Source from Wisdom Finance
Huatai Securities released a research report that since September, the pulp and paper industry chain has seen more positive signals on the demand side. Finished paper producers have generally synchronized their start-up rates with inventory reduction.
Pulp and paper prices are generally on the rise, and the profitability of the industry chain has improved. They believe that this reflects the fact that the industry is not far away from the supply-demand equilibrium point against the backdrop of the peak season. However, on the other hand, as the industry’s peak supply release period has not yet passed, the reversal of supply and demand may still be too early.
In September, some of the industry’s leading companies announced a slowdown in the construction of some projects, the high growth of the pulp and paper industry chain’s supply side is expected to diverge in 2024, and the new supply of some varieties is expected to slow down, which help the industry’s rebalancing.
Corrugated boxboard: paper mill inventories fell to a low level, supporting price hikes
Thanks to the peak consumption season of the Mid-Autumn Festival and National Day and downstream inventory replenishment, shipments of corrugated board have grown strongly since September. The storage have fallen from 14.9 days at the end of August to an average of 6.8 days (as of October 18), a low level in the past three years.
Paper price renovate has accelerated after September and has rebounded +5.9% from the mid-August. Boxboard corrugated capacity growth is expected to slow down significantly in 2024 compared to 2023 as leading companies slow down some project construction. They expects lower inventory levels to support corrugated board prices in the peak season. However, since August, new production capacity has accelerated, and the basis for the reversal of supply and demand is still not solid, 1H24 or still need to face a more severe market test.
Ivory board: peak season supply and demand stabilization, supply shock approaching
Since September, C1s Ivory Board market supply and demand is relatively stable, as of October 18, the inventory compared of the end of August -4.4%, but still at a high level in recent years. Catalyzed by the rapid rise in domestic pulp spot prices over the past two weeks, white cardboard prices rose again after the National Day. If the implementation is in place, the current white cardboard prices are expected to rebound 12.7% compared with the mid-July. With the completion of the installation of large-scale C2s White Art Card projects in Jiangsu, the next round of supply shocks are approaching, white cardboard prices further repair time may not be abundant.
Cultural paper: price recovery since July is significant
Cultural paper is the fastest finished paper with the fastest price recovery since 2023, offset paper and art paper prices rebounded 13.6% and 9.1%, respectively, compared with mid-July. New production capacity for cultural paper is expected to return to normal in 2024, but 2023 is still at the peak of capacity launch. They expects there will still be 1.07 million tons/year of capacity will be put into production by the end of the year, and a bigger market challenge may still come in 1H24.
Pulp:Peak season catalyzes pulp price rebound, but market tightness has eased
Along with the improvement of peak season demand, all kinds of finished paper enjoyed a more general inventory decline and start-up rate increase in September, domestic pulp demand also benefited from this, in the end of month the pulp stocks in China’s main ports fell by 13% compared with the end of August, the largest one-month drop this year. Domestic broadleaf and coniferous pulp increase since the end of September, respectively, rose rapidly 14.5% and 9.4%, South America’s major pulp mills have also recently raised the price of pulp to China in November by 7-8%).
However, after the National Day, the tightness in the domestic market has eased as downstream demand has slowed at the margins and pulp import traders have likewise stepped up shipments. They expects 2023-2024 to be the peak of chemical pulp capacity launch, and with most of the new commodity pulp capacity coming from low-cost producing regions, the rebalancing of pulp supply and demand may likewise remain unfinished.
Post time: Nov-04-2023