At the end of past years, due to market demand, paper prices have risen to varying degrees. According to the law of different season, the probability of corrugated and cardboard prices rising in December is greater than the that of falling. However, the situation in this year is different from previous years.
From the perspective of current terminal consumption, the overall increase of downstream demand is limited, and the support for New Year's Day, Christmas and other holidays is not enough. The policies of Replacing Plastic with Paper and Ban on Abolishment, which had supported the industry's development, fell into a downturn under the double pressure of high cost and weak demand. From the beginning of December, under the leadership of Nine Dragons Paper and ShanYing Intl, some packaging paper enterprises even launched the second round of large-scale downtime for maintenance in the year.
On December 4, ShanYing Intl announced that 17 paper machines in five production bases in China would stop for 10 to 29 days from January 6 to February 3, 2023. According to the designed capacity, it is estimated that the output will be reduced by about 312,000 tons, most of which are corrugated paper and cardboard. Following the announcement at the beginning of this month that some paper machines in Tianjin, Quanzhou and Dongguan bases will be shut down in December, Nine Dragons Paper released the Spring Festival shutdown schedule for Dongguan and Taicang bases on December 19, the earliest shutdown time will be January 5, 2023.
After the announcement of the downtime for maintenance, according to the changes of price adjustment, the shutdown is more concentrated in South China. And some paper mills have raised the price by 20 yuan to 50 yuan each ton. As ShanYing Intl and Nine Dragons Paper just announced price increases, they have announced it again in recent days, which is known as a small but frequent way to increase prices in the industry. Following the shutdown and price increase of upstream paper mills, many news has also been sent from packaging and printing industries around the country. Hunan packaging enterprises announced that the price of cardboard had risen by 3%, and several packaging enterprises in Dongguan, Wenzhou and other places issued the notice of the Spring Festival holiday, which will stop receiving orders from December 31.
Since the demand is limited, why can the paper mill raise the price frequently?
It is generally believed that the current industry faces the triple dilemma of weak demand, high cost and shortage of raw materials. The profit per ton and valuation level are at the bottom of the last decade, and the extent of further decline is limited. However, on the whole, the demand recovers slowly, new orders are not enough, and there is limited support for the market before the Spring Festival.
ShanYing Intl and Nine Dragons Paper are both in the midstreams of the paper industry, and the upstream is mainly the pulp industry. Because China's pulp is highly dependent on foreign countries and the international pulp price rose sharply in the first half of this year, some paper enterprises that overwhelmed by the cost pressure announced price increases one after another. As of May, ShanYing Intl has raised the price for four consecutive times, with an increase of more than 200 yuan each ton.
The main business of ShanYing Intl is the production of cardboard, fluting paper, special paper, cardboard and paper product packaging. The main products are various packaging paper, special paper, cardboard, and other paper products with ShanYing label, which are widely used in consumer electronics, household appliances, chemical, light industry and other consumer and industrial products industries. It has built five paper bases in Maanshan, Anhui, Jiaxing, Zhejiang, Zhangzhou, Fujian, Jingzhou, Hubei and Zhaoqing, Guangdong. The existing landing capacity is about 6 million tons, ranking the first three in the industry. The company will develop the packaging sector in economically developed areas along the river and sea, close to the gathering place of leading customers in the industry, with an annual output of more than 2 billion square meters, ranking the second in China.