Uncoated Woodfree Paper Market Picks Up As Paper Mills Actively Implement Price Hikes
In Mid-September, large-sized paper mills posted price increase notices, planning to raise the uncoated woodfree paper price by RMB 100-200/mt due to constantly rising costs. The price hike is implemented actively, in addition to the peak season prospect, the market price starts to tick up.
According to SCI, as of September 21, the market average uncoated woodfree paper price is RMB 6,362.5/mt, up RMB 187.5/mt or 3.04% from late August, and 19.48% Y-O-Y. Under constant cost pressure and low profits, paper mills are determined to raise the price. Besides, the market expects better demand with publishers’ orders during the peak season, which has supported the price hike.
Pulp prices remain firm, weighing on paper mills’ profits
The pulp prices have been hovering at highs since the start of the year, squeezing the profitability of paper mills. Paper mills have previously been forced to shut down or switch production because of poor profitability. After announcing the price hike plans in mid-September, paper mills are active and well-coordinated in implementation.
According to SCI, as of September 15, the major feedstock cost of uncoated woodfree paper production has reached RMB 5,329.4/mt, up RMB 1,537.5/mt or 40.55% Y-O-Y. The theoretical industry gross profit is below the breakeven point at -7.34%, down 7.96% Y-O-Y.
Demand picks up with support from bullish market sentiment
Currently, orders slightly improve from previous stages, and the inventory at distributors is relatively low. Thus, the price hike encounters limited resistance. On the other hand, publishers’ orders are expected to follow up from September to November. Participants’ sentiment is boosted to some extent, enabling the materialization of the price hike.
Outlook
Under constant highcost pressure, the peak season demand from publishers will be the major supporting factor for the uncoated woodfree paper market. In addition to maintenance downtimes, production swings and capacity relocation, the supply pressure s slightly eased. On the whole, the stalemate in market supply and demand is alleviated slightly, and the inventory in distribution channels is at a medium-to-low level. However, buyers are still cautious about restocking, and the actual demand recovery will still be the key factor that determines future price adjustments.
SCI reckons that the high pulp price will provide cost support for the uncoated woodfree paper market. Buyers tend to buy ups and may start to restock before the National Day holiday. Therefore, the uncoated woodfree paper market may possibly go up.
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