RMB devaluation, environmental protection pressure, rise of coal transportation costs and other factors continue to push up the price, and in many places "a piece of paper is difficult to find". But the crazy paper price will continue.
This is a reshuffle in the paper making industry in China and that is the trend. The oligarchs in paper industry will benefit.
“More difficult to find a paper”
The paper mills tried everything to sell papers before, but now the buyers are rushing to purchase papers. In just a few months, the paper industry has a dramatic reversal.
"You should take the cash to compete with other buyers. Some paper mills have to raise the initial payment to 120% of the full payment. Otherwise the order will not be accepted by the manufacturers. In past year ends, the inventory is approximately 7,000 tons after the destocking, but now the inventory is only 3,000 tons in November.
After more than three years of downturn, the recovery rebound of paper prices seems reasonable. But the manager from Jiangsu Zhenjiang Dadong Paper admitted that the madness of the paper is still beyond his imagination.
The buyers are rushing to the paper mills though some mills even raised the price eight times in one month. At the same time, even if the market is in short supply, there are still some paper mills do not dare to take orders. "He told Oasis fabrix," Now that as the market is still in short supply and the industry is generally bullish sentiment, so many companies are hesitant to take orders, worrying lest the order has not been put into production here, the price in upstream suppliers hikes.
In Ningbo city, the situation was highlighted: “a paper is also difficult to find”. A manager from Ningbo Gaodu paper said that due to the shortage of the upstream supply, the local paper mills even went far away to Sichuan province to find and purchase raw materials. Since October, the paper market has opened up the skyrocketing mode and the production costs have risen by 30%. The cost was passed on from party to party. And now the gray board price has risen by more than 1,000 RMB per ton, kraft paper price has risen by nearly 2,000 RMB per ton and approx. 1,000 RMB for white papers.
"Though the price is soaring up in all parties, some downstream carton manufacturers and traders still have a hard time. Some big manufacturers can benefit from their strong financial capacity while some small factories have to maintain their customer relations at their own loss." He said that at present it takes about two months for paper mills to order and purchase from upstream suppliers but while the price increases more and more intensively. Thus it became more and more difficult to transfer the cost the downstream parties.
As more and more foreign papermaking enterprises tend to use waste paper as raw materials for production, since 2016, the rising tendency of price first occurs in United States waste paper market and then in China. Since mid-October 2016, the country's price of waste yellow board was raised for 6 times from 1220 RMB / ton up to 1,400 RMB / ton with the cumulative increase of 15%. As the last products to raise the price in the upstream paper industry, the base paper prices from the beginning of December also began to enter the upward channel. According to record monitoring, the major domestic base paper manufacturers have made two upward adjustment in price by approx. 400 RMB / ton. Moreover, the third wave of price rises have been ready to come out.
High costs will push up the price of paper
Once China paper making industry was beset by excess capacity, but now “a paper is hard to find”. And perhaps the situation will continue with the price adjustment letter flying in the sky.
"The production of 1 ton of paper needs at least 1.03 tons of pulp. From late November to now, wood pulp prices have risen at least 800 RMB / ton, but the base paper prices rose only by an average of 400 RMB / ton. There is large potential for paper prices continue to rise." We analyze that once the domestic papermaking was occupied by straw-based pulp material but the production of which results in great environmental pollution. The straw-based pulp has been expelled out of the market as a result of more strict regulations in environmental protection in recent years. The wood pulp become the main raw material instead for paper making. Under the recent trend of the RMB devaluation, the cost of imported pulp get a substantial increase.
"Now the central parity of the US dollar against the RMB has reached 6.95 with the appreciation of about 6% relative to the beginning of the year. Although the devaluation of the RMB helps domestic paper enterprises to participate in global competition, but for imports of wood pulp and waste papers, the cost will rise. We note that since the price rise of wood pulp in the beginning of December, the wood pulp price rise again for softwood & hardwood pulp by approx. 150-350 RMB / ton. At present, near the end of the year, part of the wood pulp trade enterprises has stopped making offers due to financial settlement. The pulp price rise on the one hand is affected by the external buying demand, on the other hand is also affected by changes in the RMB exchange rate. In addition, since the second half of the year is the traditional demand season for papermaking, along with the short supply of wood pulp, these factors all lead to frequent price changes to high levels.
In addition to wood pulp, the rise of coal, freight and other costs are also keeping their pressures on paper-making enterprises and the paper price.
"This year the freight rose badly. We have just signed a contract with the logistics company, and the freight rates have risen by 25% compared to the same period." The manager told us, from October 2016, according to the new revised "The Provisions of Road Traffic Regulations", the penalties for overloading overrun unprecedentedly. The loading capacity of one 13-meter-long truck has to cut down to 30 tons from 42 tons of waste paper which directly results in the transport costs rise by at least 200-300 RMB / ton. At the same time as South Korea's largest shipping companies closed down as well as the price rise of petrol and diesel, this year's maritime market is also very chaotic with a substantial reduction in transport vessel and high prices. Usually it takes approx. 10 days voyage by sea from Shanghai to Guangzhou, now it takes 15 days.
He said that the coal price has almost doubled since mid-March under the policy of de-capacity by the government. Driven by commodity price rise of such as coal, even the price of plastic films for the packaging of tissue papers has risen by 3,000 RMB / ton. Paper and other industries are facing the situation of cost surge.
In this winter, the north China is covered under the ever strongest smog & haze. A storm of environmental protection and production limit starts. As a heavily polluting industry, the paper making industry as well as the paper price is seriously affected.
"For example, in Hebei Province, a heavily polluted major manufacturing area of papers, the government maintains a ban on paper production for environmental protection through this winter. 30 major paper mills in the area are arranged to take their turns to stop and start production which leads to the price soar of liner base papers. It is said that the paper mills of less than 50 tons production capacity are all shut down which opened the window for paper price rise. From the end of October, liner base paper prices raised from 5800 RMB / ton up to more than 6600 RMB / ton now. In the situation of rise in costs and decline in production capacity, the paper price will maintain in high level in the next period of time.