P&W Paper Price Hikes Encounter Obstacles from Sluggish Demand
Intro: In late July, P & W paper mills announced price increase notices scheduled for August affected by high production costs. However, the market demand and trading continued to be sloppy, and price hikes were hardly implemented.
P&W paper price trends varied under sluggish demand and high costs
Paper mills have been posting price increase notices since June, and the implementation of uncoated woodfree paper price hikes was passable during the previous stage supported by publishers’ orders. However, the coated paper demand was comparatively sloppier, and the price trended downwards from late July.
Paper mills announced another round of price increase notices at the end of July, planning to raise the price by RMB 200/mt. But the purchasing appetites of downstream players diminished notably after the price hike, and the implementation encountered obstacles. Thus, most paper mills held stable offers, and the market price remained stable in spite of the cautious and pessimistic market sentiment.
According to SCI, as of August 10, the uncoated woodfree paper market average price was RMB 6,275/mt, up RMB 62.5/mt or 1.01% from early July. The average coated paper price was RMB 5,390/mt, down RMB 140/mt or 2.53% M-O-M.
Demand becomes increasingly sloppy: The P & W paper market is in a traditional bear season, and publisher’s orders during the delayed peak season gradually diminish, and orders from other buyers continued to be tepid. As sales start to drop, the market price lacks upward momentum, and operating losses are still common within the industry. Downstream players struggle to make a profit and are less willing to restock, putting heavier inventory pressure on paper mills.
Costs to fluctuate at highs: The high import offers may continue to support the pulp spot market, squeezing the profitability of paper mills. Thus, most of them are determined to hold the price stable. As of August 10. The theoretical gross profit rate of uncoated woodfree paper mills was -8.61%, down 10.89% Y-O-Y, and that of coated paper was -22.61%, down 27% Y-O-Y.
In conclusion, affected by high costs, paper mills will continue to hold the price firmly. But as the market demand may hardly pick up, downstream players will operate cautiously and purchase less, leading to inventory accumulation. Under the pressure of cost and inventory, more market-related downtimes and production swings are expected. SCI reckons that in the short term, the P & W paper market will continue to rebalance, and the market may suffer higher downward pressure as some players start to recoup funds.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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