption is expected to rise by 19.04% Y-O-Y in H1 2024. However, from a M-O-M perspective, it went down by 12.81% compared to that in H2 2023, reflecting insufficient organic recovery. Besides, downstream players’ sentiment turned cautious and purchased in small batches to avoid risks. The ivory board exports improved in Q4 2023 and maintained a stable trend in H1 2024, but the export market offered little support to the domestic ivory board price.
On the whole, in H1 2024, the ivory board market supply-demand balance narrowed by 3.33% Y-O-Y but the market was still oversupplied. The release of new ivory board capacity will have certain impacts on the market supply structure. Due to reduced market concentration and lower synergy between market players, the competition continued to intensify and weighed on the market price.
Pulp prices to lend weaker support to the ivory board market
In H1 2024, the main feedstock pulp price trends varied. Due to overall lower CMP and SWP average prices, the ivory board total cost went down by 3.53% Y-O-Y. However, the ivory board market saw more apparent drops in prices than in costs, and the gross profit rate continued to decrease. SCI’s data suggests that the average ivory board gross profit rate was -7.98%, down 1.80% Y-O-Y. Due to the constant decline in operating profits, some producers have started to shut down or engage in production swing since mid-April, but as the ivory board overcapacity is severe, production cuts and swings have limited influence.
In H2 2024, the ivory board demand may see a seasonal increase, and the market price may be stable-to-rising. However, the industry overcapacity and anticipated capacity release may set a ceiling to the uptrend.
On the demand side, domestic consumption may start to see marginal recovery, and order status may improve. Besides, more frequent festivals and holidays in H2 such as Mid-Autumn, National Day will boost ivory board consumption. As for exports, due to excess supply in China and exchange rate fluctuations, ivory board mills may actively attempt to export, but due to potential economic deceleration overseas, the growth in exports may be limited. Therefore, domestic consumption recovery will still be key to ivory board market. It is estimated that the market demand will be 6.51 million tons in H2 2024, up 12.44% compared to that in H1.
As seen from the cost factor, main feedstock pulp prices may go down under pressure but will likely be at a high level. With the release of new pulp capacity in H2, the pulp price is likely to see more apparent decreases, but due to firm import offers, exchange rate fluctuations and uncertainties in the futures market, the pulp price drop may be limited. Considering the poor profitability of the ivory board industry, players are eager to raise prices. The cost factor may still lend some bottom support to the ivory board market.
On the supply side, with the release of new capacity, the ivory board market will continue to be oversupplied. Bolstered by anticipated demand recovery, some ivory board lines under downtimes or production swings may restart ivory board production, and the market supply is expected to be loose. Besides, a 1.2 million ton/a ivory board line is expected to be launched in South China during Q4, and the producer may offer low prices to compete for market share, creating heavier competitive pressure. Besides, the market overcapacity will affect ivory board imports. It is estimated that the total ivory board market supply will be 8.14 million tons in H2 2024, up 8.10% Y-O-Y, and the rising supply pressure will continue to restrict ivory board prices.
As seen from the seasonal pattern, the ivory board price shows certain seasonal characteristics and is more inclined to rise from February to March and from September to November. In January and from April to August, the ivory board price is more likely to decrease. The ivory board market in H2 2024 is likely to follow the traditional seasonality. Since the ivory board price has dropped to a historical low, and ivory board mills plan to raise prices in July, the price hike may appear earlier than usual in H2 2024. Besides, it is advised to pay attention to the influence of new capacity release.
On the whole, the market supply-demand conditions may improve somewhat in H2 2024, lending bottom support and a phase of price rebound. However, near the end of the year, the ivory board price may edge down as players start end-year promotions and the demand weakens. Besides, the release of new ivory board capacity will also hamper the ivory board price. In general, SCI still holds the trend forecast in the 2023-2024 China Duplex Board and Ivory Board Market Annual Report. The ivory board market is likely to rise first and then drop within the range of RMB 4,350-4,750/mt. The highest price may appear in September or October, while the lowest price may appear in July.
Risk disclosure: overseas economic decline exceeds expectations, unexpected supply disruptions, uncertainties in demand recovery, new capacity expansion, poor market confidence, etc.
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