The cost pressure has increased, and the packaging paper industry has issued four rounds of price increase letters within the month

In late July, the packaging paper industry once again received a price increase letter. Recently, several production bases of Nine Dragons Paper (Holdings) Co., Ltd. (hereinafter referred to as "Nine Dragons Paper") and paper giants such as Jiangxi Liwen Paper Co., Ltd. have issued product price increase letters, unanimously announcing that they will raise the ex factory prices of corrugated paper and recycled kraft paper by 30 yuan/ton from August 1st.

According to incomplete statistics from reporters, this is the fourth round of price increases initiated by the paper industry market since July. In the past 20 days, paper companies represented by Nine Dragons Paper have repeatedly called for price increases, with prices of various types of raw paper rising alternately, with a single increase of 30 yuan/ton. However, overall, the implementation of price increases varies in different regions.

Li Li, an analyst in the corrugated paper industry at Shandong Zhuochuang Information Co., Ltd. (hereinafter referred to as "Zhuochuang Information"), told Securities Daily reporters that in July, leading paper companies continued to push up the market prices of paper products, mainly due to the tightening of raw material waste paper supply and the continuous rise in prices, leading to a significant increase in cost pressures in the industry. Driven by cost, enterprises alleviate their operational pressure by raising product prices.

According to statistics from Zhuochuang Information, as of July 21st (the latest statistical date on a weekly basis), the market price of waste yellow cardboard was 1475 yuan/ton, an increase of 15 yuan/ton from June 30th.

The reason for the increase in the market price of waste yellow cardboard in July is that the overall supply of the industry is average, coupled with more rainfall since July, which has affected the trading of waste paper in some areas, resulting in a shortage of overall supply of waste yellow cardboard in the market. Zhuochuang Information's waste paper market analyst Liu Jian told Securities Daily reporters that the purchase price of waste yellow board paper by leading paper companies has steadily increased, helping to slightly warm up the bullish atmosphere in the waste paper market, while also providing some cost support for the rise of finished paper.

From the perspective of market dynamics, leading paper companies in the industry have recently launched sustained upward movements in multiple bases across the country, providing support for the market. Starting from mid to late this month, the enthusiasm of small and medium-sized paper mills to follow suit has also significantly increased, and the scope of follow up has shown an expanding trend. As a result, downstream packaging factories have reduced their raw paper inventory to a low level in the early stage, and some companies have chosen to replenish their inventory in moderation at low prices, which has also provided some support to the market.

The industry believes that the recent series of price increase letters from paper companies, which have raised the ex factory prices of paper products, can be seen as a "counterattack" by the packaging paper industry against the continuously declining market situation since the beginning of this year.

In the first half of this year, the main corrugated and box board paper market in the packaging paper industry continued the supply-demand imbalance pattern since last year, with prices showing an overall downward trend. According to data monitoring by Zhuochuang Information, the average price of corrugated paper in the Chinese market was 2682 yuan/ton in the first half of this year, a year-on-year decrease of 2.44%; The average price of cardboard in the Chinese market is 3616 yuan/ton, a year-on-year decrease of 3.42%. From the perspective of industry profitability, the gross profit margin of the corrugated paper industry in the first half of the year was 9.97%, a decrease of 1.11 percentage points compared to the same period last year; The gross profit margin of the cardboard industry was 18.96%, a decrease of 1.24 percentage points from the same period last year, and the overall profitability of the industry continues to be under pressure.

This is due to the overall oversupply in the industry, "said Li Li, and this situation is expected to be difficult to change in the short term. However, the second half of the year belongs to the traditional consumption peak season, coupled with the continuous efforts of domestic demand expansion policies, which is favorable for the upward trend of paper prices.

In Li Li's opinion, the packaging paper market may show a trend of first rising and then falling in the second half of the year, and the price recovery efforts are not enough to fully offset the decline in the first half of the year. The overall average price will show a downward trend compared to the previous period. From the perspective of industry profitability, due to the linkage effect between raw material costs and paper prices, the overall profit margin of the industry will remain in a low oscillation state.