618 Shopping Festival May Offer a Turning Point for Packaging Paper as Industry Consolidation Speeds Up

With the 618 mid-year shopping event drawing near, China's packaging paper sector—under pressure since the start of 2023—may be nearing a recovery.

Even so, containerboard and corrugated paper prices kept sliding in June, a phase some in the market describe as the darkest hour before dawn. Tonghuashun iFinD data shows that, as of June 5, the ex-factory price of 140g corrugated paper in China was 3,395 yuan per tonne, below the 3,400 yuan per tonne level. That represented a 19.36% year-on-year decline and an 11.13% drop from 3,820 yuan per tonne at the beginning of 2023.

In interviews, several experts and institutional analysts said the 618 mid-year shopping festival could be a critical opening for the packaging paper industry to leave its downturn behind. Tebon Securities believes that, with online shopping campaigns such as 618 and Double 11 as catalysts, the consumption recovery trend in the second half of this year is relatively clear. As downstream restocking confidence improves, packaging paper prices may turn upward as early as the end of the second quarter.

Industry sits at the bottom of the cycle

Since 2023, containerboard and corrugated paper prices have remained weak, with soft demand the primary drag.

Lü Yanshuo, an industry analyst at Sublime China Information, told Securities Daily that in Q1 this year, although operating rates rebounded quickly after the Spring Festival and supply of containerboard and corrugated paper increased, weak domestic demand recovery and slower export recovery kept downstream packaging plants operating at low levels. Their cautious base paper purchasing pushed market prices lower. Data shows corrugated paper prices had already hit a five-year low by the end of March.

Another pressure point came from tariffs: starting January 1, 2023, China applied zero tariffs to multiple paper grades, including containerboard and corrugated paper. Industry insiders said this gave imported paper products a price advantage. Domestic packaging paper producers responded with measures such as shutdowns for maintenance while continuously lowering containerboard and corrugated paper prices to narrow the gap with imports and defend market share.

Lü said late March marked a turning point. In April, the industry posted a modest rebound that lasted nearly a month. Most industry analysts viewed this as prices stabilizing at the bottom.

Discussing the impact of the 618 mid-year promotion, a Sun Paper executive told Securities Daily that downstream paper packaging players had already begun building inventory for 618 in April. At that time, after a quarter of continuous declines, upstream mills were calling for price increases to support the market. Terminal demand was expected to recover with 618 support, and market trading improved amid the supply-demand tug of war, producing the April rebound.

On the renewed decline in containerboard and corrugated paper prices since May, especially in recent weeks, the Sun Paper executive said the situation differs somewhat from Q1. With coal, electricity and other energy prices falling recently, cost-side pressure on companies has eased. Paper producers, especially large ones, have benefited noticeably and no longer need to rely as frequently on shutdowns for maintenance as they did in Q1. While maintaining operating rates, they continue to lower paper prices to capture more market share.

Starting with the 618 mid-year promotion, a further recovery in consumer demand will be an important factor driving demand back up for packaging paper and related industries.

Hong Yong, a think-tank expert at the China 50 Forum on Digital-Real Integration, told Securities Daily that the 618 mid-year shopping festival usually boosts demand in the packaging paper industry, and the second-half consumption peak season is also the sector's traditional high period.

Hong said 618 and various festivals and activities in the second half of the year will drive diversified demand for packaging paper, particularly in segments such as high-end packaging paper, personalized packaging paper and smart packaging paper.

Industry consolidation is accelerating

As packaging paper prices keep falling, the industry is speeding up its shakeout and showing a trend of concentration toward leading players.

Recently, news has continued to emerge from southern China about small and medium-sized containerboard and corrugated paper producers going bankrupt. At the same time, leading paper companies including Nine Dragons Paper and Shanying International are actively expanding capacity.

Sublime China Information forecasts that containerboard and corrugated paper will add 8 million tonnes of new capacity between 2023 and 2025. More additions are planned for 2023, with 4.9 million tonnes of containerboard capacity and 1.3 million tonnes of corrugated paper capacity, making the short-term supply landscape looser. The new capacity is mostly concentrated among leading companies. According to Sublime China Information, from 2023 to 2024, Nine Dragons Paper and Shanying International will expand capacity by 2.05 million tonnes and 1 million tonnes, respectively.

Tebon Securities notes that as environmental rules tighten, the waste-import ban raises the industry threshold, and the zero-tariff policy on imported paper takes effect, leading domestic containerboard and corrugated paper producers are seizing the window to rapidly deploy pulp and paper capacity at home and abroad. This strengthens their control over upstream resources and costs and will help them capture further market share.

Zhang Xinyuan, secretary-general of the Co-Found think tank, told Securities Daily that rising industry concentration is an inevitable result of the shakeout in packaging paper and related sectors. Competition is intense and market share is fragmented, but some leading companies have already begun raising concentration through M&A and resource integration, strengthening their competitive edge and market position. As competition intensifies and consolidation accelerates, concentration is expected to rise further, while leading players' advantages are likely to be further consolidated.

However, the Sun Paper executive said that, due to factors such as leading companies' placement radius and freight costs, small and medium-sized paper producers will still retain some room to survive.

Hong Tao, a professor at Beijing Technology and Business University, told reporters that China's plastics ban will be fully implemented in 2025. Combined with the rapid pickup in national consumption in 2023, this will promote a restructuring of China's packaging paper industry. Leading companies will play an increasingly large role, while small and medium-sized packaging paper companies will also open up market space for distinctive development, Hong said.

——This article is reprinted from China Packaging Network (pack.cn), original link: http://news.pack.cn/show-379359.html