May Day holiday is over!

But the paper packaging industry is not over yet!

The market is still depressed, and some sub-packaging areas are not even alive. Both export and domestic orders have shrunk sharply.

Looking forward to the future, residents'consumption has been pressured to death by housing loans, medical treatment, education and old-age care, and has been eaten by the iron public base, which has been launched crazily. In recent years, Sino-US relations have become increasingly volatile, and more and more people's original optimistic expectations have gradually cooled down, as evidenced by the declining investment in private enterprises.

Demand-side water level drops, base paper supply exceeds demand and paper mills lose pricing rights

In the past four months, the demand for packaging materials, including base paper, film, tinplate and aluminium, has decreased year on year due to the overdraft of export orders and the persistent downturn of domestic demand.

Looking ahead to the beginning of May, it seems that the pace of outward transfer of foreign orders has not stopped, and the situation of domestic demand is not optimistic at all. On the one hand, very few people have reached the limit of consumption at home and have to spend a lot of money abroad, even throwing $6.5 million to send their daughters to Stanford. On the other hand, most families are under the pressure of four new mountains, such as mortgage, medical treatment, education and old-age care. They are watching their incomes decrease.

In this case, even the positive energy business owners, also aware of the future order crisis, and thus firmly determined the long-term oversupply of raw materials judgment, will not hoard paper to rise. In fact, as most packaging factories'orders continue to shrink, their safe stock has also declined again and again, making the upstream paper industry more passive. The supply side is expanding, but the demand side is shrinking. Paper mills have completely lost their pricing power.

Riddle-like demand side, unfriendly iron base

Usually, in the market economy, it is demand-oriented rather than supply-oriented. And demand-oriented, first of all, consumption. As a socialist market economy with Chinese characteristics, the main body of consumption includes residents'consumption and government consumption. From 2008 to 2014, it belongs to the golden period of residents'consumption, and it is also the most popular period of demand orders in China's packaging industry. However, since 2015, the real estate and iron public base which belong to the government consumption have continued to boom, which has also largely restrained the consumption of residents. Since 2016, the demand for packaging materials, including base paper, has continued to decline.

Looking at the current consumption of residents, the situation is not optimistic. Demand by the end of 2018, China's resident debt rate reached 53.2%, 15 percentage points higher than the average level of emerging market countries, close to the level of some developed countries, but considering that the degree of perfection of China's social security system is far lower than that of developed countries, residents still need to rely on their own savings to support the elderly, China's current debt level is on the high side, even more than that of some developed countries.

A set of data is also very detrimental to the packaging industry. Since 2012, the growth rate of total retail sales has been in the downward channel, but the contribution of final consumption to GDP growth shows a steady upward trend. What is the reason? The main reason is that the growth rate of service consumption which is not included in the total retail sales of social consumer goods, such as education, health care, culture and financial intermediaries, has increased significantly. In 2018, service consumption increased by about 35%, 26 percentage points higher than the growth rate of 9% in 2017. Data show that per capita expenditure on health care, education and culture has increased by 80% and 50% respectively in the past five years, much faster than the growth rate of overall consumption expenditure in the same period. Residents are spending more and more on health, education and culture, which has greatly inhibited the total retail sales, resulting in a decline in demand in consumer electronics, clothing, shoes and hats, food and beverage industries.

You don't have to guess what the paper price will be like in May.

It can be seen from the snowflakes of price increase letters from paper mills in 2018, but the decline of paper prices, that any price increase out of the demand fundamentals is unsustainable. Especially in the period of economic downturn adjustment, the decision-making power of the market is firmly in the hands of consumers.

To take a vivid example, after the 3% tax cut in April, no matter the material dealers, intermediate processors or terminal brand dealers were able to retain these three points of preferences, and finally transferred to consumers through retail terminals. Thus, in the current demand situation, without a major shift in national macro-policy, it is no doubt a fool's dream that manufacturers want to raise prices.

Looking at China's paper packaging industry, on the one hand, material dealers continue to struggle hard to ensure delivery at low prices, on the other hand, they increase the price of waste paper in order to increase the extrusion effect on small and medium-sized paper mills, on the other hand, they benefit from the monopoly advantage of waste paper; on the other hand, the loss of secondary paper mills continues to expand; on the other hand, in 2017, Yunhua has dug a big pit for the industry, and the major shuffling has begun; on the other hand, the situation of secondary and tertiary carton mills is not the same Let's be optimistic. Lower price pressure and competition from customers are overwhelming, and the continued shrinkage of orders is really desperate.

For many packaging professionals, the most anticipated is the market recovery. So, how to judge that the market may recover?

In the view of the editorial, if there are the following characteristics, the market is likely to recover:

1. The State has made macro-policy adjustments similar to those made in 1998 to stop the already excessive investment in iron and public infrastructure.

2. The government's consumption decreases and invests a large amount of wealth in the fields of education, medical treatment and pension.

3. China has once again demonstrated its determination to expand its openness and reached agreements with the United States, with a large number of people.