Running at Full Capacity Yet Still Short of Demand: Carton Prices in Taiwan Rise Sharply

The second quarter of each year is traditionally the off-season for the carton packaging industry, but this year was not the case in the Taiwan region. According to Taiwanese media reports, due to the impact of multiple factors, the Taiwan region remains in a state of carton shortage. Carton plants in the central and southern regions are already producing and supplying at full capacity, but delays are still unavoidable, leaving agricultural enterprises in the awkward position of "having orders but no way to package them".

Full capacity utilization, yet supply still falls short of demand

In mid-March this year, the Taiwan region saw "carton shortages and sharp price increases"; see: carton prices in Taiwan rose 15-20% in March, with delivery delays required. Now that mid-April has arrived, the situation has still not improved.

According to the Taiwan Commercial Times, the recent bumper harvest of pineapples and other agricultural products has caused a surge in demand for agricultural cartons, drawing keen concern from the Ministry of Economic Affairs and the Council of Agriculture. The local paper container association has promised that member companies will produce at full capacity to ensure cartons remain in stock, but with pears and other fruits coming to market in May, cartons will continue to be in short supply and the problem is likely to remain unresolved before the third quarter.

To support industrial recovery and avoid the situation of having orders but no cartons to ship, the Taiwan region's Ministry of Labor began relaxing employment requirements for the pulp, paper and paper products manufacturing industry at the end of March, boosting carton capacity through measures such as extending working hours and increasing attendance. Industry estimates suggest carton capacity can increase by at least 5%-10%.

Industry insiders said there are nearly 60 corrugators capable of producing corrugated board at carton plants across Taiwan, with total monthly carton capacity exceeding 200 million square meters. Among them, paper mills north of Hsinchu together have nearly 30 corrugators, with monthly capacity of about 90 million to 100 million square meters. This year, the three major companies Rong Cheng, Cheng Loong and Yuen Foong Yu all have plans to replace old equipment or invest in plant expansion at their northern plants.

Three major paper mills launch plant expansion plans

Specifically, Rong Cheng Paper's Longtan plant will upgrade its equipment in May, and it is roughly estimated that carton output will drop by three to four million square meters per month during the transition period, equivalent to a nearly 5% reduction in supply in northern Taiwan. Although this capacity gap is expected to be filled by other carton plants, with all paper mills currently running at full capacity, adding 5%-10% more capacity will be difficult.

Next, Yuen Foong Yu Paper's Nankan plant will upgrade its equipment at the end of this year, with production expected to begin in early next year, adding 1-2 million square meters of monthly carton capacity once operational; in addition, Rong Cheng Paper's Luzhu plant will also launch a plant expansion plan, expected to be completed next year. This also means carton supply will continue to decline during the equipment upgrade period.

However, new capacity is still being gradually brought on stream in the Taiwan region. Cheng Loong Paper's new Yenchao plant could start production as early as May, adding about 4 million square meters of monthly capacity by the end of the year; Rong Cheng Paper's Yunlin plant expanded its 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.

An era of high paper prices may be arriving in Taiwan

The sharp rise in demand is also driving paper prices up. According to the Taiwan Commercial Times on April 13, in April wood chips rose by USD 200 per tonne, US waste paper rose to USD 240-270 per tonne, coal rose by about 40% per tonne, chemical raw materials rose by 30%, and container shipping freight rates quadrupled over the past six months. With raw materials rising sharply, the upward trend in base paper is likely to be irreversible.

As of April this year, carton prices in the Taiwan region had risen by about 12-15%, and paper prices had risen by an average of 25% across the board, with white cardboard commonly used for online shopping up 40% and cultural paper and paper tube paper up 25%. In addition, imported newsprint rose 40%, all marking the first price increases announced in the past two to three years.

As pulp prices have 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 the Taiwan region, revealed plans to raise prices by 10% in April, possibly by another 5%-10% in May and June, and estimated that 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