Spend Matters welcomes this guest post by Monika Sosnowska, of Mintec.
It is hard to believe the holidays are already on their way. The shopping malls are becoming busier and the seasonal smells add to the festive atmosphere. We may be thinking about what gifts to buy, but no matter what we buy, there is one thing we cannot avoid buying: wrapping paper. So, let’s check how the prices look like this year.
Whether it is a luxury bag or a roll of wrapping paper, the price of the feedstock for all papers is going down in the U.S., putting downward pressure on the end-product prices.
Wood pulp is the primary feedstock for paper bags and wrapping paper, although cheaper wrapping paper is produced from recycled paper. Pulp prices have been on a downward trend since the beginning of the year, with prices in November down 8% year-over-year.
Supply and demand are the main drivers of the pulp market and despite month-over-month declines in global softwood pulp stock in September, stock level remained 3 days higher than a year ago, at 30 days of supply. In previous years there have been low stocks, driving prices higher, but as the stock this year is considered as balanced, prices have fallen. Supply has improved, but weak demand has driven prices lower. The strong US dollar makes U.S. exports more expensive for foreign buyers, resulting in weakened demand. China is a major importer of pulp and Chinese import demand for softwood pulp fell by 5.5% m-o-m in August and by another 2% in September.
As for recycled paper, we need to look at its feedstock: waste paper. The U.S. exports large amounts of waste paper to China and other Asian countries. The Chinese economic slowdown, strong U.S. currency and changes to Chinese import quotas for 2016 have weakened demand for waste paper as well. Stricter import regulations have led Chinese recycled paper producers to source domestic feedstock rather than relying on imported material. Waste paper imports into China fell by 20% y-o-y in September, with old corrugated containers (OCC), the grade used most often for paper production, falling by 22% y-o-y.
So this year we can justify buying more presents by the potential savings to be made on the wrapping paper! Surely with all the bad news for the packaging producers, looks like the more presents we buy, and therefore packaging, the more chances to cheer them up.