Corrugated Paper Prices Trend Downward from January to August 2024, Import Impact Eases

From January to August 2024, the corrugated paper market trended downward amid volatility, mainly affected by the bearish factors of supply-demand conflict and a decline in costs. Against the backdrop of relatively slow recovery in domestic demand and falling paper prices, import enthusiasm for corrugated paper weakened somewhat, with monthly import volumes gradually returning to the average level of the past five years and the impact on the domestic market easing.

Imports are a component of total supply in the corrugated paper market and compete with domestic supply. Since the tariff policy adjustment in 2023, corrugated paper import costs have fallen and the import advantage has widened, with a clear impact on the domestic corrugated paper market. According to data published by the General Administration of Customs, corrugated paper imports in 2023 reached 3.59 million tonnes, up 47.74% year on year. Entering 2024, the “zero tariff” policy continued, and the import advantage remained, but imports showed a declining trend: cumulative imports of corrugated paper from January to July reached 1.7745 million tonnes, down 11.82% year on year. The decline in corrugated paper imports is mainly attributable to insufficient import demand, falling domestic paper prices and the international situation.

Sluggish domestic market, limited import demand

In 2024, the overall recovery in domestic demand for corrugated paper was limited. According to monitoring data from Zhuochuang Information, domestic corrugated paper consumption from January to July 2024 rose 2.13% year on year, a relatively slow pace of demand growth. The boost to consumption from festivals such as Chinese New Year, May Day and e-commerce festivals weakened somewhat; according to market feedback, compared with previous years, stocking demand for end-use packaging materials did not increase markedly, orders at packaging plants fell short of expectations and order continuity declined, with most players stocking only for immediate needs and mainly taking a cautious, wait-and-see stance on the market outlook. Because the shipping time for imported paper is generally 45-60 days, delivery timeliness is relatively lacking compared with domestic spot material; in a market environment of persistently weak demand, players find it hard to be optimistic about the market, import paper traders are cautious about stocking, and import demand from downstream and end customers has decreased somewhat.

On the other hand, looking at the registered locations of consignees and consignors for corrugated paper imports, import demand is generally concentrated in the eastern coastal regions of Guangdong, Fujian, Zhejiang, Jiangsu, Shandong and Shanghai, which are both the main distribution areas for import paper traders and the main consumption areas for corrugated paper, and are more sensitive to changes in market demand. From January to July, total corrugated paper imports into the above provinces fell 8.80% year on year, also reflecting the year-on-year decline in domestic import demand.

Falling domestic paper prices combined with rising import costs narrow the import arbitrage window

On the domestic virgin paper side, the supply-demand conflict in the corrugated paper market was pronounced in 2024 and paper prices fell. From January to August, new capacity in the corrugated paper market approached 1.2 million tonnes, and because market downtime was concentrated at small and medium-sized units, total output rose year on year, increasing pressure on the supply side. Demand recovered slowly and effective end-use demand failed to keep pace, so the market's oversupply pattern continued. In addition, upstream raw material

prices fell more often than they rose during the year, weakening cost-side support for corrugated paper. Under the bearish influence of supply, demand and costs, paper mills adjusted prices frequently and corrugated paper prices trended downward amid volatility. As shown in Figure 2, as of 22 August, the average market price of China AA-grade 120g corrugated paper was 2,609 yuan/tonne, down 4.68% year on year and down 10.80% from the end of 2023.

On the imported paper side, import costs increased due to international factors. On the one hand, the international situation was unstable in 2024, sea freight costs rose markedly and transit times lengthened, further reducing the stability of international freight; sea and rail transport, as the main modes for corrugated paper imports, were heavily affected. Against this backdrop, freight rates for imported paper rose and some offers also trended upward, weakening the price advantage and to some extent weighing on corrugated paper imports. On the other hand, exchange rate fluctuations were frequent during the year, which also affected corrugated paper imports.

The fall in domestic paper prices and the rise in import costs narrowed the arbitrage window for corrugated paper imports and weakened import enthusiasm, with import volumes generally trending down from January to July. Taking shipping schedules into account, imported paper in January was mostly ordered at the end of 2023, while March volumes were supported by the continuation of the “zero tariff” policy and Chinese New Year stocking orders, pushing imports to a five-year high of 362,200 tonnes. Thereafter, as domestic paper prices fell markedly, import volumes declined month by month, gradually returning to the average level of the past five years.

In summary, the favourable effect of the 2024 corrugated paper import tariff policy on import volumes weakened somewhat, and, affected by the bearish factors of slow domestic demand recovery, falling paper prices and international factors, import enthusiasm for corrugated paper diminished. Domestic demand is expected to improve in the third and fourth quarters, but competition in the domestic market is intense and the international bearish factors will be hard to digest in the short term; imports of corrugated paper from August to December are expected to be close to the five-year historical average, with second-half volumes slightly higher than the first half and full-year volumes down year on year compared with 2023.

— This article is reprinted from the China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-379637.html