2021 Corrugated and Containerboard Markets Develop Steadily, Average Prices Continue to Move Up Year-on-Year

From 2017 to 2021, the corrugated and linerboard market showed a trend of "surge - wide fluctuation - accumulation then upward movement". In 2017, affected by the ban on waste paper imports, corrugated and linerboard prices climbed for a time, with corrugated paper reaching 5,400 yuan/tonne and linerboard breaking through the 6,000 yuan/tonne mark, forming the ceiling of the linerboard market. From 2018 to 2020, prices fluctuated widely, mainly affected by China-US trade frictions and public health events. In 2021, affected by the zeroing out of imported foreign waste paper, the global inflationary environment, the domestic 14th Five-Year Plan and the dual carbon policy, plus rising costs of energy and waste paper, overall prices stayed on an upward track.

Overview of the corrugated paper and linerboard market

In 2021, the corrugated paper and linerboard market was in a stage of steady development. With the commissioning of new projects by large paper companies, the capacity concentration of corrugated paper and linerboard showed an upward momentum. In terms of the supply and demand pattern, the supply of corrugated paper and linerboard slightly exceeded demand in 2021, with supply pressure more prominent for linerboard than for corrugated paper. From 2022 to 2023, linerboard capacity will be released in a concentrated manner, and supply pressure is expected to continue to increase.

In terms of production characteristics, corrugated paper producers are more dispersed than linerboard producers. Most large paper companies are able to produce both corrugated paper and linerboard, and the largest domestic paper company has a combined corrugated paper and linerboard capacity of nearly 20 million tonnes, with producers distributed in coastal areas such as South China, East China and North China. Affected by policy and raw material factors in recent years, paper mills' new projects have extended to Guangxi, Hubei, Guizhou and other places.

Analysis of corrugated paper and linerboard price trends

In 2021, the corrugated paper market showed a "rise - fall - rise - fall" trend, with the overall market running relatively strong. According to data monitoring by Sublime China Information: as of November 24, the average market price of China AA-grade 120g corrugated paper was 3,882 yuan/tonne, up 18.47% year on year. The high point appeared in October at 4,494 yuan/tonne, and the low point appeared at the beginning of the year at 3,474 yuan/tonne, with a high-low price spread of 1,020 yuan/tonne and a fluctuation range of 29.36%. The main factors affecting paper prices are as follows: first, tight raw material supply drove up costs. Second, the clear policy orientation of large paper mills played a guiding role in the direction of market prices.

Third, affected by the repeated global public health events, overall shipping was relatively tight in 2021, and as ocean freight rates and foreign corrugated paper prices rose, the arbitrage space between domestic and overseas markets narrowed, so imports were relatively low and their impact on domestic paper prices was small. Finally, 2021 came before the start of the 14th Five-Year Plan, and the implementation of policies such as coal-to-gas conversion, carbon neutrality and carbon peaking was also an important factor affecting paper price trends.

In 2021, the linerboard market showed an "N-shaped" trend. According to data monitoring by Sublime China Information: as of November 24, the average market price of linerboard in China was 4,791 yuan/tonne, up 16.97% year on year. The high point appeared in November at 5,348 yuan/tonne, and the low point appeared at the beginning of the year at 4,430 yuan/tonne, with a high-low price spread of 918 yuan/tonne and a fluctuation range of 20.72%. Specifically, the linerboard market showed a pattern of "strong upward pull in January-February - sideways consolidation then downward turn in March - marked decline in April-May - volatile adjustment from June to September - accumulation then upward pull in October - pullback at high levels in November".

In January-February, the linerboard market was dominated by upward price pulls. The main influencing factors were: first, foreign waste paper imports were zeroed out, and with 2021 as the first year, a market environment of generally high raw material prices was basically established; second, large paper companies pushed prices up in 6-7 rounds in January-February, after which linerboard stood at around 4,900 yuan/tonne, up 500-600 yuan/tonne from the beginning of the year. The high-frequency, intensive price increases by large paper companies noticeably stimulated the market's "buy on the rise, not on the fall" mentality, restocking progressed quickly in January-February, and packaging plant inventories climbed to a relatively high level.

In March, affected by the early overdraft of demand, linerboard prices, after a period of sideways consolidation, still could not shake off the drag of weak downstream demand. In April-May prices were on a downward track. After this round of destocking, paper mills, seeking to raise paper prices to protect profits, began to shift into price-hike mode, announcing 6-7 consecutive price increases starting from May 13. However, as this was the off-season for consumption demand and both domestic and external demand performed poorly, the price push was rather deadlocked, so from June to September the market was basically in a state of supply-demand tug-of-war, with overall prices mainly fluctuating. In October, affected by factors such as energy and raw materials and a tightening on the supply side, paper mills again started upward price pulls.

After a month of sharp gains, the market has now turned into a rapid decline.

Forecast of corrugated paper and linerboard price trends

Sublime China Information expects the corrugated paper market to run relatively strong in 2022, with prices likely to consolidate at a high level. The average market price of corrugated paper in 2022 is expected to continue the upward trend of 2021. 2022 is the second year of the 14th Five-Year Plan, and the gradual implementation of various policies and plans may accelerate the rapid upgrading of the corrugated paper industry toward a green manufacturing system. In the first half of 2022, the corrugated paper market may show a trend of rising first and then easing; in the second half, it may fluctuate upward. The second half has more traditional holidays, providing relatively strong support on the demand side, but as new domestic capacity is gradually commissioned, supply may increase, placing a certain restraint on paper prices.

In 2022, linerboard prices are still expected to rise year on year, but the increase will narrow. The main reason is that new capacity will successively enter mass production in 2022, increasing supply, so linerboard prices will come under pressure and will find it difficult to continue rising substantially. The main factors affecting the linerboard market in 2022 are: 1. In the first half of 2021, the economy recovered steadily, with all indicators performing well, among which exports played a notable driving role.

1. Raw material waste paper costs are expected to continue rising, but the marginal utility of tight supply is gradually weakening. Coupled with the successive commissioning of foreign recycled fiber pulp projects, the gradual improvement of the domestic waste paper recycling system and the increase in domestic pulp projects, the supporting effect of raw materials will trend downward later on, but in the short term there will still be a certain degree of bottom support. 3. New capacity will be released, bringing relatively great supply pressure. Affected by market conditions, capital conditions and the domestic and international economic environment, the commissioning of new projects has been slightly held back. In addition, large paper companies' investment in linerboard projects is relatively concentrated, and the second half of 2022 to 2023 is a period of concentrated commissioning, so supply pressure will increase noticeably.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378772.html