Market preference, the predicament of the waste paper industry chain will not last long

The domestic waste paper industry chain is experiencing a climate of panic, and there is still a strong expectation of a price drop. It will take time for the market to escape this panic. The price of domestic waste yellow cardboard may still fall this year. However, China's exports and consumption are still maintaining a stable and positive trend. From this perspective, the difficulties faced by various operating segments in the waste paper industry chain will not last long.

The fundamentals of the domestic waste yellow cardboard market changed in 2019. Compared with the significant reduction in the supply of imported waste, the Price of domestic waste yellow cardboard from January to May 2019 first rose and then fell, mainly due to pressure from end-user demand.

First, the consumption of waste yellow cardboard decreased year-on-year. According to statistical data, the total consumption of waste yellow cardboard from March to May 2019 decreased by 2.10% year-on-year. As shown by market performance, the main reason for the year-on-year decrease in waste yellow cardboard consumption is the decrease in finished paper demand. Another reason is the significant year-on-year increase in imports of finished paper and waste pulp, based on a low base.

Second, paper mills' purchasing interest is low, and the level of readily available domestic waste paper inventory in 2019 is lower than in 2018. Under the background of a rapid reduction in imported waste, the reduction in finished paper demand is undoubtedly more severe, thus making paper mills maintain a cautious attitude towards purchasing and stocking for a long time.

Under the above background, the profit of finished paper continues to decline. Since March 2019, the gross profit margin of domestic corrugated paper has been between 7% and 12%, and paper mills are facing great pressure in production and operation. Domestic packaging paper companies have entered a period of difficulty, and the root cause of the difficulty mainly comes from changes in the demand for finished paper.

In summary, with significant fluctuations in China-US trade relations, market operators' expectations have become pessimistic, reducing the flow rate of finished paper in the closed-loop cycle of the industry, causing the Price of waste paper to fall and possibly continuing to fall this year. However, China's long-term stable and positive economic situation remains unchanged, which does not support the long-term difficulties of various operating segments in the waste paper industry chain.