H1, 2019 Coated Paper Market Review and Outlook

In H1 of 2019, the coated paper market first decreased marginally, then fluctuated upwards and finally trend flat. In January, the coated paper market stabilized after inching down, and market transactions were flat around the Spring Festival holiday. Paper mills targeted high prices in March, and transactions turned active. The coated paper market price stabilized after fluctuating upwards in Q2. The market supply tightened in April, so the price increase at paper mills was successfully implemented. Distributors soon followed suit and so did the market price. In H1 of May, the coated paper market price went up marginally. The market turned lukewarm in June, and transactions were mediocre.

Imported wood pulp prices declined after increasing

In H1 2019, the wood pulp market price first increased and then started to fall. In Q2, the demand was weak, and the pulp price fluctuated downwards. The wood pulp import price was adjusted frequently within one month. In June, the import price of SWP and HWP decreased by $60/mt and $190/mt respectively from early 2019. The wood pulp spot price moved in tandem with import price. The price increase in January and February was caused by firm wood pulp import price. Besides, downstream paper mills replenished their feedstock before the Spring Festival holidays, driving up wood pulp spot price. However, the wood pulp price started to fall in March ahead of the slack season due to high inventory in major regions. From March to June, the SWP and HWP prices decreased by RMB 1,000-1,550/mt and RMB 1,200-1,850/mt respectively and fell back to the level in 2016 before the price spikes.

Gross Profit Rate Increased Constantly

The gross profit rate of coated paper kept growing in H1 of 2019, affected by two major factors. On the one hand, the coated paper price was stable-to-increasing. Paper mills targeted higher prices as downstream participants were willing to purchase; On the other hand, the feedstock wood pulp price went down noticeably, mainly resulting in the coated paper profit increase.

The Import Volume Decreased Noticeably While the Export Volume Edged Up

The data from China Customs suggests China’s coated paper import volume from January to May was 88.34kt, down 38.52% Y-O-Y; the coated paper export volume was 510.59kt, up 7.15% Y-O-Y. 

Outlook

Cost: The imported wood pulp spot price may first decrease and then increase, and it may recover in Q4.

Supply: Participants are advised to pay attention to the operating rate at paper mills.

Demand: The tender for next spring’s text book printing will start in late August, signaling the traditional boom season in cultural paper industry, and the demand will improve.

The market may remain weak in July, and the transactions were made agilely. The coated paper market may trend sideways in H1 August, and in H2, paper mills may post price increase notices collectively in an attempt to push up the coated paper price. The paper industry will prosper in September and October. The coated paper price is likely to increase depending on the upstream pulp price and the downstream buying appetite. In November and December, the coated paper price will stabilize and mainly trend sideways as the demand from publishers will cease.

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