Container Board Prices Fluctuated as Supply-Demand Contradiction Persisted
Introduction At present, leading paper mills of corrugated paper and cardboard paper canceled the discount of RMB 50-100/mt after the Dragon Boat Festival, and the market held wait-and-see attitude. In June, the newly added capacity was released, and the recovery of demand was not obvious. The contradiction between supply and demand still existed, and the gross margin was low. Thus, it is expected that prices of corrugated paper and cardboard paper will fluctuate mainly.
On June 1, leading paper mills of corrugated paper and cardboard paper offered a time-limited discount from RMB 50/mt to RMB 100/mt during the Dragon Boat Festival, and these mills canceled the discount on June 7. A few medium and small-sized paper mills followed the price drop, and offered a discount of RMB 50/mt to stimulate purchases. However, the implementation was moderate. Most paper mills held wait-and-see attitudes and were more inclined to negotiate by order.
The contradiction between supply and demand still existed
The recovery of market demand in May was not as expected, and the destocking process was moderate at paper mills, so the inventory pressure was heavy at the beginning of June. According to SCI, in early June, the companies’ corrugated paper inventory increased 32.08% Y-O-Y, and cardboard paper inventory grew 25.89% Y-O-Y. About the newly added capacity, corrugated paper has increased 250 kt/a and cardboard paper has increased 600 kt/a since May. The capacity released gradually in June, and the supply pressure was higher. As for the downstream demand, the online e-commerce festival had positive effect on end consumption. Orders at downstream packaging mills were fair, and some mills bought the dips. Therefore, the purchasing of paper did not last long, and the contradiction between supply and demand in corrugated paper and cardboard paper markets still existed.
Insufficient cost support and low gross profit
The price of OCC has fell first and then slightly rebounded since June. According to SCI, up to June 9, China’s domestic average price of OCC was RMB 2,319/mt, down 0.43% compared with the price at the end of May, and leading to insufficient cost support to the corrugated paper and cardboard paper markets. As seen from the table, the gross margin of corrugated paper has been low in June. Most paper mills reflected that the corrugated paper prices had fallen near the cost line and may not drop further.
According to SCI, prices of corrugated paper and cardboard paper will mainly fluctuate within a narrow range in the middle and late-June. Firstly, the pressure of supply still exists due to the destocking at paper mills and the release of newly added capacity. As the weather turns hot, the end demand for soft drinks is expected to be better, and it will lend support for corrugated paper and cardboard paper consumption. However, the contradiction between supply and demand still exist and the grow of demand is limited due to the tepid industry atmosphere. Secondly, the industry gross profit has been low at present, so it is less likely to have price declines for paper. The price of upstream feedstock moves sideways, and the support of cost is limited. Finally, supply and demand are rebalancing at present, and downstream packaging plants are still cautious about purchasing. Overall, prices of corrugated paper and cardboard paper will mainly fluctuate within the narrow range.
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