Packaging / Advertising & Office

According to the Huacheng Import and Export Data Observation Report, according to the latest shutdown plan released recently by Jiulong Paper Industry, the company's two major paper machines at its Quanzhou base will be shut down for maintenance starting this week. Based on the design capacity, it is expected to reduce the production of corrugated cardboard by 15000 tons. Prior to the issuance of the shutdown letter by Quanzhou Jiulong, Dongguan Jiulong and Chongqing Jiulong had already carried out rotation stoppages, and it is expected that the two bases will collectively reduce production by nearly 146000 tons in February and March.

Leading paper companies have taken measures to shut down production in response to the continuing decline in the price of packaging paper, mainly corrugated box paper, since 2023.

Xu Ling, an analyst at Zhuochuang Information, introduced to reporters that since this year, on the one hand, demand has recovered less than expected, with the impact of import policies superimposed, and the contradiction between supply and demand in the market has gradually become prominent. On the other hand, cost has also been declining. "From a price perspective, the price level of corrugated paper in 2023 is the lowest in the past five years." Xu Ling said that it is expected that the supply and demand of the corrugated paper market in 2023 will still be dominated by gaming.

Prices hit a five-year low

Since 2023, the packaging paper market has been "constantly falling", and the price of corrugated box board has continued to decline.

According to Huacheng Import and Export Data Observation, as of March 8, the market price of AA grade corrugated paper in China was 3084 yuan/ton, down 175 yuan/ton from the end of 2022, a year-on-year decrease of 18.24%, the lowest price in the past five years.

"The price trend of corrugated paper since this year is indeed different from previous years." Xu Ling said that from 2018 to early March 2023, the price trend of corrugated paper showed a stable and upward trend in other years from January to early March, especially after the Spring Festival, except for the slow recovery of demand in 2022, where the price of corrugated paper fluctuated and moved downward after a small increase.

"Generally, after the Spring Festival, most paper mills have price increase plans, on the one hand to boost market confidence, and on the other hand, the supply and demand relationship has slightly improved after the Spring Festival." Xu Ling introduced that due to the process of logistics recovery after the festival, there is often a temporary shortage of raw material waste paper, and there is a process of cost increase, which will also provide some support for the price of corrugated paper.

However, since this year, major enterprises in the industry have experienced relatively rare cases of both price and production reductions. For the reasons, industry insiders and analysts interviewed by reporters can be summarized in three points.

The first is the adjustment of import paper tariff policy. From January 1, 2023, the state began to implement zero tariffs on recycled cardboard and corrugated base paper. Affected by this, domestic import enthusiasm has improved. "The previous negative impact has remained on the policy side. Starting in late February, imported corrugated paper for new orders this year will gradually arrive in Hong Kong, and the game between domestic base paper and imported paper will become increasingly apparent." Xu Ling said that the previous policy impact has gradually shifted to the fundamentals, as reported by Huacheng Import and Export Data Observation.

The second is the slow recovery of demand. In this regard, there are differences with many people's feelings. Mr. Feng, the person in charge of a packaging paper dealer in Jinan, told reporters, "Although there is a clear feeling that the market 'fireworks' is much stronger after the Spring Festival, the demand recovery has not met expectations based on the inventory and orders of downstream packaging factories." Xu Ling also said that although terminal consumption is gradually recovering after the festival, the overall recovery speed is slower, and there are slight differences in regional recovery.

The third reason is that the price of waste paper continues to decline, and cost support has weakened. The person in charge of a waste paper recycling and packaging station in Shandong told reporters that the recycling price of waste paper has been decreasing slightly recently. "Since this year, it has fallen seven or eight times, each time by 30 to 50 yuan (per ton). However, the packaging station can only significantly reduce the recycling price," the person in charge said.

According to Huacheng Import and Export Data Observation, as of March 8, the average market price of waste yellow cardboard was 1576 yuan/ton, a decrease of 343 yuan/ton compared to the end of 2022, a year-on-year decrease of 29%, which is also the lowest price in the past five years.

Backward production capacity or accelerated liquidation

When can the depressed packaging paper market get out of trouble? In response, the industry generally believes that the painful period of the packaging paper industry dominated by corrugated box paper has not yet ended, and the rebalancing of supply and demand in the industry may still have a long way to go.

Li Li, an analyst at Zhuochuang Information, told reporters that March was not the peak season for box and corrugated paper consumption, so the market may continue its downward trend. However, Li Li believes that as the price of paper continues to decline and the scope of paper mill downtime and maintenance increases, the downward space may narrow.

Mr. Feng, the aforementioned dealer, also told reporters that in order to offset the impact of foreign and imported paper, paper mills in some regions are also protecting the local downstream market by controlling production capacity and reducing the price of local base paper through reasonable startup and shutdown.

Regarding the overall industry situation in 2023, Xu Ling introduced that there is still a plan to increase production capacity of 2.05 million tons in the corrugated paper market in 2023, so there is still great pressure on the overall supply side. "Against the backdrop of global economic inflation and the still high level of uncertainty in the international market, the overall recovery of domestic demand still needs a period of time, and it is expected that the price of the corrugated paper market will remain weak in 2023." Xu Ling said.

Huatai Securities believes that due to the industry's pain period has not yet ended, it is expected that the industry's profit margin will remain low in the first quarter of this year. In addition, on the whole, large enterprises in the industry are currently improving their control over cost factors such as fiber raw materials to better respond to market challenges. With the fall in energy prices and the continuous launch of fiber production capacity, Huatai Securities expects that the advantages of large enterprises in the fields of scale advantage, self-provided power plants, and raw material cost control are expected to be strengthened, and their competitiveness against small and medium-sized enterprises is expected to be further improved. In the future, the clearance of small and medium-sized enterprises and backward production capacity in the industry may be more thorough than in the past. Huacheng Import and Export Data Observation Report.