Ivory Board Market May Remain Bullish in September
Introduction: After experiencing a continuous market uptrend in August, the traditional autumn peak season also approaches, and the ivory board market may remain bullish in the following month. Recently, the order status at ivory board mills has been decent, and they post price increase notices. In addition to the gradual demand recovery, the ivory board market is most likely to rise in September with mostly favorable factors.
As of September 5, the average market price of ivory board was RMB 4,520/mt, up 6.10% M-O-M. The price increase in the market is led by price hike attempts of ivory board mills, and downstream restocking activities also provide positive support. This article will comb the bullish and negative factors that affect the market situation to assess whether the ivory board market uptrend will continue.
Bullish factors:
In terms of macro environment and policies, the authority recently released policy measures aiming to promote consumption and stabilize the economy, and the overall economic performance is showing a decent trend of recovery. Therefore, the paper industry's performance may continue to improve.
On the demand side, the ivory board market will enter a traditional autumn demand peak season in September, and the industry order status may see seasonal recovery. New orders are placed before the Mid-Autumn and National Day holidays, and with more active online promotions as well as the peak season of pharmaceutical packaging, the ivory board demand is expected to rise constantly.
As for inventory, the ivory board production has been stable lately, but due to active downstream restocking activities, the ivory board producer inventory dropped apparently. Some players are already seeing low inventory. Under tight production schedules, large-sized producers planned to raise prices continuously in September by RMB 200/mt, boosting market sentiment and lending support to resale prices at downstream distributors.
In terms of cost, the recent pulp price fluctuations have led to a rebound in production costs, strengthening the cost drive. But despite that ivory board prices are also raised, the theoretical industry gross profit is still meager. Therefore, producers may continuously attempt to raise prices under cost and profit pressure.
As seen from the seasonal pattern over the past 10 years, the ivory board market is generally in an uptrend in September, with a 60% chance for price hikes. Due to the apparent price drop in H1 of 2023, the demand recovery in H2 may prompt the seasonal uptrend in the market.
Bearish factors:
On the supply side, the operating rates of ivory board mills ramped up in general given rising prices and better demand, and the market supply is expected to go up. Ivory board mills have no maintenance plans announced, and some swing units may shift towards ivory board production as well. Thus, with rising domestic production, the supply hike may offset the boost from demand recovery.
As seen from inventory in the distribution channels, downstream distributors and packaging plants have restocked recently to various degrees, and the downstream inventory accumulation may have bearish influence on the market trend.
In terms of market sentiment, some market players still hold a cautious sentiment. The demand increase has been limited recently, and there are uncertainties about whether the demand recovery will persist. Besides, the stimulation from constant price hikes may overdraft part of the market demand, and the volumes of future orders may be diluted. In the meantime, the start-up of a 1,000kt/a new ivory board line in Jiangsu is scheduled for October, and due to the anticipated new capacity release, downstream buyers tend to take up a more cautious stance.
On the whole, the prospect of the ivory board market in September is mixed in general, but the market is more likely to rise with more bullish factors. Ivory board mills reflect no sales pressure so far, and distributors are also determined to raise prices to reverse previous operating losses. But the implementation of price hikes may be determined by the acceptance of downstream buyers. Some had stocked up recently, and the inventory in distribution channels may restrict ivory board price hikes.
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