Guotai Haitong Securities Co., Ltd. has released a research report outlining its outlook for July. The report notes that leading paper producers issued price hike notices of 200 yuan per ton effective in early July at the end of June, which is expected to support cultural paper prices. In June, white board paper prices increased month-on-month, underpinned by strong cost-side support. Both containerboard and waste paper prices rose during the month, with manageable supply-side pressure in the containerboard market providing support for price increases. The overall price trend for upstream raw material waste paper was upward; with tight supply, the frequency and magnitude of price adjustments increased, creating a favorable cost environment for base paper. In the wood pulp sector, the average spot market price for imported wood pulp in June showed mixed movements, with trading dominated by rigid demand. The key views from Guotai Haitong Securities Co., Ltd. are as follows:
Cultural Paper: June Quotes Generally Fell, Producers Issue July Price Hike Notices
As of June 26th, the average market price for 70g wood pulp high-white offset paper this month was 4,573 yuan per ton, down 0.87% month-on-month and 11.22% year-on-year. The main factors influencing price trends were: 1) Producer quotes were relatively stable this month, but overall shipments were mediocre; 2) There were numerous instances of production shifts and shutdowns in the offset paper market during the month, leading to a month-on-month decrease in market supply; 3) In the mid-to-late part of the month, some publishing orders began taking delivery, slightly alleviating inventory pressure for producers, but demand from the broader market showed no signs of recovery, causing selling prices to follow the downward trend; 4) Partial declines in the upstream imported wood pulp market provided weak cost-side support for offset paper. Looking ahead to July, the price hike notices issued by leading producers at the end of June for early July are expected to support cultural paper prices.
White Board Paper: Strong Cost Support in June, Paper Prices Rise Month-on-Month
As of June 26th, the average monthly transaction price including tax for 250-400g sheet-fed white card paper was 4,028 yuan per ton, up 0.98% month-on-month but down 1.44% year-on-year. Reasons for this month's price movement include: 1) Paper prices were at low levels, yet cost pressures persisted, leading mills to maintain a stance of promoting price increases; 2) To mitigate the situation where their own selling prices were inverted against costs, some traders raised paper prices under pressure in the first half of the month; 3) Market demand remained in a seasonal lull, creating some resistance in passing on market price increases downstream.
Containerboard: Prices Rose Continuously During the Month, Transaction Prices Increased Rapidly
As of June 26th, the average monthly price for Chinese containerboard was 3,734 yuan per ton, up 2.64% month-on-month and 6.66% year-on-year. The main drivers for this month's price changes were: 1) Mill ex-factory prices continued to rise, enterprise inventory levels were not high, and the volume of imported paper arriving at ports was relatively low, resulting in manageable supply-side pressure that supported price increases; 2) Overall order volumes for downstream packaging plants were slightly weaker compared to the previous month, but the strong market sentiment for price hikes maintained the procurement pace for base paper; 3) The overall price trend for upstream raw material waste paper was upward; with tight supply, the frequency and magnitude of price adjustments increased, creating a favorable cost environment for base paper operations.
Waste Paper: Domestic Waste Paper Prices Rose Month-on-Month, Inventory Slightly Increased
As of June 26th, the average monthly price for waste corrugated paper (OCC) was 1,768 yuan per ton, up 5.62% month-on-month and 20.09% year-on-year. The primary reasons are: 1) Frequent rainy weather this month led to average collection volumes at packing stations and a weak willingness to sell, resulting in an overall tight supply of waste OCC; 2) Downstream paper mills maintained a good operational intent, keeping consumption of waste OCC at high levels, with overall strong demand; 3) The procurement prices of leading paper enterprises aimed to stabilize and promote increases, coupled with a strong hoarding inclination at packing stations, jointly fueling market bullish sentiment.
Wood Pulp: Downstream Demand Expansion Relatively Limited, Softwood Pulp Prices Slightly Rose
The average spot market price for imported wood pulp in June showed mixed movements, with trading dominated by rigid demand. Key influencing factors included: 1) The price of the main pulp futures contract on the Shanghai Futures Exchange fluctuated downward, combined with persistently weak downstream demand and a new round of price declines in Chilean offshore quotes, collectively putting pressure on the average price of imported softwood pulp; 2) The imported hardwood pulp market was caught in a confluence of negative factors including a decline in the price ratio to softwood pulp, expectations of low-priced domestic hardwood pulp, loosening Chilean offshore quotes, and sluggish demand, leading to a subsequent price decline; 3) Rising prices for packaging paper boosted demand for imported unbleached kraft pulp, making it the only category with a month-on-month increase in average price this month; 4) Imported chemi-mechanical pulp faced increased sales pressure due to competition from low-priced domestic pulp, leading to a simultaneous weakening in quotations.
Risk factors include disruptions to overseas wood pulp supply chains and weaker-than-expected downstream consumer demand.
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