China: How much longer can the price for paper run wild?

During the last few months, market leaders in the paper industry have one by one announced that they have had to raise prices. Some business proprietors that recycle waste paper even had to store goods they could not sell. The appreciation in value has been going on since the last half year of 2016 and has lasted until today. Some companies earned a lot of profit, while others could only complain of their bitter lot.

When talking about the recent price increase for paper, a lot of people consider the rise to be caused by the prohibition of waste paper imports. In July this year, the general office of the State Council printed and distributed the "Notice of the General Office of the State Council on Issuing the Implementation Plan for Prohibiting the Entry of Foreign Garbage and Advancing the Reform of the Solid Waste Import Administration System". This paper indicated that unsorted waste paper could not be imported before the end of this year.

Moreover, the strong trend towards environmental protection has also impacted the price increase. People from companies that purchase waste paper have said that, owing to this trend, a couple of small paper companies were cut off because they did not meet environmental protection standards. Also, a couple of larger paper production facilities were not yet effectively released, which also had an impact on the price appreciation.

An analysis of the industry has shown that, following the price increase, the supply chain currently is running with low stocks, and the supply is continuously very low. The demand is traditionally high during the final season. Besides the obvious increase in demand because of the paper needed for wrapping gifts during the holiday period, the online shopping holidays like November 11 and December 12 in the latter half of the year, also cause a high demand. 

A daily demand for a billion parcels strongly stimulates the market. Looking at the current domestic market situation, the fourth season has indeed proven to have a strong demand. Estimates say that the market price could easily keep rising without any drops until the end of 2017. Facing this future trend, according to statistics from IBISWorld; forecasts have indicated that the price for paper pulp from tree logs will maintain an annual growth rate of 5.1%.

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