Cost Pressure and Returning Demand Drive Wave of Paper Price Hikes Across Packaging and Cultural Paper

On November 8, Sun Paper told reporters that it will increase ordinary wood-free offset paper by 200/tonne on top of current prices, while other products will be adjusted by different margins. Earlier, cultural and household paper producers including Nine Dragons Paper, APP and C&S Paper had all issued price increase notices.

According to institutions, a mix of ocean freight rates and supply-demand gaps, together with the continued release of consumer demand, has prompted paper companies to raise prices one after another.

In packaging paper, Nine Dragons Paper issued four price increase letters on October 25, lifting grey-backed white board by 100/tonne at its Dongguan, Taicang, Chongqing and Tianjin mills. One day later, its major production bases announced that from November 1, prices for the full range of kraft linerboard, corrugated paper and white-faced/coated kraft linerboard would rise by 100-150/tonne. Shanying Paper also said packaging paper prices would increase by 100-150/tonne from November 1. Large mills such as Lee & Man Paper, Jingxing Paper and Liansheng Paper followed with increases of 50-150/tonne.

For cultural paper, Bohui Paper and others announced that from November 1, all paper grades would increase by 300/tonne from October levels, mainly to offset the negative impact of high costs on operations.

In household paper, C&S Paper announced that rising costs would lead it to adjust prices from January 1, 2022.

Analysts at Tianfeng Securities noted that corrugated and linerboard prices rose more sharply, with small and medium-sized mills visibly following, while cultural paper price hikes were concentrated among leading producers.

Higher cost pressure, combined with improving demand and other factors, has become the driving force behind these price increases.

Some papermakers depend on imported pulp. C&S Paper recently said on an investor interaction platform that it does not currently produce its own pulp. All wood pulp used in production comes from Chile, Brazil, Canada, Uruguay, Finland, Sweden, Russia, Indonesia and other countries and regions. Ocean freight rates remain relatively high at present.

Jingxing Paper said Malaysia's multiple movement control orders during the pandemic affected progress on its 800,000-tonne waste paper pulp project there. The project is under construction, but the pandemic has caused labor shortages. As the COVID-19 situation in Malaysia gradually eases, the company and its contractor will recruit construction workers through multiple channels and work to advance the project.

The upstream waste paper market is also strengthening. China Paper Network data shows that since October 30, domestic waste paper prices have continued to rise, with the waste paper index climbing from 2320.45 to 2336.42. On November 8, prices in East China and Central China increased by another 30/tonne.

Changjiang Securities believes inventories across the chain are at mid-to-low levels, and with profitability having fallen to a low point, paper companies have a strong appetite for price increases. On demand, Changjiang Securities noted that consumption events such as Double 11 are gradually unlocking packaging paper demand, while steady progress in spring tenders will support cultural paper demand.

It is worth noting that in recent years many companies have stepped up their raw material project layouts.

Xianhe Co. disclosed plans to invest no less than 10 billion yuan in Shishou to build a 2.5-million-tonne integrated forestry-pulp-paper circular economy project. Sun Paper's semi-annual report shows that in the second half of 2021, as paper and pulp projects at its Guangxi base come online one after another, its pulp and paper capacity will exceed 10 million tonnes. Projects steadily under construction at the Guangxi base include a 550,000-tonne/year cultural paper project, a 120,000-tonne/year household paper project, and supporting 800,000-tonne/year chemical wood pulp and 200,000-tonne/year chemi-mechanical pulp projects. The company expects these paper and pulp projects under implementation to come online one after another between the second half of 2021 and the first half of 2022.

This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378638.html