Continuing Price Decline in White Cardboard: When Will the Market Bounce Back?
The white cardboard sector experienced a significant demand surge in the previous cycle due to consumer upgrades, substitution for whiteboard, and restrictions on plastic usage, which propelled major paper companies like Chenming to increase prices, benefiting both volume and pricing.
Price Trends and Market Analysis
Since March 2021, white cardboard prices have been in a downturn. Recent reports indicate that since the start of 2023, prices have fluctuated below the cost line, leading to weak profitability for businesses. This year, despite price fluctuations in primary raw materials like wood pulp, the costs for white cardboard have continued to rise.
To stabilize profit margins, the paper industry has initiated multiple rounds of price increases this year. Leading paper companies such as Chenming Paper and Sun Paper announced a price hike of 100 RMB per ton for cultural paper products starting February 1, with another increase of 200 RMB per ton from March 1. Despite these efforts, including a further round of increases in April by major players like Chenming Paper, Sun Paper, and APP (Gold East Paper), the market did not achieve a comprehensive rise due to limited demand release.
Capacity and Market Dynamics
In 2023, domestic white cardboard capacity grew by 11.21% year-over-year, indicating the market is still in an expansion phase. The lack of significant improvement in demand, combined with new mills entering the market at low prices to capture market share, suggests there might be further room for price reductions.
“April, traditionally a low season for demand, might exacerbate the supply-demand imbalance in the white cardboard market, likely leading to price pressures,” market analyst Kong Xiangfen told Securities Daily. Additionally, the continuous price decline in corrugated and boxboard paper in March suggests a gloomy outlook for April prices.
Industry Challenges and Opportunities
Despite March traditionally being a slightly busy season for white cardboard, market activity in early March was decent, but by late March, as early orders were completed and new orders were not released sufficiently, the risk of price declines increased. Heading into April, further weakening in market demand is anticipated, possibly accelerating the arrival of the off-season.
So, when will the “spring” for white cardboard and related packaging paper industries arrive?
Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, during an interview with Securities Daily, stated that over-supply is the primary challenge facing the white cardboard industry. “Under this supply-demand scenario, the paper industry faces intense cost pressures, fierce market competition, and declining overall profitability levels.”
Bai Wenxi suggested that paper companies could enhance their market competitiveness by optimizing production management, improving product quality, developing new products, expanding markets, and increasing production efficiency. Additionally, optimizing sales strategies and reducing inventory could help lower operational costs.
Zhang Xinyuan, head of research at Ke Fang De Think Tank, mentioned to Securities Daily: “Domestic consumer demand is gradually recovering. Looking at development trends, there is hope for stable growth in the near future. As consumption warms up, downstream demand will stabilize gradually, which should improve the profitability of the paper industry.”
Chenming Paper noted in its 2023 annual report: “With the expected decrease in wood pulp prices and the recovery of paper product demand in 2024, there are signs of gradual profit improvement. With strong expectations for new capacity release and potential further decreases in raw material and energy prices, the industry might continue its recovery momentum.”
International Expansion
Notably, the Chinese paper industry’s efforts to expand internationally are accelerating, with domestic paper companies increasingly active in overseas layouts. According to statistics from Paper Lead Future Net, as of 2023, domestic paper mills have acquired or added approximately 4.99 million tons of corrugated and boxboard paper capacity abroad, with 84% of this capacity located in Southeast Asia and 16% in Western countries. Leading companies like Chenming Paper, Sun Paper, Nine Dragons Paper, and Mountain Eagle International have been actively pursuing international expansion.