Main Concerns on Coated Paper Market in H2 of March
Intro: In H1 of March, China’s coated paper market prices leveled off after a rapid increase in late February. Looking ahead to the H2 of March, although paper mills continue to post price increase notices, downstream players have certain rigid restocking demand, they show sluggish acceptance of high prices, which may restrict the price hike to some extent.
Coated paper prices stabilized in H1 of March
Coated paper market prices gradually stabilized in H1 of March. First, paper mills actively pushed for price hikes under high-cost pressure, underpinning players’ confidence. Second, distributors attempted to follow the price hike, but downstream players showed limited acceptance of high prices. Some high prices were not effectively implemented for lack of insufficient purchases. As of March 19, the market average price of 157g coated paper was RMB 5,840/mt, unchanged from the end of February. The price leveled off after a rise in late February.
The main concerns of the subsequent coated paper market are as follows:
From the perspective of cost, the spot prices of imported wood pulp trended up in H1 of March. As of March 18, the average prices of SWP, HWP and CMP were RMB 6,121/mt, RMB 5,448/mt, and RMB 4,163/mt respectively, up 3.13%, 4.01%, and 0.87% from late February. The cost factor provided apparent support for the coated paper price. Looking ahead to the future market, as import offers rise and the port strike in Finland may continue in the short term, the pulp market will be continuously underpinned. The high pulp prices will continue to boost coated paper mills’ confidence to raise prices.
From the perspective of demand, the coated paper enterprise inventory slightly decreased in H1 of March, reflecting a recovery in demand. According to SCI, as of March 14, the enterprise inventory days of coated paper declined by 1.36% from late February. Tenders for publications have been successively held in some regions in North China and South China. Orders from society buyers were sluggish but saw staged growth, giving support to the market overall. In H2 of March, some publishers’ orders may be slowly released, but due to downstream players’ mediocre acceptance of price rises and their habit of long-term restocking, the increase in orders may be limited in the short run. So the push for some high prices may encounter resistance.
From the perspective of supply, coated paper mills have no new projects for the short run and mainly arrange production based on original lines. Due to expected growth in publication demand, paper mills may maintain relatively stable production without a production switch or shut. It is predicted that the operating rate of the coated paper industry may hover around 60%-70%, and the supply may be abundant. Paper mills may mainly deliver orders, and the supply influence on paper prices may slightly diminish.
From the perspective of sentiment, market players hold a cautiously positive sentiment toward the future market, with small expectation divergence. Players holding a positive attitude reckon that paper mills have a clear intention to push for price hikes as they posted price increase notices by RMB 200/mt for April 1. In addition, high pulp prices will push up the paper prices. Players holding a cautious attitude reckon that downstream players purchase on a need-to basis, and the new order increment may be limited in the short run. Coupled with players’ cautious sentiment toward high prices, the paper price may be unable to maintain sustainable growth.
On the whole, despite some favorable cost and demand factors, downstream players are reluctant to accept the price rise. It is predicted that some low-end prices may tick up, but the actual fluctuation is still affected by downstream purchases and acceptance of high prices.
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