Fourth Packaging Paper Price Round Starts in Zhejiang: Single Hike Up to RMB 200, Cumulative Rise Exceeds RMB 1,200/Tonne

After Nine Dragons completed its third round of price increases last week and the market broadly digested that move, a Zhejiang paper mill this week became the first to launch a fourth round. Smaller mills quickly followed, pushing cumulative increases above RMB 1,200 and spreading anxiety across the supply chain. Zhuochuang Paper data show corrugated paper has climbed past RMB 4,300/tonne and containerboard has exceeded RMB 5,300/tonne, with short-term prices still carrying upward momentum. The near-term market remains heated, but it will eventually return to rationality; the industry should stay cautious on the outlook.

1. Zhejiang fires the first shot of the fourth round, with cumulative gains exceeding RMB 1,200

Last week, Nine Dragons raised prices for the third time, and the market essentially completed the third round.

Yet paper mills and board plants remain constrained by multiple factors. Capacity has not been unlocked, operating rates are below 50%, and base paper and paperboard are extremely scarce. Carton plants are struggling to source paper and are even willing to accept higher prices and prepay; base paper from large mills has been nearly cleared out, while waste paper arrivals are only about 50% of normal purchasing volumes.

Against this backdrop, a leading paper mill in Zhejiang announced on the evening of March 2 a further increase of RMB 150–200, bringing its cumulative post-holiday increase to RMB 700–750. That marked the first shot of the fourth round. Numerous small mills then followed, lifting cumulative increases above RMB 1,200 and allowing panic to spread further across the industry.

1. Post-holiday cumulative increases may reach 40%, and paperboard could remain hard to secure

Based on current base paper increases, most board plants are expected to start a fourth round from March 3, with hikes of about 10%. Since the holiday, cumulative increases could reach as high as 40%, and paperboard may still be difficult to obtain.

1. Corrugated paper breaks RMB 4,300/tonne and containerboard breaks RMB 5,300/tonne? Short-term prices still have upside

On March 2, the corrugated paper market was mostly stable, though some regional quotes continued to rise. More paper enterprises have restarted, but insufficient raw material supply means many lines are not yet at full load. Downstream demand is recovering and purchasing interest is fair, leaving the corrugated paper supply-demand balance tight.

The containerboard market showed no obvious change. Large mills kept quotes stable, while small and medium-sized mills stayed on the sidelines. Industry operating rates are trending higher, and many mills are set to resume production early this month, but raw material constraints are likely to cap any major improvement in overall load.

Upstream market snapshot

Old yellow board paper:

On March 2, domestic waste yellow board paper arrival prices were largely stable, with some mills raising prices further and a few cutting them. As transportation recovers faster, mill arrivals have increased, weakening the momentum for further short-term gains in waste paper prices. Arrivals vary by mill, and most are watching volume changes. Zhuochuang expects arrival prices to remain stable tomorrow, with local adjustments possible.

On March 2, the imported wood pulp spot market saw light trading, and market participants were less active in offering quotes. Mills in Hebei are gradually restarting, but operating loads are limited; they are consuming prior raw material inventories, and buying interest is low. Local traders have no clear offers. Before the holiday, Ust-Ilimsk softwood pulp was quoted at RMB 4,450/tonne tax-inclusive, and hardwood pulp at RMB 3,750–3,800/tonne tax-inclusive.

The corrugated and containerboard markets continue to trend steady-to-upward, with bullish factors still dominant. Zhuochuang expects short-term paper prices to retain upward momentum.

1. The short-term market remains frenzied, but rationality will return; be cautious on the later trend

China Securities Journal reported that corrugated and containerboard prices have risen recently. On February 28, the bases of large paper enterprises raised prices again by RMB 100–200/tonne. Zhuochuang data show that in some regions, high-strength corrugated paper 120g ex-factory tax-inclusive cash quotes have topped RMB 4,000/tonne, up RMB 600–800/tonne from the pre-holiday mainstream quote of RMB 3,300–3,400/tonne, an increase of 17.65%–24.24%.

Raw material supply shortage:

Recent price adjustment notices and customer letters from paper enterprises frequently mention tight raw material supply and rising costs. Industry sources say the epidemic disrupted waste paper collection, creating a waste paper shortage and raw material tightness—the main driver behind the recent rally in corrugated paper and containerboard prices. Zhuochuang monitoring data show that as of February 28, the daily average price of domestic waste yellow board paper was RMB 2,415/tonne, up 13.86% from the start of the month.

Employees unable to return on schedule have made work resumption less smooth, affecting raw material capacity. Paper mills are running at low loads, and some have suspended or limited order intake. Normally, a mill needs at least three days of raw material inventory to start up, but current arrivals are hard to guarantee.

On the demand side, express delivery and logistics are gradually resuming, and e-commerce and other sectors are recovering their need for packaging paper. Some board and carton plants have also begun restocking. According to the Jiangsu Provincial Postal Administration on February 25, all branded delivery companies in Jiangsu had resumed production, with daily collections and deliveries climbing to more than 90% of the same period last year.

Longzhong Information said on February 28 that with waste paper in short supply and downstream demand continuing to warm up, corrugated and containerboard prices are expected to have relatively strong upward momentum in the near term, with room for increases of RMB 200–300/tonne.

Caution on the later trend:

Zhuochuang analyst Jin Peipei

believes a cautious stance is still needed for the outlook. In March, major paper mills will gradually resume operations, and market supply will return to normal step by step. In addition,

Nine Dragons Paper will commission a combined 1.1 million tonnes/year of containerboard capacity in the first quarter at its Dongguan and Yongxin bases, which could have a significant impact on the market.

Downstream demand still has room to improve, but end-market performance is not optimistic. In March, paper prices may run at high levels,

but supply and demand will eventually return to rationality, and downside risk may increase in the second quarter.

It noted that the main challenges facing the paper industry in 2020 remain unresolved, including deteriorating supply-demand dynamics and reduced competitiveness compared with overseas papermakers.

It pointed out that the raw material mix in the paper industry is diverging, and leading paper mills continue to show cost advantages. This divergence leads to profit divergence. As the price gap between domestic and foreign waste paper widens again, companies with higher foreign waste quotas have a clear cost advantage over those using only domestic waste. With imported waste paper declining year by year in 2020–2021, leading mills' raw material cost advantage is expected to materialize through overseas waste pulp and overseas finished paper projects. If raw material prices rise over the next 1–2 years, that cost advantage will become even more pronounced.

—Reprinted from China Packaging Network (pack.cn), original link: http://news.pack.cn/show-354675.html