Short-term Downward Pressure on Inventory in December 2023

According to the monitoring of the commodity market analysis system of SunSirs, the overall price of waste paper in Zhejiang Province showed an upward trend in December. On December 29th, the average purchase price of A-grade waste yellow cardboard in Zhejiang Province was 1,616 RMB/ton, an increase of 3.72% compared to the average price of 1,558 RMB/ton on December 1st. The price of corrugated paper is also steadily rising. On December 29th, the average ex factory price of 140g corrugated base paper was 2,832 RMB/ton, an increase of 0.85% compared to the average price of 2,808 RMB/ton on December 1st.

By observing market changes, it can be seen that in early December, the prices of waste paper in Zhejiang region continued to rise, and the domestic waste paper market prices also continued to rise on a large scale. Due to the high production enthusiasm of downstream paper mills and their low inventory of waste paper, the purchase price of waste paper has increased, and interest in purchasing waste yellow cardboard continues to rise, which is conducive to fulfilling the demand for waste yellow cardboard.

In late December, the price of waste paper continued to rise, and prices began to decline towards the end of the month. The continuous increase in prices is mostly due to the expanding range of rainy and snowy weather in various parts of the country, which affects the supply of waste yellow cardboard market in some regions, and the arrival volume of waste paper from paper mills has decreased. As the operating rate of paper mills increases and the demand for waste paper increases, paper mills are increasing the price of waste paper to attract packaging stations to ship. The subsequent price decline was mostly influenced by the high inventory of waste paper in paper mills, which is also a reflection of the cyclical changes in the industry.

By observing market changes, it can be seen that the price of corrugated paper remained stable and upward in early December. With the continuous increase in waste paper prices and the release of price increase plans by large-scale paper mills, the bullish sentiment in the market has been intensified. With the cumulative 2-3 rounds of price increase by paper mills, the bullish sentiment of small and medium-sized paper mills has increased, followed by the rise of second and third tier paper mills, and the market transaction center has slightly shifted upwards. But with the introduction of new production capacity, market supply pressure may increase, which will have a certain suppression on the future price increase of corrugated paper.

In late December, the price of corrugated paper stabilized and then slightly declined. Due to the impact of previous price increases, downstream packaging factories have slightly increased their purchasing enthusiasm, resulting in a month on month decline in enterprise inventory. However, market trading remains mostly stable, with a slight easing in supply and demand relations. Downstream packaging factories have low inventory of raw paper, and in the atmosphere of strong price increases, they are making appropriate replenishment. Subsequently, with the impact of the decline in waste paper prices, the price of corrugated paper slightly declined. In addition, the traditional peak season performance was slightly inadequate due to the lower than expected increase in demand.

The paper analyst from SunSirs believes that the prices of waste paper and corrugated paper are currently weak, mainly due to the end of the peak demand season for finished paper and the decrease in interest from paper mills in purchasing waste yellow cardboard. However, the release of orders for corrugated paper during the Spring Festival was less than expected, leading to a gradual weakening of support for paper prices from holiday consumption. The market mainly consumes raw paper inventory and recovers funds, and it is expected that the prices of waste paper and corrugated raw paper may face downward pressure in the short term.

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