Duplex Board Price Hikes to Face Obstacles in Jun
Introduction: The duplex board market declined first and rebounded in May. Influenced by tariff easing in mid-to-late May, paper mills attempted price hikes, with cumulative increases of RMB 50-150/mt. However, due to insufficient overall market demand and ongoing supply-demand imbalance, paper price hikes faced obstacles. It is expected that the market will still face downward pressure in June.
In May, the duplex board market dropped first and then rose, and the market was in a wait-and-see atmosphere. In early May, several paper mills of the leading player offered holiday-limited discounts of RMB 30-50/mt, and paper mills continued to lower prices by RMB 30-200/mt after the holiday. In mid-May, as the tariff dispute eased, the market sentiment improved somewhat, and paper mills started to push for price hikes, cumulatively by RMB 50-150/mt. According to SCI, the A-grade grey back duplex board monthly average price in May was RMB 3,173/mt, down 4.80% MoM and 10.14% YoY.
More maintenance downtimes under inventory pressure
Duplex board mills showed weaker operating enthusiasm in May, with more maintenance downtimes arranged in late April and early May, the industry’s operating rate dropped apparently. In mid and late May, paper mills gradually resumed production, and the market supply increased. Some paper mills cross-produced other grades such as coated kraft liner and white-top liner. SCI data suggests the duplex board operating rate in May dropped by 2.28pp MoM and 0.87pp YoY, while the output went down by 0.41% MoM but up 0.59% YoY.
The duplex board inventory at producers first increased and then declined, but the inventory was high in general. In H1 of May, sales were slow at paper mills, and some went under maintenance to ease inventory pressure. In H2 of the month, stimulated by price hikes, some traders started to replenish stock, which helped alleviate inventory pressure on paper mills. However, because of insufficient end demand, the inventory reduction was mild. According to SCI, the duplex board inventory days at producers still increased to around 26 days in May, up 2.14% MoM.
Duplex board price is expected to soften after rising in June
During the traditional demand slack season, the market supply-demand imbalance may be obvious. On the demand side, during the consumption slack season in June, limited recovery is expected, and traders tend to maintain cautious sentiment. It is estimated that the total market demand will increase marginally by 0.76%. On the supply side, most paper mills are expected to maintain stable production, and the paper inventory will likely remain high. The monthly market supply is expected to rise by 2.04% MoM, which will keep the supply pressure. In general, the supply growth in June may be faster than that in demand, and the supply-demand gap may expand from 1,335kt to 1,370kt.
The waste paper market may drop narrowly, lending insufficient cost support. Around the university entrance examination in June, a spike in scrap paper supply is expected, but the OCC supply may hover at lows. In the meantime, the waste paper price is still restricted by the consumption slack season. Overall, the waste paper price will likely edge down in June, lending limited cost support to packaging paper prices.
Paper mills are still eager to raise prices, but the market sentiment has turned wait-and-see. Some paper mills announced price hikes planned on June 5, but some postponed the hikes to June 9 as downstream traders and end-users adopted a more cautious sentiment. So further price hikes may become more challenging.
In conclusion, the duplex board market may remain oversupplied in June with restrictions to further price rises. It is estimated that the market price will rise first as pushed by paper mills but may drop later under market pressure. SCI estimates the average market price of A-grade 250g duplex board may hover within the range of RMB 3,185-3,205/mt.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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