Mid-Autumn Peak and Tight Supply: Decoding Corrugated Paper Profit Trends

This year, Mid-Autumn Festival falls on September 21. Downstream packaging plants usually begin building stocks about two months ahead, which makes late July through August the main window for Mid-Autumn orders. After early August, corrugated paper price increases gathered further momentum, drawing attention to profitability across the corrugated paper sector.

1. Corrugated paper price trend review

Corrugated paper price trend chart, 2019–2021

From January to August, corrugated paper prices followed a V-shaped path. As of August 19, the national average price stood at 3,952 yuan/tonne, 601 yuan/tonne higher than 3,351 yuan/tonne a year earlier — a gain of 17.94%. Since late May, mainstream market prices had kept climbing, with the rise widening in early August. Base paper inventories at downstream processors were low to medium; the approach of Mid-Autumn pushed paper prices higher; and under a buy-on-rising sentiment, packaging companies stepped up stock building, improving trading activity.

1. How unexpected events and force majeure shaped the market in 2021

Supply-side impact of 2021 unexpected events on corrugated paper

In 2021, disruptions came from several directions. First, power rationing curbed normal operations at corrugated paper mills. Second, under the coal-to-gas policy, nine companies in Dongguan halted production, and seven small and medium-sized enterprises there were still shut down as of the reporting date. Third, typhoons and heavy rain left producers in Henan, Zhejiang, Hubei and other regions operating inconsistently; in particular, the Henan waterlogging and flooding from July 17 to 22 dealt a heavy blow to local manufacturers. Fourth, public health incidents emerged in multiple regions, limiting output and shipments in Jiangsu, Henan, Hubei and elsewhere. The average operating rate from January to August was 55.65%, but by mid-August it had fallen to 50.4%, down 16.45 percentage points from the late-January peak of 66.85%. Supply remained tight through July and August.

1. Profitability in the corrugated paper industry

Corrugated paper industry profit trend chart

The average gross margin from January to August was 12.31%, 1.7 percentage points above 10.61% in the same period last year. A key factor was that, after imports of foreign waste paper were banned this year, domestic waste paper supply stayed tight, driving waste paper prices higher in the first half. The average price of waste yellow board paper from January to August was 2,397 yuan/tonne, up 386 yuan/tonne from 2,011 yuan/tonne a year earlier, an increase of 19.19%. Raw material costs kept corrugated paper prices elevated. At the same time, growth in corrugated paper imports slowed sharply this year, and with overall supply tightening, prices moved steadily with a mild upward bias. The national average from January to August was 3,952 yuan/tonne, 601 yuan/tonne above 3,351 yuan/tonne in the same period last year, up 17.94%. From May to August, downstream demand was generally subdued, capping price gains, so gross margin growth remained modest.

——This article is based on content from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378044.html