Dongguan Nine Dragons Discounts to End in September, Why Corrugated and Containerboard Prices Are Being Cut Across the Board in Late August

Last Friday, that is, August 27,

Nine Dragons' Dongguan and Quanzhou bases, Liansheng Paper and Guangdong Lee & Man successively implemented preferential policies on corrugated paper and linerboard prices until the end of the month, offering a discount of 50-100 yuan/tonne, and notified that original prices would be restored on September 1.

September 21 is this year's Mid-Autumn Festival, and late August should be the peak demand season for corrugated and linerboard paper, so why offer discounts at this time? Let us analyze the reasons in detail.

Corrugated paper price trend analysis

Corrugated paper price trend chart, 2019-2021 ↓

From January to August, corrugated paper prices followed a "V"-shaped trend. From early May, corrugated paper prices showed a stable to slightly upward trend, and in August the increase in corrugated paper prices widened further.

In August, the national average price of corrugated paper was 4,101 yuan/tonne, up 579 yuan/tonne from 3,522 yuan/tonne in the same period last year, a rise of 16.44%, and up 2.08% month on month.

But by late August, preferential discount policies appeared frequently for corrugated paper prices, and market demand entered a flat period.

Analysis of the main reasons

1. Recurring public health incidents and extreme weather have had a major impact on the domestic market

In July and August, public health incidents occurred frequently in many parts of the country. As of late August, Yunnan, Jiangsu, Henan, Hunan, Hubei, Shanghai and Beijing were still high- and medium-risk areas. People's travel and transportation were affected to a certain extent, consumption in public places and tourism consumption were significantly affected, and domestic demand sentiment was not strong.

This year, Henan, Hubei, Sichuan, Shaanxi and other places were affected by typhoons and heavy rain, suffering floods; local economic activity was affected and, apart from some relief supplies, demand for other everyday goods declined.

Year-on-year change in total retail sales of consumer goods ↓

In July, total retail sales of consumer goods reached 3.4925 trillion yuan, up 8.5% year on year; up 7.2% compared with July 2019, with an average two-year growth rate of 3.6%. Of this, retail sales of consumer goods excluding automobiles amounted to 3.1578 trillion yuan, up 9.7%. Excluding price factors,

total retail sales of consumer goods grew 6.4% in real terms in July.

1. Overseas public health incidents have curbed the growth of exported goods

Public health incidents in many overseas countries are still escalating and prevention and control measures are inadequate,

Import and export containers are stranded overseas, and poor container circulation has blocked the flow of goods,

which is bearish for indirect exports of corrugated and linerboard paper, with overseas demand weakening.

1. Orders for the Mid-Autumn Festival and National Day holidays are gradually being delivered, with insufficient new orders

As the Mid-Autumn Festival and National Day holidays gradually approach, downstream packaging companies

have gradually completed the delivery of holiday orders, with few regular new orders, so paper mills are still focusing on destocking,

and downstream packaging companies are also relatively cautious in purchasing base paper.

1. At present, orders for the two holidays have basically been delivered,

and paper mills and downstream packaging companies lack orders,

which is bearish for the corrugated paper and linerboard market,

and paper prices still face downside risk during the "Golden September" period.

1. Although waste board paper prices have pulled back somewhat recently, the supply of waste yellow board paper as a raw material has remained tight this year. To ensure normal production, domestic waste yellow board paper prices are unlikely to fall significantly; high raw material costs will keep the downside for corrugated paper and linerboard prices limited, and there are still expectations of increases in the peak demand season in the fourth quarter.

Note from Carton Micro Vision:

This discount runs until August 31, which means that starting today (September 1), paper price policies will be adjusted. According to the latest news from Carton Talk,

Nine Dragons Paper (Dongguan) is canceling its previous price discounts in batches, specifically: on September 1, corrugated paper, kraft linerboard and recycled kraft linerboard were raised by 50 yuan/tonne; on September 8, corrugated paper, kraft linerboard and recycled kraft linerboard will be raised by 50 yuan/tonne.

Whether other bases will cancel their discounts remains to be seen. At present, with demand growth unclear, the industry's overall trend is sluggish and mid- and downstream players remain strongly wait-and-see.

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378148.html