Analysis of factors affecting monthly consumption of waste paper

Date: November 5, 2021      China carton network

Recently, the market has some differences on the waste paper market in the fourth quarter. The bullish view is that the fourth quarter is the peak consumption season of domestic packaging paper, and the bearish view is that the demand in the fourth quarter may be weaker than the market expectation. As for the trend in the fourth quarter, this paper makes a simple comparison of the monthly consumption of waste paper in recent five years, analyzes the influencing factors of its commonness and characteristics, and makes a seasonal reference.

By comparing the monthly consumption statistics of waste yellow paperboard by Zhuo Chuang information from 2017 to 2020, it can be seen that the monthly trends of waste paper consumption in the past five years are different. The trend of relative commonness appeared in Q1 and Q4. In the first quarter, the consumption of waste paper mostly decreased first and then increased. The main reason is that the domestic Spring Festival is mostly concentrated from January to February. The production of paper enterprises slows down and the demand for waste paper weakens. After the Spring Festival, with the recovery of paper enterprises, the bottom of waste paper demand rebounds in March. Another time period in which waste paper consumption is relatively common is in the fourth quarter. Due to more domestic holidays in the fourth quarter, consumption is more concentrated. In addition, there were many important overseas festivals in the fourth quarter, and the export volume of commodities was also increasing, supporting the demand for finished paper.

In the past five years, the demand for waste paper in the second to third quarters showed great differences. In terms of annual performance, waste paper consumption in the second to third quarters of 2017 showed strong characteristics of low and peak seasons. From March to may, it was in the peak season of packaging paper demand, the operating rate of paper enterprises increased, and the demand for waste paper increased. From June to July, the consumption was weak. In August, the Mid Autumn Festival stock period entered, and the demand for waste paper increased again.

The overall demand for waste paper in the second to third quarters of 2018-2019 showed a downward pattern, which was mainly due to the escalation of trade frictions between China and the United States since May 2018, followed by the mutual increase of tariffs between the two countries, which led to greater restrictions on the export of Chinese goods and suppressed the demand for packaging paper. The trade conflict between China and the United States continued until the end of 2019. Punitive tariffs were increased layer by layer, which became the most critical factor affecting the demand for wrapping paper in the past two years and disrupted the seasonal demand characteristics of wrapping paper.

The consumption of waste paper in the second to third quarters of 2020-2021 showed a pattern of continuous increase, and the main reason for this phenomenon was the sudden global public health event in early 2020. At the initial stage of the outbreak, all major economies implemented strict control measures, and the economy was interrupted for a time. However, with the deregulation of public health events, countries have strengthened economic repair, and the repair of consumption and international trade has accelerated, driving the demand for domestic packaging paper. In particular, China has the most effective control over public health events, and China is the region with the most sound industrial industry in the world. In other regions, public health events continue, and international foreign trade orders have come to China. China's export substitution effect is significant, which promotes the demand for packaging paper. Global or regional public health events also broke out many times in 2021, and this characteristic continues in 2021.

In the fourth quarter of 2020, with the weakening of the impact of public health events, the rapid emergence of stimulus measures in major economies, the enhancement of global inflation expectations, bulk commodities entered the fast lane of price rise, the price of waste paper also rose, and the demand for waste paper continued to increase. In the fourth quarter of this year, this impact is fading. Although the impact of public health events is weakening, with the industrial recovery of other countries, the substitution effect of China's exports is weakening, and there is also some downward pressure on China's economy. At the same time, the currencies of various countries are expected to tighten, and the inflation effect may be weakened. From this perspective, the pressure on the recovery of waste paper demand may increase in the fourth quarter of 2021, and the waste paper price may not show a large increase in the fourth quarter of 2020.