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In China, sluggish demand and excessive supply have weighed on prices for recycled containerboard and cartonboard again in July and forced some mills to curtail production, while producers of virgin fiber-based ivory board and fine paper have instigated hikes in a bid to halt the sharp price declines seen in recent months.
July is supposed to be the start of the traditional peak season for the packaging industry in China, with board demand usually picking up – driven by both domestic and overseas orders related to various festivals in the second half of the year.
But market participants have said that packaging demand has remained tepid or even flat so far this month, with the country’s industrial activity weakening due to contracting exports and waning retail sales growth amid a slump in the property market.
Leading recycled containerboard producers opted to consecutively cut their prices by a total of RMB 50-150 per tonne ($6.99-20.98 per tonne) to try and encourage orders. Smaller and medium-sized mills had to follow suit.
In eastern China, as of Wednesday July 26, the average price for high-strength corrugating medium was RMB 88 per tonne less than in late May. The average price for testliner fell RMB 102 per tonne this week compared to last month, while kraft-top liner’s average price moved south by RMB 116 per tonne. The average white-top liner price this week was down by RMB 100 per tonne from a month ago.
The seemingly non-stop price declines have largely prevailed in the Chinese market since business resumed after the Lunar New Year holiday in late January and sources from board mills and downstream box plants said they could not “see the end of the tunnel yet.”
Deteriorating profitability has put pressure on recycled containerboard mills, including large-scale ones, to curtail production. Some major recycled containerboard producers in China have announced downtime plans for late July and August.
Recycled fiber-based grayback coated duplex saw markdowns of around RMB 100-200 per tonne this month. The average for premium grade material declined by RMB 175 per tonne.
Slow packaging demand has also weighed on prices for virgin fiber-based kraftliner (KLB). Prices for imports of KLB in July were down by $20 per tonne at the top end of the range compared with June.
Russia’s Ilim Group churned out the first board roll on the new 600,000 tonne/yr kraftliner machine at its Ust-Ilimsk mill in Irkutsk Oblast in southeastern Siberia on July 16. Trader sources in China reported that the BM is still under fine-tuning and there have been no offers for its output.
Prices for virgin fiber-based coated ivory board plunged in the first half of 2023 due to worsening oversupply. The most commonly seen commodity grade saw its prices decline by about RMB 1,000 per tonne.
The drastic price cuts earlier in the year have left both board mills and distributors struggling. In early July, APP China, Sun Paper and Shandong Chenming Paper Holdings – the top three virgin cartonboard producers in the country – announced hikes of RMB 200 per tonne for coated ivory board with immediate effect. And this week, they put out another round of RMB 200-per-tonne hikes for August orders.
It remains to be seen how many of the proposed hikes will be implemented, but the moves have halted the price decline for the moment. In eastern China, the average price for premium coated ivory board was steady in July. The average price for commodity coated ivory board showed a slight uptick of RMB 55 per tonne this week compared to last month.
The oversupply issue has marginally eased due to prolonged downtime at Shandong Chenming’s Zhanjiang mill in Guangdong province, where two fatal accident – one in mid-May and the other in late June – led to a government order to suspend production from early July for rectification.
The Zhanjiang mill boasts around 1.2 million tonnes per year of virgin cartonboard capacity, mostly of coated ivory board, along with 1 million tpy in uncoated fine paper (UFP) capacity. The mill had not resumed production as of Thursday July 27.
The stoppage at the Zhanjiang mill has also somewhat bolstered UFP producer price hike attempts.
Following steep price falls in the second quarter, leading Chinese fine paper manufacturers announced hikes of RMB 200 per tonne for both UFP and coated fine paper (CFP).
Although most of the proposed hikes have not gone through, the moves have slowed down the price declines. In the eastern part of China, the average price for UFP furnished with 100% chemical pulp fell RMB 234 per tonne this week compared to late last month. UFP furnished with a mixture of chemical and mechanical pulp saw its average price edge down by RMB 20 per tonne.
Premium CFP’s average price this week was down RMB 150 per tonne from a month ago. The average price for commodity CFP dropped RMB 87 per tonne.
Market participants said that they had seen a pick-up in orders for UFP in July because downstream customers have been replenishing depleted stocks.
“In the past few months, [downstream customers] were spooked by rapid price declines and pulled back. Now that paper prices have shown signs of bottoming out and fiber costs have crept up, they are coming back to restock,” a source at a leading UFP producer in China said.
Prices for domestic newsprint remained steady this month. Chinese customs data shows the country imported about 47,000 tonnes of newsprint in June, up 2.1% compared with a year earlier.
It is worth noting that while Russia was still the largest source, volumes from Canada ballooned to around 14,000 tonnes in June, accounting for 30.04% of China’s total newsprint imports and the highest since July 2021.
Prior to that, newsprint imports from Canada had plunged to negligible levels since the third quarter of 2022 after Russian newsprint suppliers took the absolute dominant position on the Chinese market.
Competitively priced offers of newsprint from non-Russian suppliers, including some from Canada and Europe, began to emerge in China in March. Trader sources said that some offers were available at around $520-540 per tonne this month.
The comeback of competitors appears to have prompted Russian newsprint suppliers to cut their prices in a bid to maintain their market share in China. Trader sources said that new orders of Russian newsprint this month were down by around RMB 300 per tonne compared with the previous month.
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