Ivory Board Market to First Rise and Then Decrease in Q2
Into: In Q1 2022, the ivory board market mainly trended upwards. The market faces more bearish factors including the industry slack season and new capacity expansion. But at the same time, the support from the cost factor and decent export orders may remain valid. As bullish and bearish factors tussle, the ivory board market is expected to first rise and then decline.
In Q1 of 2022, the ivory board market mainly trended upwards. According to SCI, the national average ivory board price in Q1 was RMB 6,116/mt, up 2% from Q4 of 2021 but down 27% Y-O-Y. Therein, the low point appeared in January at RMB 5,871/mt, while the high point appeared in mid-March at RMB 6,390/mt, with a gap of RMB 519/mt or 8.84%.
Ivory board price hikes mainly appeared from mid-February to mid-March
So far in 2022, the ivory board market firstly trended sideways, and then started to rose before stabilizing in late March. In January, downstream printers and packaging companies rushed to fulfill orders before the Spring Festival holiday, and new orders were limited. Besides, players prepared for the holiday, and the market mainly trended sideways. In early February, due to the long holiday, the market saw minor changes. In H2 of February, the market became bullish after the holiday. As prices of feedstock and additives started to rise, ivory board mills raised the price by RMB 200-300/mt. Because the inventory in the distribution channel was not high, distributors also followed the price hike. In March, ivory board mills continued to raise the price by RMB 200/mt, and due to rising logistics freight, distributors followed suit. However, due to logistics restraints in H2, the ivory board sales slowed down, and the price stabilized.
Cost increase has been the key driver behind the ivory board price hike
In Q1, the price of feedstock pulp rose by a great margin, pushing up the production costs. As ivory board mills were determined to raise the price, the market sentiment received support. According to SCI, in Q1 of 2022, the SWP, HWP and CMP average prices were RMB 6,568.4/mt, RMB 5,597.15/mt and RMB 4,921.53/mt, up 19.54%, 20.28% and 26.84% respectively from Q4 of 2021 but down 2.43%, up 5.03% and 11.42% respectively Y-O-Y. The drastic pulp price rise affected the gross profit rate of the ivory board. In Q1, the average industry gross profit rate was 12.65%, down 11.89% from Q1 of 2021 and 26.53% Y-O-Y.
Increase in exports alleviated rising supply pressure effectively
According to SCI, the ivory board output in Q1 2022 was around 2,580kt, up 410kt or 19% Q-O-Q and 7% Y-O-Y. Few ivory board mills shut down for maintenance, and the newly added capacity in Q4 of 2021 saw higher operating rates. Therefore, the overall ivory board industry output increased. As ivory board mills received plentiful export orders, they managed to maintain a reasonable inventory level. In addition to the successful supply management in the domestic market, the inventory in the distribution channels rose slowly, supporting the ivory board price. As seen from the export data, during the first 2 months of 2022, the combined ivory board and duplex board export volume was 550kt, and it is expected to reach 850kt in Q1, up 170kt Q-O-Q and 85% Y0I0Y. The rising ivory board export volume can effectively counterbalance the supply pressure brought by capacity expansion and support the ivory board market price.
In Q2, ivory board market players will face several bearish factors such as the industry slack season, tepid domestic demand, new capacity expansion and logistics restraints. But supported by rising feedstock prices and fairish export orders, paper mills may continuously attempt to raise the price. Thus, it is estimated that the ivory board market will first rise and then decrease. In specific, ivory board mills have announced an RMB 300/mt price hike for April orders, but sellers in the market may offer low prices to recoup funds in late April. In May and June, an estimated 300kt/a capacity is expected to be launched in Shandong, and the market demand may rebound slightly as logistics restraints were lifted. However, this may hardly reverse the market trend, and the market still faces downward pressure.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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