Uncoated Woodfree Paper Market Went Up Amid Traditional Peak Season
In Q1 of 2022, the uncoated woodfree paper price went upwards bolstered by cost and seasonal demand hike from publishers, however, due to the moderate demand overall, the market has started to trend sideways.
In Q1, supported by rising feedstock costs, seasonal demand hikes from publishers’ orders, and market uncertainties, the uncoated woodfree paper market fluctuated upwards. However, due to sloppy demand from society buyers, the price hike was apparently lower than that in 2021. According to SCI, the average uncoated woodfree paper price in Q1, 2022 was RMB 5,879.79/mt, up 6.64% M-O-M but down 8.68% Y-O-Y. The highest price appeared in late March, while the lowest price appeared in January with a price spread of RMB 625/mt. As of March 31, the uncoated woodfree paper market price has risen by 10.91% from December 31, 2021.
Main market drivers for Q1:
Persisting cost support: In Q1 of 2022, affected by unexpected supply-side disruptions and market uncertainties, the imported wood pulp spot market price mainly fluctuated upwards. Under high-cost pressure, the gross profit rate of the printing and writing paper industry plunged to a sub-zero level. Therefore, paper mills actively attempted to raise the price. According to SCI, in Q1 2022 the average imported SWP spot market price was RMB 6,568.40/mt, up 19.54% Q-O-Q but down 2.43% Y-O-Y. The average HWP price was RMB 5,597.15/mt, up 20.28% Q-O-Q and 5.03% Y-O-Y.
The demand support was limited due to tepid demand from society buyers: During the traditional peak season of the printing and writing paper market in March, orders from publishers have increased, benefiting large-sized paper mills. Price hikes were constantly seen, and the market sentiment was boosted. Downstream buyers restocked adequately after the Spring Festival holiday, and paper mills actively implemented price hikes. However, the demand from society buyers had dropped notably due to weaker end-demand for exam reference books. In addition to market uncertainties and logistics restraints, the operating rates of printers went down. In the meantime, as distributors and downstream printers have purchased in previous stages, the purchasing activities cooled down, lending limited support to the uncoated woodfree paper price hikes.
Market oversupply started to appear: In Q1, the market operating rate was relatively stable, and the uncoated woodfree paper output was 2,250kt, up 8.17% Y-O-Y. Most medium and small-sized paper mills shut down for maintenance around the Spring Festival holiday, and large-sized paper mills operated normally. However, affected by tepid demand from society buyers and logistics restraints, the inventory at paper mills continued to climb in spite of occasional maintenance and production shifts, and the market supply pressure was apparent.
Participants’ sentiments tended to be cautious: The rapid price rises and falls had affected participants' sentiment, and they tended to be more cautious in face of a similar rapid price hike. In addition, the sloppy market demand also restricted the price hike. On top of that, the market uncertainties had a certain negative impact on the market sentiment. Therefore, most players held a cautious sentiment and followed the market trend.
Q2 market drivers
Demand: The demand was still supported by export orders, but the domestic demand hardly improve. As publishers’ orders start to diminish, the demand factor will turn increasing bearish.
Cost: The wood pulp prices are to fluctuate at highs in the short term, but the market may regress to the fundamentals in the future.
Supply: A new uncoated woodfree paper machine has been added at the end of Q1, and some paper mills in East China may shut down for maintenance in Q2, and the supply pressure may be alleviated slightly. However, the overall market oversupply may persist, and the inventory may remain high.
Market sentiment: Market players are less confident in future market development due to uncertainties and logistics restraints. Besides, the market orders continue to be sloppy, and the market sentiment is pessimistic overall.
Outlook:
The printing and writing paper market will still be in a traditional peak season, and orders from publishers will continue to lend demand support. In addition to the high wood pulp prices, the industry profit may remain low. Therefore, paper mills will continue to hold the price firmly. Some have announced maintenance schedules, and the supply pressure may be alleviated slightly. At the start of April, the uncoated woodfree paper price may edge up slightly, but it may start to soften in mid and late April due to waning demand and bearish sentiment. As publishers’ orders start to diminish in May and June, the demand factor will become increasingly bearish, and the uncoated woodfree paper market may face downward pressure.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
