PROFINET, launched by Profibus international organization, is a new generation of automation bus standard based on industrial Ethernet technology. It provides a complete network solution for the automation communications sector, covering current hot topics in automation such as real-time Ethernet, motion control, distributed automation, fail-safe and network security, and, as a cross-vendor technology, it can fully compatible with industrial Ethernet and existing fieldbus technologies, protecting existing investments. Custom Profinet,Connector M8 Profinet,M8 Connector Shielded,Profinet M8 Connector Kunshan SVL Electric Co.,Ltd , https://www.svlelectric.com
In recent weeks, the nationwide decline in waste paper prices has progressively expanded from smaller and mid-sized paper mills to larger enterprises like Liberal, Ji'an, Jingxing, Rongcheng, Zhenglong, Yongfengyu, and even Tianjin Xiaolong. Meanwhile, several medium-to-large scale paper mills in Guangdong have completely halted operations. The overall reduction in waste paper costs has caused the current trajectory of paper pricing to deflate significantly.
All signs point to the paper packaging supply chain being caught in a "two highs and one low" predicament characterized by high waste paper inventories, high raw paper inventories, and low transmission efficiency. To escape this chaos, the paper packaging supply chain must address this critical challenge in the near future.
Waste Paper Stocks
Over the last two decades, the global shift of factories to China has resulted in a surge of packaging exports to the U.S., necessitating the import of large amounts of pulp and waste paper from the U.S., Japan, Europe, and Australia to make up for the inefficiencies in domestic recycling. Recently, the decline in export volumes has correspondingly reduced the demand for imported waste paper.
However, according to customs data, national pulp imports in June reached 1.97 million tons, a decrease of 50,000 tons from May. From January to June, imports totaled 12.07 million tons, representing a 21.4% increase compared to the same period last year. In June 2017, waste paper imports also showed a 10% increase from January to May.
Due to weak domestic demand, society's consumption of waste paper has diminished, yet the rise in waste paper prices has spurred its collection. Consequently, a surplus of waste paper has become inevitable.
From the trends observed recently, numerous paper mills are experiencing fully stocked waste paper inventories. Some manufacturers have been forced to cease purchasing, placing immense pressure on paper mills.
Excess Raw Paper Stocks
Despite the emphasis on environmental protection and capacity reductions in paper mills, the situation isn't as expected. Statistics show that there are 52 pulp manufacturing firms and 2,730 paper industry entities in China. As of noon on July 8, 2017, 2,618 "emission permits" for the paper industry had been issued. Clearly, the anticipation of emission permit capacity reductions has been misplaced. Some overly optimistic paper mills may fall into the "permit trap," leading to unexpected surpluses in raw paper stocks.
Deutsche Bank predicts that the gross profit margin for paper stocks will peak in the first quarter of 2017 and begin adjusting in the second quarter. Given that the current raw paper inventory stands at 1-3 months, it cannot sustain the current high paper prices. I learned from second-tier plants that the base paper inventories at second-tier factories in the Pearl River Delta and Yangtze River Delta regions are generally over a month.
Compared to the same period in 2016, 2017 paper packaging orders have been significantly lower, and the arbitrary rise in paper prices has led packaging customers to abandon paper packaging materials. Due to various adverse factors, the shipment of paper mills has been hindered. The recent downtime of paper mills clearly shows the mounting pressure on their inventories.
Low Efficiency in Price Increase Transmission
As a prominent figure in the paper industry once mentioned on CCTV Finance, the packaging industry can only pass on the rising costs of raw materials if the industrial chain is to develop steadily. However, in reality, due to the advance consumption of housing and car purchases in previous years, consumer spending power has been severely curtailed. Packaging users currently face intense low-price competition, making them either unable or unwilling to accept price hikes for paper packaging materials.
According to statistics, the food category saw a 3.2% drop in the first half of 2017, with fresh vegetable prices decreasing from 28.2% in the same period last year to 24.6%, and pork prices shifting from a 26.1% increase to a 3.7% decline. These figures suggest that raw material prices are still rising, but consumer end prices are falling, indicating poor consumer demand, forcing businesses to slash prices to move goods.
In the first half of the year, prices in the other seven categories didn't increase significantly year-over-year. Apparel rose by 2.0%, household items by 2.0%, and daily necessities and services by 1.0%. The lack of consumer confidence implies that it will be challenging for the packaging and printing industry to push upstream raw material price increases.
The "three highs and one low" dilemma facing the paper packaging supply chain will be difficult to resolve in the short term. Packaging and printing companies could find themselves squeezed if they're not cautious. Thus, it is recommended that the industry avoid speculating on raw material price increases. Instead, they should collaborate with paper mills to seek mutual profitability and pursue the long-term development of the paper packaging supply chain.