Taiwan Corrugated Carton Market Runs at Full Capacity Yet Remains Short: Agricultural Demand Surges as Paper Price Pressure Persists

The second quarter is usually the off-season for carton packaging, but Taiwan has not followed that pattern this year. Taiwanese media report that multiple factors have kept cartons in short supply; although carton plants in central and southern Taiwan are supplying at full capacity, delivery delays persist, leaving agricultural businesses unable to pack despite having orders.

Capacity Maxed Out, Supply Gap Persists

In mid-March this year, Taiwan recorded carton shortages and significant price increases; related coverage noted that Taiwan carton prices rose 15-20% in March, with delivery delays required. By mid-April, the situation had not improved.

The Taiwan Commercial Times reported that a recent bumper harvest of pineapples and other farm produce caused agricultural carton demand to surge, drawing close attention from the Ministry of Economic Affairs and the Council of Agriculture. The local paper container association promised that member firms would produce at full capacity to keep cartons supplied; however, with pears and other fruits also coming to market in May, carton shortages are expected to continue and may not ease before the third quarter.

To support industrial recovery and prevent orders from being held up by carton shortages, Taiwan's Ministry of Labor began easing employment requirements for the pulp, paper, and paper products manufacturing sector at the end of March. Measures such as longer working hours and higher attendance are intended to lift carton capacity. Industry estimates put the increase at at least 5%-10%.

Industry sources say Taiwan has nearly 60 corrugators capable of making corrugated board, with total monthly carton capacity exceeding 200 million square meters. Paper mills north of Hsinchu account for nearly 30 of those corrugators, with monthly capacity of about 90 million to 100 million square meters. This year, the three major players, Rong Cheng, Cheng Loong, and Yuen Foong Yu, all have plans for equipment replacement or expansion investment at their northern plants.

Three Major Paper Makers Launch Expansion and Upgrade Plans

Specifically, Rong Cheng Paper's Longtan plant will upgrade equipment in May. During the transition, monthly carton output is roughly estimated to fall by 3-4 million square meters, equivalent to a nearly 5% decline in northern Taiwan supply. Other carton plants may fill the gap, but with mills now running full, adding another 5%-10% of capacity will be difficult.

Next, Yuen Foong Yu Paper's Nankan plant will upgrade equipment at the end of this year and is expected to start production in early next year, adding 1-2 million square meters of monthly carton capacity. Rong Cheng Paper's Luzhu plant will also proceed with expansion, expected for completion next year. That means carton supply will continue to fall during the equipment upgrade period.

Still, new capacity is gradually coming online in Taiwan. Cheng Loong Paper's new Yenchao plant could start production as early as May, adding about 4 million square meters of monthly capacity by year-end. Rong Cheng Paper's Yunlin plant expanded equipment at the end of last year and began production after consolidating the Shenkang plant, adding about 2 million square meters of monthly capacity from this year.

A High Paper Price Phase May Have Begun

Rapidly rising demand is also pushing paper prices higher. According to the Taiwan Commercial Times on April 13, wood chips rose by USD 200 per tonne in April, US waste paper climbed to USD 240-270 per tonne, coal rose by about 40% per tonne, chemical raw materials increased by 30%, and container shipping freight rates quadrupled over the past six months. With raw materials rising across the board, the upward trend in base paper may be hard to reverse.

As of April this year, carton prices in Taiwan had risen by about 12%-15%, while paper prices had increased by an average of 25% overall. White cardboard commonly used for e-commerce rose 40%, and cultural paper and paper tube paper rose 25%. Imported newsprint also rose 40%, marking the first announced increases in the past two to three years.

Pulp prices have already risen by 60%-70% this year, while base paper prices have so far risen by only about 30%. A relevant person in charge at Chunghwa Pulp, a well-known paper company in Taiwan, revealed plans to raise prices by 10% in April and possibly another 5%-10% in May and June. Carton prices may rise by around 15%-20% in the second quarter due to continued raw material increases.

—This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-359520.html