In 2019, find out these three points and talk to customers about paper prices.

Source: Packaging Zone

In 2018, when paper prices were easy to fall and hard to rise, industry companies that had suffered a lot with customers and accepted price cuts successfully saved orders. Be aware that during periods of declining demand, there is probably nothing more valuable than an order. I will enter the new contract year immediately. How should packaging and printing companies talk to customers about paper prices?

Before we make a decision, it is necessary to first understand the three major determinants of the 2019 price trend.

The situation of oversupply of the original paper remains unchanged

A report by CCTV Finance in November truly revealed the icy cold of the paper industry. The prices of national waste, raw paper and carton fell, but the inventory was seriously oversupplied. The price of corrugated paper fell from 5,100/ton in May to the current 3,700/ton, a drop of nearly 30%, and the price of cardboard paper fell from 5,600/ton to 4,000/ton, a drop of 29%.

â–¼The price trend of each paper type (/ton)

Source: Zhuo Chuang Information, Soochow Securities Research Institute

In December, the paper mills were shut down on a large scale, but the situation of oversupply of raw materials was unable to change. In 2019, the situation of oversupply is likely to continue to deteriorate.

Goldman Sachs (the world's leading investment bank (Goldman Sachs)) released a report saying that the perception of the Chinese paper sector has turned prudent, due to the increase in new production capacity and the slowdown in consumption, which has led to weak demand this year and next. It is expected that the supply and demand of packaging paper will deteriorate significantly. Goldman Sachs predicts that due to increased imports, the capacity utilization rate of the packaging paper industry is expected to fall from 83% last year to 75% this year and further fall to 70% next year.

â–¼ Xiaobian statistics of 2018 expected investment in packaging paper production capacity (incomplete statistics):

According to some data, due to the wave of popularity last year, paper mills have been overestimating the market's prosperity, resulting in an oversupply of output. By December, some industry associations pointed out that raw paper stocks increased by 40% year-on-year. Especially in July and August, the paper mill was very optimistic about the upcoming National Day, Mid-Autumn Festival and Double 11 orders. The factory was full of horsepower production, but the result was very disappointing. The expected peak production season was lost, which aggravated the situation of oversupply.

A paper industry expects a 10-15% reduction in domestic packaging paper production in 2018. The reduction in imported base paper will result in some discounts, but in fact the demand for packaging paper is significantly reduced by 20-35%, which means In 2019, raw materials will face greater de-stocking pressure.

The downward trend of the cost integration of various factors in the paper industry remains unchanged

It is necessary to carefully analyze the trend of the mutual cost of the paper industry. Among the costs of the paper industry, 60%-70% are raw materials, 10%-15% are energy sources such as coal and electricity, and the rest are labor, depreciation and other auxiliary materials. Waste paper is about 1.2 tons of waste paper to produce 1 ton of base paper, and pulp is about 0.8 tons of wood pulp to produce 1 ton of base paper.

In 2018, affected by the foreign ban, raw material volatility was fierce, which aggravated the turmoil in the paper packaging industry. But the final result shows that the total import volume is similar to last year. In 2019, the first batch of external waste approvals released 5 million tons of days, indicating that the warning of raw material shortage will no longer exist. In 2019, the RMB exchange rate is likely to continue to decline, and even the possibility of fleas is not ruled out. However, considering the weak demand and the amount of inventory, the first batch of 5 million tons of imported waste is enough to cover the year-round demand for foreign waste in the packaging paper industry next year. The significance of consuming expensive foreign exchange for high-priced imports is actually small.

Due to the increasing pressure of survival, the waste paper shell has become a valuable resource for the bottom people to break the brain and robbing. This not only greatly promotes the recycling of waste, but also reduces the cost of recycling. In addition, the demand is sluggish, and the national waste is expected to continue to fall in 2019. Low paper price.

In terms of energy, US-led oil has experienced a decline of more than 40% in the past month and a half, which is very beneficial to the high-energy paper industry, but the 2019 exchange rate decline may offset these declines.

Overall, in 2019, national waste is likely to continue to decline, and even long-term low-level operation; energy costs have dropped significantly; environmental protection may be loosened with economic downturn; labor costs account for too small; therefore, 2019 packaging paper industry Cost integration should be declining.

Wrapping paper demand or will accelerate attenuation

In 2018, the decline in the demand for packaging paper was the most impressive year for printing and packaging people, and its experience even exceeded that of 2008. In 2019, affected by the shift of foreign orders, Sino-US trade friction, the decline of domestic demand and the excessive excavation of the iron base, the accelerated decline in the demand for packaging paper is inevitable.

In Tianjin, Samsung has closed a 3,000-person mobile phone factory. As Samsung's largest mobile phone production base in India is completed and put into production, its last mobile phone production base in Huizhou has no value. Not long ago, affected by the domestic boycott of Apple, Foxconn and Asustek both accelerated their overseas capacity expansion, and the Apple industry chain will accelerate its outward migration in 2019. In Shenfu Industrial Park, the only Chinese park in Haiphong, Vietnam, the number of Chinese companies visiting this year is about three to five times that of the same period last year. Since June, it has received three to four Chinese business delegations every day. And these companies have shown anxious emotions without exception.

China's auto industry is the third largest industry in terms of packaging demand in addition to e-commerce in recent years. However, for the first time this year, there was a general negative increase. In November, it fell by as much as 18.0% year-on-year. The future situation is not very optimistic. The demand for packaging paper in the automotive industry has fallen sharply in 2019 and seems to be inevitable.

Let's talk about the real estate industry, which involves 33 industries and is the backbone of China's packaging printing industry in the past decade. After the completion of destocking in the third- and fourth-tier cities in 2018, under the policy of not living in the house, it means that this behemoth will gradually turn off, and the most influential, in addition to local finance, there are 33 industries including packaging and printing industry. .

Some people say that 2019 is the best year for the next decade, but for the packaging and printing industry, it is the most difficult year. Because of the combination of various unfavorable factors, the winter of the paper industry will be extremely cold. Therefore, if you can bind a few high-quality customers, you will have a chance to survive the long winter in this wave of polar cold waves next year.

With this information, how to talk to customers about paper prices, I believe that your heart is more generous.

Editor in charge: Ge Hongyan

This article is posted on the website for the purpose of transmitting more information and does not imply endorsement of its views or confirmation of its description.

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