(www.chinapaperonline.com) The outbreak of COVID-19 has undoubtedly hit hard at China’s paper-based packaging industry, causing serious reduction in paper and board supply, significant slow-down in logistics, shortages in workforce and rises in production and service costs. Surveys showed operating rates at paperboard mills, for example, nosedived to about 5% in early February and most were still at below-normal runs by mid-February. Under great uncertainties such as the lack of workforce and inconsistent fiber supplies, more market observers remained cautious on the market prospects in March-April, which could trigger a new round of price increases in containerboard. And more mid-to-small paperboard mills could be forced to cease operation and submit themselves for a new round of industry consolidation.
On the other hand, ravage of the virus has stimulated e-commerce activities which subsequently add demand for packaging boxes. Contrary to the traditional low-season for online shopping during the Chinese New Year holiday period, the nationwide at-home isolation from late-January generated huge online shopping for food, drinks, pharmacies and many other things in China! This has dramatically changed short-term data and long-term forecast on increases in packaging box consumption. Reports from China Postal Service said more than 78 million packages – over 50% of them were paper-based packages - were delivered between January 24th and 29th in 2020, surging +110.3% from the same period of 2019! This did not count the huge on-holds caused by logistics and workforce problems under national lock-down to combat COVID-19 during the time.
Long-term, the consensus is that more consumers, especially the younger generation, will not only shop online, but also prefer whatever e-commerce may provide to make life easy and cost-effective. China Postal Service now predicts that corrugated box packages will top 41 billion in 2020. And market analysts see that the number will exceed 72 billion by 2022, taking into account of the latest ban on plastics packaging by the government.
Along with the dramatic growth in corrugated box consumption, market analysts also forecast strong increase in consumption of boxes made of folding box board in food and retail services down the road. Pick-up and delivery services at food and drinks stores, especially large chains such as Starbucks, McDonald, Pizza hut and Hai Di Lao hot pot, all closed their seat-in business and changed to window pick-up and/or delivery service in February, which were welcome by the customers. Many now believe the change may likely become the main business model going forward. Joining by many food, convenient and grocery stores, this has and will significantly expand folding boxboard demand and consumption, market analysts say.
In short, COVID-19 has brought serious damages to China’s economy and the country’s paper industry will go through difficult periods as a result of order cancellation from the board converters in 2020. Long-term, however, more market analysts remain hopeful that China’s paper industry will recover and rebuild its strength through business consolidation, product upgrades and the society’s endorsement of paper to plastics.
