In 2023, pulp prices first suppressed and then rose. In the first half of the year, there was a large-scale increase in overseas production capacity, and a large amount of supply side goods were sent to China to suppress prices, breaking out of the 2000 point decline. In the second half, supported by demand, there was a fluctuating 1400 point rise. So how to interpret the price of pulp in 2024 and whether it will continue to rise? Please refer to the report breakdown for details. What impact will the price trend of pulp in the new year have on the market of custom jewelry paper packaging box wholesale ?
The large-scale production capacity deployment in 2023 has caused market concerns about the spot pressure caused by sufficient supply of goods. The negative impact of sufficient supply in 2024 has been fully digested, and there are not many bright spots in the overall supply side, namely a slight increase in broadleaf pulp production capacity, while coniferous pulp production capacity remains unchanged. It is expected that global shipping volume will increase slightly. The Eurozone economy may experience a turning point in the first half of next year, and it is expected that the issuance of Chinese stocks to alleviate inventory pressure will be reduced for domestic use. Therefore, the volume of shipments to China throughout the year tends to be normal, with a slight increase. The decline in paper prices in 2023 has played a regulatory role in stabilizing and decreasing prices for global custom jewellery packaging wholesale.
In terms of domestic demand, China plans to invest approximately 5 million tons of paper production capacity in 2024. The demand for double adhesive paper and household paper continues to grow steadily and healthily, while copperplate paper and white cardboard maintain their current state.
The initial bearish situation on the supply side has basically been eliminated, and the subsequent prices are supported by demand. It is expected that the overall focus of pulp prices will shift upwards in 2024.
1. Market Review
In 2023, pulp futures showed a trend of first suppressing and then rising. Over a period of three months, they emerged from a peak of 6800 after the Spring Festival and experienced a smooth unilateral trend, falling all the way to around 5000, entering a stage of fluctuating and rising in July. This period of decline has brought positive news to major jewellery brands in terms of packaging, with many brands planning ahead for demand jewellery packaging wholesale in the next six months to a year.
The first stage of the market is from the beginning of the year to the end of April. Due to the optimistic expectation of gradually improving demand due to the relaxation of epidemic prevention policies in the market, prices slightly increased before the Spring Festival. After the holiday, demand fell short of expectations, and against the backdrop of large-scale deployment of broadleaf pulp production capacity abroad, concerns about a significant increase in global production capacity have increased. The price of broadleaf pulp has driven the price of coniferous pulp down. In addition, while demand in Europe has remained low since the end of 2022, demand in the United States has gradually weakened. After global pulp inventories reached a high level, a large amount of pulp was sent to China, with sufficient available spot goods and port inventories, putting pressure on domestic pulp prices.
Entering May, China has entered the off-season of the industry, and the spot price of broadleaf pulp has dropped to a low price of around 4000 since 2020. The absolute low price, coupled with the continuous low raw material inventory of some domestic paper mills, has promoted a round of replenishment of broadleaf pulp raw materials, driving up the spot price of broadleaf pulp. Starting from the end of May, the price of Brazilian broad-leaved pulp and gold has risen twice, each by $30. At the same time, the depreciation of the Chinese yuan has accelerated, increasing import costs. In the early second quarter, large-scale purchases of European pulp gradually arrived at ports, and the monthly arrival volume of coniferous pulp was close to a five-year high. Port inventory was backlog, and there was sufficient circulation of goods, resulting in low consolidation of futures prices.
Starting from early July, overseas manufacturers announced a series of production cuts and shutdowns, boosting market sentiment. At the end of July, Chilean coniferous pulp manufacturers withdrew their previous low price quotations and increased their August quotations by $10. Starting from September, the traditional peak season of the paper industry has arrived, and downstream demand has improved from several perspectives, promoting the demand for raw material replenishment. This is the main reason for this period of the market: paper mills have started using low-priced raw materials prepared before, and the profit situation has improved, resulting in good export orders for finished paper; The traditional peak season for finished paper has arrived; A large amount of new paper production capacity needs to be stocked at the end of the year.
After the National Day holiday, there were no new growth highlights in demand, and pulp prices fell. The appreciation of the Chinese yuan offset the previous increase in the external market, weakening the cost support effect. Macro level fiscal policy stimulus still requires time, market sentiment is pessimistic, and terminal demand has not continued to improve month on month. There is sufficient circulation of goods in the market, and some businesses are offering discounts to sell, resulting in light market transactions that are more in demand.
2. Supply side 2.1 Large pressure on new production capacity of broad-leaved plants
The planned production capacity of commercial pulp for this year has been put into operation on time. According to public data, the newly added broadleaf pulp production capacity mainly includes 1.56 million tons in Chile, 2.1 million tons in Uruguay, 350000 tons in Brazil, and 1.5 million tons of coniferous pulp that can be converted from Finland. According to the six-month ramp up of production capacity, all new production capacity will reach production in the first quarter of next year, which will cause long-term broadleaf pressure. Combined with the announced closure plan of the pulp mill, the production capacity of commercial coniferous pulp will decrease by about 150000 tons in 2023, a month on month decrease of -0.6%, and increase by about 520000 tons in 2024, a month on month increase of+1.9%; In 2023, the production capacity of commodity broadleaf will increase by about 2.4 million tons, a month on month increase of 7.8%, and in 2024, it will increase by about 1.4 million tons, a month on month increase of 4.3%.
From January to August 2023, the global production of coniferous pulp reached 15 million tons, a cumulative year-on-year increase of 0.6%, which is basically the same as last year. The continuous decline in production in the second quarter compared to the previous period is related to the pulp mill's proactive destocking due to high inventory.
80% of the global broadleaf pulp is produced in South America. From January to August 2023, the global broadleaf pulp production was 17 million tons, a cumulative year-on-year increase of 5.2%. The new production line has low production costs, high profit margins, and is more competitive.
When calculating supply side production, it is also necessary to pay attention to changes in unplanned shutdowns. The impact of unplanned shutdowns on global wood pulp in 2023 is the highest in nearly five years, affecting production of 2.2 million tons, with half of it being adjusted temporarily based on market conditions. Unplanned shutdowns of approximately 1.8 million tons of coniferous and broadleaf pulp account for 3% of the total commercial pulp production capacity.
2.2 sluggish demand from Europe and America, increasing shipments to China
The main production area of broadleaf pulp in South America is not a major consumer country, and the increase in production capacity will reflect the total export volume; The main producing regions of coniferous pulp, North America and Europe, have increased their exports to China during periods of low domestic demand and stockpiling. The export proportion of Finnish coniferous pulp, Chilean and Brazilian broadleaf pulp to China is increasing. In addition, due to the sluggish overall demand market, there has been a decline in consumption across various categories, which has seriously affected the packaging industry's demand for paper. The jewellery industry has also been affected. The custom jewellery packaging wholesale factory that can survive this year are all jewellery paper packaging wholesale factory that have been operating for many years and have a certain strength foundation.
The high inflation in Europe has reduced people's willingness to consume, and European pulp consumption has been affected by the overall economic environment in Europe, weakening from the fourth quarter of 2022 and continuing to be sluggish until August 2023. At the same time, port inventories have remained at an absolute high level in the first six months of this year, which has been in place for 20 years. The cumulative supply of goods from European ports began to flow outward in the first half of the year, with a cumulative export of 1.85 million tons, exceeding the five-year average by 20%, while increasing the proportion of exports to China.
From a historical perspective, the demand for cultural paper terminals in Europe and America has declined rapidly, and the recovery is relatively slow, often requiring a process of four months. At present, terminal consumption in Europe has not improved, and the upward trend of pulp prices in Europe mainly relies on the transfer of goods to China to support pulp prices. Paper mills have taken the initiative to shut down and reduce production to support paper prices. The European Central Bank's interest rate hike is coming to an end, and the European economy may experience a turning point next year. The inventory of European ports has dropped to a low point in 2022, and the production destocking cycle may end. The first half of next year will enter the replenishment phase. At that time, the proportion of shipments to China will gradually decrease, alleviating certain import pressures.
2.3 High import volume and high proportion of needle leaf inventory in ports
From January to October 2023, China imported a total of 7.62 million tons of coniferous pulp, a year-on-year increase of 28%, and 13.28 million tons of broadleaf pulp, a year-on-year increase of 24%. The proportion of coniferous leaves in port inventory gradually increased, and some of them were stored in the form of warehouse receipts in the port. Exchange inventory reached a historical high of 450000 tons. According to export shipment data, it is speculated that the arrival volume in the first quarter of next year will remain at a high level.
3. Demand side 3.1 Large scale expansion of domestic paper production capacity
According to incomplete statistics, the newly added paper production capacity in China in 2023 is 3 million tons of cultural paper, 2.5 million tons of household paper, and 6.4 million tons of white cardboard. The total production capacity of the four major paper types has increased by 20% compared to 2022. The production of new equipment has led to an increase in paper production for a period of time. From January to October 2023, the cumulative production of the four major paper varieties was 30.85 million tons, an increase of 12% from 2022. The growth rate of production is the fastest in 17 years, with double adhesive paper and household paper performing the best. In 2024, it is planned to add 1.15 million tons of cultural paper, 500000 tons of household paper, and 2.6 million tons of white cardboard. At present, the market production capacity of double adhesive paper and white cardboard has almost reached saturation, and the speed of new production capacity has been increasing year by year. The growth rate of production is slower than that of production capacity, and the operating rate has been decreasing year by year. But from the perspective of operating rate, it is predicted that the growth rate of paper production will be less than 5% next year. Assuming the operating rate is the same as in 2023, based on the production formula of finished paper, the addition of new equipment will bring about an additional demand of 300000 tons for coniferous pulp and 900000 tons for broadleaf pulp. In addition, the supporting self-produced broad-leaved pulp production capacity is 3 million tons, offsetting some of the demand for externally purchased pulp. ITIS Customized Jewellery Packaging Box Wholesale Factory has over 20 years of experience. In this round of paper price decline, we have also seen opportunities. We have invested a large amount of money to purchase commonly used paper in jewellery box packaging wholesale, such as gray board, double copper, white ox, black ox, etc. We have all purchased large quantities of inventory. We believe that in the future, when the global market recovers, we can still provide our customers with high-quality and affordable factory jewellery packaging wholesale.
3.2 Domestic demand gradually recovers
With the restoration of production and living order, the demand for Party building materials printing, office paper, and outdoor tourism and catering has become more elastic, leading to an increase in demand for double adhesive paper and household paper; Copperplate paper is mainly used for journal brochures, and this demand is gradually being replaced by online reading; White cardboard is mainly used for packaging drugs, food, tobacco, and alcohol. As of October, the cumulative retail sales of tobacco and alcohol consumption increased by 10.3% compared to last year. However, due to its proportion of about 15%, the demand for total white cardboard has not been boosted significantly. From January to October 2023, the cumulative consumption of double adhesive paper increased by 15% year-on-year, and the cumulative consumption of household paper increased by 25% year-on-year.
When pulp prices fell in the first half of the year, paper mills saw stronger processing profits, higher production willingness, and better demand for finished paper at the end. However, paper companies did not have a strong willingness to replenish raw material inventory, leading to a decrease in raw material inventory to a low level. As pulp prices continued to decline to absolute levels, paper consumption continued to rebound, promoting paper companies to replenish raw material inventory that had been consumed to a low level. In the second half of the year, the market has optimistic expectations for terminal consumption, and paper companies have shifted their finished product inventory to channels, resulting in a significant reduction in inventory pressure for paper mills. Next, we will focus on the pulp consumption increased by paper mills through increasing production and replenishing finished product inventory. There are currently no new growth highlights in terminal demand, and we will follow economic expectations to slightly increase and maintain the previous level.
3.3 Strong export of finished paper
From January to October 2023, the cumulative net exports of the four major paper varieties reached 2.81 million tons, an increase of 2.3% from the same period last year and a new five-year high. Among the main export destinations: Southeast Asia has strong economic growth, European paper mills have low production profits, and have implemented shutdown to raise paper prices. Insufficient demand is supplemented by imports. It is expected that the export volume to Southeast Asia will continue to increase in 2024, while the export volume to Europe will decrease. The total export volume of paper will maintain or slightly increase.
4. Supply and demand balance sheet
It is expected that the global shipment of commodity pulp will reach 58.06 million tons in 2024, a slight increase of 1.8% compared to 2023. The economies of other regions around the world have recovered, and the proportion of pulp sent from Europe to China has decreased, with a slight increase of 3% compared to the previous month.
5. Outlook for 2024
Supply side: The global production capacity of coniferous commodity pulp is expected to increase by 520000 tons, and the production capacity of broadleaf commodity pulp is expected to increase by 1.4 million tons, with little change compared to previous years. Global shipping is expected to remain stable. In 2023, the European variables were relatively large, and the shrinking demand led to a large amount of pulp being sent to China. The situation will end in 2024. With European inventories already low to the same period in previous years in October, it is expected to start the replenishment cycle in the first quarter of 2024 to reduce the flow of pulp to China. The cost of self-produced pulp for 23 years is higher than that of imported pulp. It is expected that when the price of imported pulp increases in 24 years, the amount of self-produced pulp will slightly recover. The overall domestic supply is steadily increasing.
On the demand side: In 2024, domestic paper mills will have a production capacity of 4.25 million tons, which will provide some support for demand. From the perspective of domestic demand by paper type, it is expected that the demand for double adhesive paper and household paper, which are closely related to the economy, will increase slightly, while the demand for copperplate paper and white cardboard will remain stable. The white cardboard market is already saturated, but there are still 2.6 million tons planned to be put into production in 2024, which puts great pressure on prices and production profits, and may have some pressure on production. At present, the inventory of cultural paper and white cardboard enterprises is at a low level in previous years, and the first half of 2024 may enter a replenishment cycle. In terms of net paper exports, the increase in exports to Southeast Asia compensates for the decrease in exports to Europe, thus maintaining stable or slight growth.
Viewpoint: Domestic pulp prices are mainly based on extreme pricing, and the bearish effects of high shipping have been basically released. Demand in Europe and America is expected to increase, while domestic demand is steadily growing. It is expected that the overall focus of pulp prices will shift upward next year.
Multi cycle technical analysis:
Monthly Line: From a perspective of a large cycle, it can be seen that this variety is in the midst of a major correction wave since the bull market cycle that started at the bottom in 2020, with a triangular convergence shape. After more than three years of operation, the shape is fully constructed and is about to complete the impact on the upper boundary of the triangle. From a strategic perspective, the 5830 line is the central axis for fluctuation balance. After breaking through and withdrawing upwards, the main direction moves towards the upper edge of the triangle, With an upward trend as the main direction, in the future (next year), after completing the impact on the historical high of 7628 at the large cycle level, the idealized minimum measurement range of the three waves of the bull market can be seen at the 8300 point line. The large cycle may be characterized as a sustained development of medium and long-term bull market fluctuations.
The global market crisis has been going through for two years, and with the arrival of 2024, we believe that the global economy will definitely recover, and we have prepared comprehensively for it. To welcome the recovery of the market and provide our customers with more high-quality and affordable custom jewelry paper packaging wholesale.
Weekly: After hitting a high of 6344 in mid October, the weekly chart broke through the seven week standard and then stepped back, with support at the 5830 line on the central axis. After reaching a new low this week, it closed above 5830 without breaking through. Technical adjustments may come to an end, and the weekly chart is expected to resume an upward trend. Pay attention to the pressure in the 6500 line area on the weekly chart, and in the future, stand firm at the 6500 line. It will resonate with the monthly line and challenge the historical high of 7628 with fundamental support.
Daily chart: The daily chart shows an unconfirmed downward trend with a standard boundary of 6144 as the equilibrium point. Moreover, Thursday's bearish cross star, combined with Friday's mid day bullish line, provides just the right support for the mid-term upward support line since June. It can be expected that the establishment of a daily level stop from falling and an excellent break even ratio opportunity will come. On the premise that the future market no longer deviates significantly from the 5830 line, multi cycle resonance upward may restart.
Conclusion: Through multi cycle comprehensive analysis, following the principle of large constraints and small evolution having a greater impact, it can be inferred that pulp varieties are likely to remain in dynamic development since the 2020 bull market next year, and may have completed triangular adjustments, currently undergoing three waves of upward multi cycle resonance, with a scale comparable to the first wave of the 2020 bull market. The overall strategy can start from the daily level, with bands following the trend, and capturing the bull market bands of this variety under the normal safety margin of the monthly and weekly lines.
