Corrugated board prices surge in China ahead of Singles’ Day
CGTN
["china"]
Share
Copied
Every year, Chinese consumers spend quite a chunk of money on Singles’ Day shopping extravaganza in November. This year is expected to be no difference, only that shoppers may have to brace themselves for a higher cost of corrugated board as supplies of the raw material shrink.
Corrugated board prices surged to over 5,500 yuan (828 US dollars) per ton in October, up from around 3,000 yuan (451 US dollars) in July last year.
The country's largest corrugated board maker, Nine Dragons Paper Holdings, raised prices in mid-September for the fourth time in two months.
Prices of corrugated boxes have nearly doubled since the end of August: a 32 (L) x 22 (W) x 14 (H) shipping carton cost 1.3 yuan before jumping to 2.7 yuan, a 39 (L) x 39 (W) x 50 (H) box now has increased to 6.3 yuan from 3.5 yuan, according to a retailer on Alibaba Group’s Taobao shopping site.
What’s behind the prices hike?
VCG Photo
VCG Photo
China’s banning of imported waste is widely regarded as the leading factor in the recent rise in corrugated board prices.
A major raw material for the corrugated board production is waste paper, and relatively cheaper imported waste paper is undoubtedly attractive to domestic corrugated board makers.
China, the world's largest paper recycler, produced some 63.3 million tons of waste paper pulp in 2016, according to the China Paper Association (CPA), with some 24 percent produced from imported waste paper.
China imported 27 million tons of waste paper in 2016, with 25-30 percent unsorted waste paper.
This may soon change as the country indicates it will impose an outright ban on unsorted waste paper imports.
On July 18th, China told the World Trade Organization that by the end of the year, it will no longer accept imports of 24 categories of solid waste, including unsorted waste paper, as part of a government campaign against “yang laji,” or “foreign garbage” and environmental pollution.
In the second half of this year, authorities have tightened quotas for imported waste paper to cut back on allowed levels of contaminants markedly.
Meanwhile, the government is toughening paper manufacturing regulations to address air pollution and other environmental problems. Small- and mid-sized paper mills have been shut down for failing to comply with greenhouse gas emission restrictions and other regulations.
This has tightened supply amid increased demand, sending corrugated board prices skyrocketing.
A box shortage is feared
VCG Photo
VCG Photo
There has been concern over looming box shortages since corrugated board prices began rising. If there are not enough boxes to full orders, e-commerce may take a hit.
In China, e-commerce services from Alibaba Group and other companies have risen sharply.
About 31 billion packages were delivered in China in 2016, up 50 percent from the previous year, according to a statement of the online retailer JD.com.
Alibaba’s upcoming Singles’ Day online shopping festival on November 11, which posted more than 120 billion yuan (18 billion US dollars) in sales last year, is heavily reliant on such packaging.
As imports tighten, recycled paper collection businesses are becoming more prevalent in the country, which is in line with the regulator’s goal to reduce pollution.
Opportunities for large corrugated board makers to expand
Zhang Yin, chairperson of Nine Dragons Paper Holdings /VCG Photo
Zhang Yin, chairperson of Nine Dragons Paper Holdings /VCG Photo
The constrained supply, caused by the government’s campaign against “foreign garbage” and environmental pollution, may take a toll on small- and medium-sized paper mills but favors large corrugated board makers with plenty of free cash flow to expand existing plants, such as one of China’s largest packaging and paper producers.
Nine Dragons Paper Holdings, listed on the Hong Kong Stock Exchange, is expected to realize a revenue jump of 23 percent this year to over 44 billion Hong Kong dollars (about 5.7 billion US dollars).
The company operates with low-profit margins and carries plenty of debt, which under normal circumstances are worrisome traits, but in an upswing, act like accelerators.
Its chairperson, Zhang Yin, said at a recent press conference that the price of recycled paper “wouldn’t be cheap” in the long term.
She didn’t give specifics except to say labor costs had also risen, and that the firm would increase the collection of waste paper within China given the slowdown in waste imports.