(www.chinapaperonline.com) By comments of some market observers, large paper and board producers are now leveraging their strength, especially the superior position on savings of fiber cost, to push mid-to-small competitors to the corner in the China market. In barely a week from its first round of price cuts by RMB50-150/mt, Nine Dragons announced a second round of price cut on March 16th. This time, it could be as deep as RMB100-250/mt and affecting multiple grades of paper and board. It won’t be a surprise the move will quickly be followed by other large players.
The price cuts in paper and board came after price declines in recovered paper that began from Southern China in early March. The declines enabled large paper and board mills, especially those who have the privileges of buying recovered paper from overseas under quota at lower prices, to strengthen their cost-effective position over mid-to-small mills. The worsening economic situation outside of China, which will likely reduce demand for goods from China, also prompted large containerboard mills to grab orders from the box converters and consumers.
In the midst of market volatility, people are eyeing at the relatively steadiness in the pulp market. Instead of a straight downward dive, price of market pulp varied in different regional markets in China, with minor dips vs. more gains and under reports from China Customs that the country’s market pulp imports in the first two months of 2020 grew +21.4% from that of 2019 to nearly 4.69 million metric tons! Rising stocks at destination ports seemed to have little impacts on the list price in China’s spot market so far.
For recovered paper, the uncertainties are on generation and collection in the March-April period, now that stocks at most balers have depleted under price pressure. A new round of “RCP hunger” may come sooner and stronger than estimates! The slow recovery in residential collection may help to some extent, but the great uncertainty remains at the generation and collection of commercial and industrial sectors, which contribute to roughly 70% of China’s RCP generation. Slow recovery in manufacturing and business consumption in the country in the short-term may tighten China’s domestic RCP recovery and supply and spur price hikes in the 2nd Quarter.
