MARKET DYNAMICS

• The polyethylene (PE) market sentiment in China remained stable to weak due to the off-season in manufacturing and cautious restocking activities.  Suppliers are concerned about insufficient demand, leading to a gradual decline in PE prices as supply increases. 
• Falling crude oil prices and competitive offers from overseas suppliers have further pressured PE prices.  Overseas supplies, mainly commodity grades such as low-density polyethylene (LDPE), are readily available, and due to intense competition, LDPE prices have dropped sharply compared to other PE commodity grades.
• China's government meeting in July did not introduce large-scale fiscal stimulus measures to boost domestic demand, resulting in downward pressure on PE spot prices, which fell during the month, squeezing producers' profits.  However, the government implemented new stimulus measures at the end of July, including allocating ultra-long treasury bonds to support new equipment upgrades and consumer goods trade-ins.  This is seen as a positive step towards stimulating PE demand, although the impact of the policy will take time before a recovery is evident.
• Prices of most PE resin grades fell month-on-month as some market players lowered their quotations to increase sales.  Import prices of LDPE grades declined more sharply compared to LLPE and HDPE prices.  The decline in LDPE prices may be attributed to the end of seasonal demand in spring and the onset of the off-season.  Overall, the price outlook for August and September is expected to remain stable and firm, with restocking sentiment forecasted to increase with the arrival of traditional festivals.

TECHNOLOGY OVERVIEW

METALLOCENE CATALYSTS

• These catalysts allow for greater control over the polymerization process, enabling the production of LDPE and HDPE resins with specific properties tailored to specific packaging applications. Benefits include improved strength, clarity, and barrier properties.

MULTILAYER EXTRUSION

• This process combines multiple layers of materials, including LDPE and HDPE, into a single film or sheet. This allows for the creation of packaging with enhanced barrier properties, improved printability, and reduced material usage.

NANOCOMPOSITES

• Adding nanoparticles to LDPE and HDPE resins can significantly enhance their mechanical, barrier, and thermal properties. This can lead to lighter, stronger, and more durable packaging.

RECENT DEVELOPMENTS

Date	LDPE/HDPE Manufacturer	End User (Company 2)	Development Type	Description	Deal Value
June 2024	Berry Global Group (US)	-	Product Development & Launch	Berry Global Group is distributing a customizable, rectangular HDPE bottle solution for the beauty, home, and personal care sectors, available with up to 100% post-consumer recycled plastic.	-

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW 

DEMAND COMMENTARY

• The global demand for LDPE and HDPE packaging remains strong, driven by factors such as e-commerce growth, food & beverage industry expansion, and increasing healthcare needs. However, environmental concerns are shaping the industry towards more sustainable practices and developing eco-friendly alternatives. The future of LDPE and HDPE packaging will likely involve balancing meeting consumer needs and minimizing environmental impact.

SUPPLY ANALYSIS

• The overall supply in the plastic packaging raw material market is sufficient, while the terminal consumer market is sluggish.  Plastic packaging manufacturing capacity continues to be oversupplied, leading to overcapacity at all stages—from raw materials to packaging products—and resulting in fierce price competition. 
• Additionally, major industry players are promoting environmentally friendly and low-carbon raw materials with the global shift away from plastics.  For example, PepsiCo advocates for 100% recyclable, compostable, and reusable packaging.  These new initiatives will likely reduce the overall demand for traditional plastic materials and drive the development of new materials in the packaging industry.
• China's PE supply remains ample despite several plants experiencing unplanned shutdowns.  Analysis indicates that China's total PE operating rate was 82-83% in July, with some manufacturers opting to operate at lower rates to reduce inventory pressure.  Meanwhile, supply from the Middle East increased significantly in the second half of July, and PE imports from South Korea also grew.  The pressure from imported PE supply has intensified, and based on overseas quotations, the import volume for August and September is expected to be limited.
• In India, domestic PE plants operated at peak capacity in July.  However, demand remained subdued, leading to an accumulation of inventories among producers.  Exporting was not a viable option for most producers, as overseas market prices were not particularly attractive.  PE prices stabilized in July, creating challenges for domestic producers as market participants began to offload inventories and remained cautious about placing new orders.  Supplies of all three PE grades are adequate.

PRICING SITUATION

• PE is the primary raw material for plastic packaging.  In July and August, PE prices in China trended lower compared to June.  This decline was primarily due to ample availability from Chinese PE manufacturers and competitive import offers.  Demand remained weak due to the seasonal lull, and downstream converters continued to operate at reduced rates, resisting higher prices due to low converting margins.  At the end of July and the start of August, prices for all PE grades declined in the market.
• HMW HDPE film traded at RMB 7,950-8,450 ($909-967) per metric ton in East China, reflecting a decline of RMB350 ($49) from the end of June.  LLDPE butene-1 film traded at RMB8,300-8,700 ($950-996) per metric ton in East China, representing a decrease of RMB175 ($25). 
• LDPE GP film prices experienced the most significant drop compared to the other two PE commodity grades, falling by RMB750 ($105) per metric ton to reach RMB9,850-9,900 ($1,130-1,136) per metric ton CFR China.
• In India, manufacturing remained strong in July.  The reference price for low-density polyethylene (LDPE) GP film was $1,230-1,250 per metric ton CFR Mumbai, while linear low-density polyethylene (LLDPE) butene-1 film and high-density polyethylene (HDPE) blow molding grades were $990-1,010 per metric ton CFR Mumbai and $1,000-1,030 per metric ton CFR Mumbai, respectively.

MARKET DYNAMICS

• In the short term, initial signs of weakness may emerge in September as the demand for beverages and food drives domestic demand for PET materials in China, maintaining peak levels during the summer.  However, as the off-season approaches, market sentiment may significantly deteriorate by the end of August.  Major bottled beverage brands are currently holding off on restocking for the fourth quarter, waiting for prices to decline.  The release of bulk purchase tenders may temporarily ease sales pressure on producers, but it is unlikely to alter the overall market balance.  Unless prices drop sharply to stimulate pre-orders, export order volumes could face challenges in the coming month.
• August prices are expected to remain essentially flat compared to the previous month, as PET economics are likely to deteriorate further with potential plant restarts and additional capacity coming online.  The economic outlook could become particularly poor between September and November when the seasonal lull takes hold in the domestic market.

TECHNOLOGY OVERVIEW

ACTIVE AND INTELLIGENT PACKAGING

• These technologies incorporate sensors or indicators into PET packaging to monitor the product’s condition inside or provide information to the consumer. Examples include time-temperature indicators, freshness indicators, and RFID tags for traceability.  

BARRIER TECHNOLOGIES

• Advancements in barrier coatings and multilayer structures enhance the barrier properties of PET packaging, protecting products from moisture, oxygen, and light. This extends shelf life and expands PET's applications to sensitive products.

PLASMA TREATMENT

• This surface modification technique improves the adhesion of inks, coatings, and adhesives to PET surfaces, enhancing printability and enabling more sustainable, water-based inks.

RECENT DEVELOPMENTS

Date	PET Manufacturer	End User (Company 2)	Development Type	Description	Deal Value
July 2024	Indorama Ventures (Thailand)	International Finance Corporation (IFC) (US)	Funding	Indorama Ventures Public Co. Ltd. has secured a new seven-year loan totaling $200 million from the International Finance Corporation (IFC). Proceeds from the loan will help fund the continued growth of the company’s strategic sustainability programs in India, Thailand, and Indonesia, "promoting a circular economy as the world’s leading polyethylene terephthalate (PET) recycler.	$ 200 Million
May 2024	ALPLA (Austria)	-	Product Development & Launch	Safe, affordable, and sustainable: the plastic packaging specialist ALPLA is launching a recyclable wine bottle made of PET. The bottle weighs approximately only an eighth of a glass bottle, reduces the carbon footprint by up to 50%, and allows for price savings of up to 30%.	-
May 2024	ALPLA (Austria)	Re-Purpose (US)	Partnership	The ALPLA Group and Re-Purpose have announced a strategic partnership that will advance sustainable packaging solutions and strengthen the feedstock value chain of ALPLA’s very first PET recycling facility in Africa.	-
May 2024	Plastipak Holdings (US)	Kraft Heinz (US)	Partnership	Plastipak Packaging, Inc. announce they’ve partnered with Kraft Heinz to transition KRAFT® Real Mayo and MIRACLE WHIP® containers to be made entirely from recycled PET (rPET) material.	-
January 2024	Sidel Group (France)	-	Product Development & Launch	Sidel, a leader in innovative PET packaging solutions, is launching its latest quality control technology for PET bottles. IntelliADJUST™ is set to transform customers’ ability to produce PET bottles to a high and consistent standard. The smart bottle-blowing control system offers high-performance and easy-to-use technology that enables customers to achieve a consistently higher bottle quality and supports the production of bottles with recycled PET (rPET) content.	-
January 2024	Sidel Group (France)	-	Product Development & Launch	Sidel introduces EvoFILL PET - its new filler for water and still beverages. The compact new design offers enhanced hygiene and quality, while also improving sustainability and contributing to a reduced total cost of ownership.	-

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW 

DEMAND COMMENTARY

• The global demand for PET packaging is expected to maintain a steady growth trajectory in the coming years, driven by factors such as sustainability concerns, versatility, e-commerce growth, and technological advancements. While the outlook for PET packaging is positive, the industry needs to focus on addressing environmental challenges and promoting responsible consumption and recycling practices to ensure long-term sustainability.

SUPPLY ANALYSIS

• China's supplies are ample, and inventories remain high.  PET production in China has gradually slowed since a unit at China Resources Chemical's Jiangyin plant was shut down in late June.  Yisheng Dahua reported a 10% drop in production in early July, followed by the shutdown of two units at Yisheng Hainan for maintenance. 
• China's total production in July was approximately 1.2 million tons, marking the lowest level in four months.  However, even after these significant production cuts, it will be challenging for physical inventories to show any meaningful decline.
• As previously mentioned, the global strategy in plastic packaging is shifting towards de-plasticization, with industry giants promoting green, environmentally friendly, and low-carbon raw materials. 
• Several well-known companies across various industries, such as Apple's electronics manufacturers, are collaborating with suppliers to promote RPET packaging and the recycling of PET packaging.  Additionally, L'Occitane en Provence, a cosmetics company, is working with the French biochemical company CARBIOS to test and launch 100% transparent RPET packaging bottles.  Their goal is to achieve 100% post-consumer recycled packaging by 2027.

PRICING SITUATION

• Quotations from major Chinese producers rose rapidly to RMB 7,350-7,450 per ton in the second week of July.  However, closing deals at prices above RMB 7,250 per ton proved highly challenging.  Upstream price fluctuations in the third week of July forced major producers to lower their quotations to RMB 7,150-7,200 per ton. 
• The short-term (three-month) price curve remained nearly flat, with minimal month-to-month differences in quotations from significant producers.  Average prices for July and the start of August remained around RMB 7,100 per ton, up slightly by more than RMB 100 per ton month-on-month. 
• In early July, the price gap between PET resin and upstream raw materials PTA and MEG was compressed to less than RMB 300 per ton, but by early August, it had recovered to around RMB 500 per ton.

MARKET DYNAMICS

• The North American paperboard and kraft paper markets are experiencing a cautious recovery, with containerboard prices stabilizing after a significant increase in the first half of 2024 (Accumulated 8%-10%).  The first quarter of 2024 saw demand sink to its lowest level since 2016, but the second quarter showed growth, with seasonally adjusted shipments per day increasing each month.  The market is expected to recover and become increasingly robust, with an annual percentage growth of 1.6% in 2024 and nearly 4% in 2025.  Operating rates are forecasted to remain in the 91-92% range through most of 2024-25, indicating a relatively stable production environment.  The baseline forecast projects another price increase in 2025 due to continuing cost inflation.  New capacity will be added to the market in 2026-27, potentially impacting the supply dynamic.
• In China, SCI (Sublime China Information) estimates containerboard and corrugated paper prices are expected to rebound slightly after August, primarily due to demand factors.  August marks the off-season and transition period between peak seasons for the packaging industry, which could lead to an anticipated growth in demand.  Driven by the holiday effect and large paper mills, packaging factories are expected to replenish their inventories.  At the same time, costs support the price trend of packaging paper.  The price trend of waste yellow paperboard, the raw material for containerboard and corrugated paper, may stabilize initially and then rise in August and September.  However, given that the entire packaging industry faces excessive inventory pressure on the supply side, the rebound in market prices for containerboard and corrugated paper in August and September is expected to be relatively limited.
• The rapid growth of Vietnam's economy has driven the packaging industry to become one of the country's continuously expanding markets, with carton packaging showing significant growth in 2023-2024.  The Vietnamese paper packaging market is projected to reach USD 2.6 billion in 2024, with a compound annual growth rate (CAGR) of around 10% expected by 2029.  The market is expected to expand significantly, driven by several key factors: the development of the e-commerce industry has increased demand for carton packaging, the food and beverage industry continues to grow, tariff advantages from free trade agreements have bolstered Vietnam's strong exports, and urbanization, along with the growing middle class, has boosted consumption, further driving demand in Vietnam's packaging industry.

TECHNOLOGY OVERVIEW

SURFACE TREATMENTS

• Applying coatings or surface treatments to linerboard can enhance its printability, moisture resistance, and other performance characteristics. This allows for broader applications and improved product protection.

FUNCTIONAL ADDITIVES

• Incorporating additives during the papermaking process can improve linerboard's strength, stiffness, and resistance to tearing, enhancing its suitability for demanding packaging applications.

NANOTECHNOLOGY

• Research is underway to explore the use of nanocellulose and other nanomaterials in linerboard to improve its strength, barrier properties, and other performance attributes.

RECENT DEVELOPMENTS

Date	Linerboard Manufacturer	End User (Company 2)	Development Type	Description	Deal Value
July 2024	WestRock (US)	-	Business Expansion	WestRock, a corrugated packaging company based in the US, will open a new corrugated box manufacturing facility in Pleasant Prairie, Wisconsin, to address the increasing demand from customers within the Great Lakes region.	$ 140 Million
May 2024	WestRock (US)	Coca-Cola Beverages (US)	Contract	WestRock and Liberty Coca-Cola Beverages have successfully installed new equipment at the bottler’s production facility in Philadelphia, seeking to replace an estimated 200,000 pounds of plastic rings used in multipack bottled drinks with recyclable paperboard carriers.	-
September 2023	Smurfit Kappa (Ireland)	WestRock (US)	Joint Venture	Following the announcement of a possible combination dated 7 September 2023, the Boards of Smurfit Kappa, a FTSE 100 company, and WestRock, an S&P 500 company, are pleased to announce the signing of a definitive transaction agreement to create Smurfit WestRock, a global leader in sustainable packaging. The Boards of Smurfit Kappa and WestRock see the compelling strategic, commercial, and financial rationale for combining Smurfit Kappa and WestRock’s highly complementary paper-based packaging companies to create a global leader in sustainable packaging.	-

Source: Press releases & company websites

DEMAND/SUPPLY OVERVIEW 

DEMAND COMMENTARY

• The demand for paperboard and kraft paper is influenced by consumer spending on food, which has been below its long-term trend, reflecting budgetary pressures US consumers face.  Actual grocery spending has been particularly affected, with a significant decline from the long-term trend.  The nondurables manufacturing sector, a key driver of demand for paper packaging, has been in contraction territory, although it has shown signs of recovery.  The recovery in demand for paper packaging is expected to continue in the second half of 2024, supported by a modest rebound in the manufacturing sector.
• The upcoming Mid-Autumn Festival in September and National Day in October are essential traditional Chinese holidays.  As the traditional peak season approaches, demand is expected to increase accordingly.  Driven by the festival effect and the influence of large industry manufacturers, most packaging factories will likely replenish their inventories appropriately to meet the anticipated demand. 

SUPPLY ANALYSIS

• Supply is characterized by stabilizing containerboard prices and expecting another price increase in 2025 due to continuing cost inflation.  Producers face eroding margins, particularly in recycled containerboard, which will likely remain near cyclical lows.  The baseline forecast suggests that operating rates will stay in the mid-90s through 2026, which could lead to the next round of capacity expansion.  There are indications of potential new capacity coming online, which could affect supply dynamics.  Exports have been a significant factor in supporting operating rates and shipments, with the US containerboard market benefiting from improved export performance.
• Data from the National Bureau of Statistics of China shows that in the first half of 2024, cardboard production in China grew by 11.8% year-on-year.  From an export perspective, the cumulative export delivery volume also rose by 11.9% year-on-year during the same period, helping to alleviate some of the pressure from domestic overcapacity.
• On July 12, a severe fire broke out at the largest paper mill in Turkey and Europe, causing significant losses.  Approximately 140,000 tons of finished paper and 85,000 tons of waste were destroyed.  The fire may lead to a temporary shortage of cardboard in Turkey and Europe.

PRICING SITUATION

• The interplay of cost inflation and demand drives pricing dynamics.  The forecast for 2025 anticipates another cost-driven price increase, with producers likely to announce a more substantial increase compared to the $40-per-ton increases seen in 2024.  This is due to the expectation that cost inflation will continue to erode price/cost ratios.  For 2026, prices are projected to stabilize as cost inflation is expected to slow, leading to increased competition for orders.  The 42-lb kraft liner price index has already seen a $40-per-ton increase in June, with high-side risks to the price forecast becoming more limited for the rest of 2024.  However, price increases in 2025-26 are possible if demand recovers and export strength continues.
• July marked the off-season for the packaging industry, resulting in weak order conditions for downstream packaging factories.  Small and medium-sized paper companies were negotiating prices on a real-time basis.  Overall, the cost of corrugated paper exhibited a downward trend.  In July, many large paper companies implemented multiple price reductions, with cumulative adjustments ranging between RMB 30 and RMB 150 per ton.  However, the profit margins for paper companies narrowed, limiting the extent of these adjustments.  Overall, the Chinese market experienced a decline in July, with prices trending downward.
• Starting in August, the paper industry gradually entered its traditional peak season.  On August 1, several major Chinese packaging paper manufacturers, including industry leaders Nine Dragons Paper and Sun Paper, announced a new round of price increases for corrugated base paper and containerboard, raising prices by approximately RMB 30 per ton.

• Prices of most PE resin grades fell month-on-month as some market players lowered their quotations to increase sales.  The decline in LDPE prices may be attributed to the end of seasonal demand in spring and the onset of the off-season. 

• The overall supply in the plastic packaging raw material market is sufficient, while the terminal consumer market is sluggish. 

• The global strategy in plastic packaging is shifting towards de-plasticization, with industry giants promoting green, environmentally friendly, and low-carbon raw materials. 

• Several well-known companies across various industries, such as Apple's electronics manufacturers, are collaborating with suppliers to promote RPET packaging and the recycling of PET packaging. 

• The short-term (three-month) price curve for PET packaging remained nearly flat, with minimal month-to-month differences in quotations from significant producers. 

• The upcoming Mid-Autumn Festival in September and National Day in October are essential traditional Chinese holidays.  As the traditional peak season approaches, demand is expected to increase accordingly. 

• The liner board paper packaging price forecast for 2025 anticipates another cost-driven increase. Producers are likely to announce a more substantial increase compared to the $40-per-ton increases seen in 2024. This is due to the expectation that cost inflation will continue to erode price/cost ratios.