2021 Review: Corrugated and Containerboard Prices Shift Higher YoY as Market Steadies

Looking back over 2017–2021, the corrugated paper and containerboard sector traced a path of rapid ascent, wide swings and then a momentum-driven climb. In 2017, the ban on waste paper imports sent corrugated paper as high as RMB 5,400/tonne, while containerboard broke through RMB 6,000/tonne, a level that became the market ceiling at the time. During 2018–2020, China-US trade friction and public health events caused sharp price volatility. In 2021, zero imported recovered paper, global inflation, China's 14th Five-Year Plan and dual-carbon policies, along with higher energy and waste paper costs, kept the overall price trend on an upward track.

Corrugated Paper and Containerboard Market Overview

In 2021, the corrugated paper and containerboard market developed in a broadly stable manner. New projects from large papermakers came online, lifting capacity concentration in both segments. On the supply-demand side, supply slightly outpaced demand in 2021, with containerboard facing more obvious supply pressure than corrugated paper. In 2022–2023, containerboard capacity is set for concentrated release, and supply pressure is expected to keep rising.

From a production standpoint, corrugated paper makers are more fragmented than containerboard producers. Most large paper companies can make both corrugated paper and containerboard. The largest domestic papermaker has combined capacity of nearly 20 million tonnes, with plants located mainly in coastal regions such as South China, East China and North China. In recent years, policy and raw material factors have pushed new mill projects toward Guangxi, Hubei, Guizhou and other areas.

Corrugated Paper and Containerboard Price Trend Analysis

In 2021, corrugated paper moved through a rise-fall-rise-fall pattern, with the market generally firm. Sublime China Information data shows that as of Nov. 24, the average market price of China AA-grade 120g corrugated paper was RMB 3,882/tonne, up 18.47% year on year. The annual high was RMB 4,494/tonne in October, and the low was RMB 3,474/tonne at the start of the year, a spread of RMB 1,020/tonne and a fluctuation range of 29.36%. Key price drivers included: first, tight raw material supply raised costs; second, clear policy direction from large mills provided guidance on market price movements.

Third, repeated global public health events kept shipping tight in 2021. As ocean freight and overseas corrugated paper prices rose, arbitrage room between domestic and foreign markets narrowed, imports remained low, and the impact on domestic paper prices was limited. Finally, 2021 came before the launch of the 14th Five-Year Plan, and the implementation of coal-to-gas conversion, carbon neutrality and carbon peaking policies was another important factor shaping paper price trends.

In 2021, the containerboard market followed an N-shaped trajectory. According to Sublime China Information, as of Nov. 24, China's average containerboard market price was RMB 4,791/tonne, up 16.97% year on year. The high was RMB 5,348/tonne in November, and the low was RMB 4,430/tonne at the beginning of the year, a spread of RMB 918/tonne and a fluctuation range of 20.72%. In stages, the market moved from strong upward pulls in January-February, to sideways trading and a downward turn in March, a clear decline in April-May, volatile adjustment from June to September, an upward pull in October, and a high-level pullback in November.

In January-February, upward price pulls dominated the containerboard market. The main factors were: first, foreign waste paper imports were zeroed out, and with 2021 as the first such year, a broadly high raw material price environment was established; second, large paper companies pushed through 6–7 rounds of increases in January-February, lifting containerboard to around RMB 4,900/tonne, RMB 500–600/tonne higher than at the start of the year. The frequent, intensive hikes by large mills clearly spurred the market's buy-on-the-rise mentality. Restocking moved quickly in January-February, and packaging plant inventories climbed to a relatively high level.

In March, demand had been pulled forward, and after a period of sideways trading, containerboard prices still struggled under weak downstream demand. Prices entered a downtrend in April-May. After this round of destocking, paper mills sought to raise prices to protect margins and began a new round of hikes, announcing 6–7 consecutive increases from May 13. However, with consumption in the off-season and both domestic and external demand underperforming, the upward push stalled. From June to September, the market was largely a supply-demand tug-of-war, with prices mostly rangebound. In October, energy and raw material issues and a tighter supply side prompted mills to launch another upward push.

The sharp run-up lasted roughly a month and has since reversed into a fast decline.

Corrugated Paper and Containerboard Price Forecast

Sublime China Information expects the corrugated paper market to remain relatively strong in 2022, with prices likely to consolidate at a high level. The average market price in 2022 is expected to extend the upward trend seen in 2021. As the second year of the 14th Five-Year Plan, 2022 will see policies and plans rolled out gradually, potentially accelerating the corrugated paper industry's upgrade toward a green manufacturing system. In the first half, the market may rise first and then soften; in the second half, it may fluctuate upward. The second half has more traditional holidays, offering stronger demand-side support, but as new domestic capacity comes online, supply may increase and cap paper prices to some extent.

In 2022, containerboard prices are still expected to rise year on year, but the gain will narrow. The main reason is that new capacity will enter mass production in 2022, adding supply and pressuring containerboard prices, making a further sharp rise difficult. Key factors affecting the 2022 containerboard market include: 1. In the first half of 2021, the economy recovered steadily, with solid performance across indicators, and exports played a notable driving role.

1. Raw material waste paper costs are expected to keep rising, but the marginal effect of tight supply is gradually fading. At the same time, overseas recycled fiber pulp projects are coming online, China's waste paper recycling system is improving, and domestic pulp projects are increasing, so raw material support is likely to trend downward later; in the short term, however, there will still be some bottom support. 3. New capacity will be released, creating relatively heavy supply pressure. Market conditions, funding conditions and the broader domestic and international economic environment have slightly delayed some new project start-ups. In addition, large paper companies' investments in containerboard projects are highly concentrated, and H2 2022 to 2023 is a period of concentrated commissioning, so supply pressure will rise noticeably.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378772.html