Containerboard Market Situation in 4Q2009 (Forecast)

Date :- 6/11/2009

Generally, demand for Containerboard (CT) had slowed down in the last 2 weeks. This situation seems to be common with most Asian countries except Japan. There were lots of price bargaining among the box plants and paper millers. The situation can be analysed based on the followings

Inventory level

Generally, most of the Asian box plants are having sufficient paper rolls inventory to last for another 6-8 weeks. The low inventory of 2-4 weeks in the last 3 months had changed dramatically with paper millers deliver their full back log orders. With comfortable stock level coupled with low demand season, most box plants prefer to buy only what they need. They are not in hurry and will continue to negotiate with paper miller for a discount. This will further dampened CT prices.

Paper prices

The present prices of Corrugating Medium (CM), Testliner (TL) and Kraft Top (KTL) are at the high level. These prices had reached the pre-global crisis level in 2008. Many box plants are expecting prices to dip in Dec 09 and Jan 2010. Thus, box plants will not buy but to run down their inventory.

Exchange rates

The recent strengthening of Asian currencies against US Dollars had caused imported prices from overseas mills within the Asian region to be cheaper. Thus, many box plants will wait for their domestic currencies to continue strengthening against the greenback.

Price weakening sentiments

Most box plants started to receive news from China market that price discount is given to gain order. Similarly, other mills from Korea and Taiwan who offered to Northern Asia (India, Bangladesh, Sri Lanka) had also started to relax the price offering subjected to further discount if huge volume can be placed.

Shorter delivery lead time

The lead time from overseas mills had also been shortened and is very apparent to the box plants that paper millers start to be hungry for order again.

Caution - high raw material cost and high oil prices for paper millers

However, a point worth to note is the continuous escalation of raw material cost (recovered paper and pulp) which will eventually pushes CT price upwards. This will eventually lead to another price jump which may caught most box plants by surprised. The high oil prices will also support current high prices. But at present, no one is at the position to dictate where the CT prices will be heading to.