Paper companies "increase prices" or "insure prices"

Jul 11th, 2023

Paper companies "increase prices" or "insure prices"

Paper prices oversold and rebounded, and the prosperity of the paper industry ushered in an inflection point?

Since the beginning of this year, the worst situation among various paper types is white cardboard. According to public data, the domestic market average price of 250g to 400g white cardboard has dropped from 5110 CNY/ton at the beginning of the year to the current 4110 CNY/ton, and is still setting new lows in the past five years.

Faced with the price of white cardboard falling endlessly, starting from July 3, some small and medium-sized white cardboard companies in Guangdong, Jiangsu, Jiangxi and other regions took the lead in issuing price increase letters. On July 6, the leading white cardboard industry Enterprises such as Bohui Paper and Sun Paper also followed up and issued price adjustment letters, planning to increase the current price of all cardboard products by 200 CNY/ton.

The reason behind the price increase may be a helpless move. It is reported that the cost and paper price of white cardboard have shown a serious upside-down situation, and paper companies can only achieve the goal of stopping the decline by jointly adjusting prices.

In fact, at the beginning of February this year, the paper industry was already planning to raise prices. Leading paper companies such as Bohui Paper, Chenming Paper, and Wanguo Paper took the lead in raising the price of white cardboard. After that, Yueyang Forestry and Paper followed suit. The wave of price increases spread from leading paper companies to small and medium paper companies, but the follow-up effect was not ideal, and the landing effect was mediocre. The main reason is that the downstream demand is relatively weak, and paper companies have no choice but to raise prices. In fact, it is to protect prices and prevent further price declines.

The paper industry serves many downstream industries, including consumption, industrial manufacturing, etc. It is regarded as a barometer of the economy, and is often regarded as a reference indicator of economic strength. The weak trend of paper prices this year also reflects to some extent that under the current macro environment, the process of economic recovery may be lower than market expectations.

Pulp prices at the cost end are under pressure

The upstream of the papermaking industry chain includes forestry, pulping, etc., and the downstream includes papermaking and paper products, which are divided into corrugated paper, white board paper, white cardboard, art paper and so on. In the cost of papermaking, the cost of pulp accounts for 60% to 70%, and some paper types even reach 85%.

In the past year, pulp prices continued to run at a high level. Softwood pulp rose from 5,950 yuan/ton at the beginning of 2022 to 7,340 yuan/ton at the end of the year, an increase of 23.36%. Over the same period, hardwood pulp rose from 5,070 yuan/ton to 6,446 yuan/ton tons, an increase of 27.14%. The strong price of pulp has squeezed the profits of paper companies, and the downstream is miserable.

Since 2023, the adjustment of pulp prices has brought breathing opportunities for paper companies. Data show that pulp futures have dropped from nearly 7,000 yuan/ton at the beginning of the year to around 5,000 yuan/ton and stabilized, a drop that exceeded expectations.

The reason behind the collapse of pulp prices in the first half of the year may be the huge production capacity of overseas hardwood pulp. In addition, factors such as sluggish consumption under the background of high overseas interest rates have also formed obvious constraints on upstream pulp prices. Although some pulp mills have taken actions to "stand up the price", the effect is not obvious.

Most institutions are not optimistic about the follow-up trend of pulp prices. The Shenyin Wanguo Research Report believes that the pattern of strong pulp supply and weak demand continues, the fundamentals are bearish, and the overall rebound space is expected to be limited. However, the decline in the previous period has basically reflected the current weak situation, and the room for continued sharp decline in the future is also relatively limited. In the second half of the year, the overall trend of low volatility will be maintained.

This also seems to indicate that the worst time for the paper industry has passed, and the industry may usher in an inflection point of prosperity. People in the industry generally believe that due to the pressure on pulp prices, the primary factor affecting the prosperity of the paper industry has shifted from the cost side to the demand side again.

From the perspective of the first quarter, the performance of most paper companies is relatively sluggish. Sun Paper, which has the largest revenue scale, achieved a net profit of 566 million yuan in the first quarter of this year, a year-on-year decrease of 16.21%. In the first quarter, the net profit attributable to the parent of Shanying International and Chenming Paper was -341 million yuan and -275 million yuan, a sharp drop of 270.67% and 341.76% year-on-year.

In the first half of the year, the decline in the high level of pulp has reduced the pressure on domestic paper companies. The papermaking sector may usher in a double catalyst of price increases and cost declines, and the performance is expected to recover. As for the status of the repair, it will be announced in the semi-annual report of the relevant company.

Integrated layout to consolidate competitiveness

my country's pulp supply has always been highly dependent on foreign countries, and pulp is mainly imported from Canada, Chile, the United States, Russia and other countries. Due to the rich resources of raw materials for pulping, Canada has always been a major producer of pulp and one of the important sources of imported pulp in China. Pulp mills consume a lot of forests and cause damage to the environment. The domestic pulp industry has strict restrictions on the development of the pulp industry, the threshold is high, and the operating costs are even higher than some foreign pulp mills.

It is worth mentioning that in recent years, under the background of tight supply of imported pulp and high prices for a long time, the life of domestic paper companies has not been easy, leading companies have gradually expanded to the upstream of the industrial chain, and the original separation of afforestation, pulping, The three links of papermaking are integrated to promote the layout of the "forestry-pulp-paper integration" project and enhance its own pulp supply capacity, so as to ensure the stability of the raw material supply chain and further reduce production and operation costs.

Several leading companies in the domestic paper industry, such as Chenming Paper and Sun Paper, have already started relevant layouts. Chenming Paper is considered an early paper company that launched the "pulp and paper integration" strategy. In 2005, Chenming Group undertook the forestry-pulp-paper integration project in Zhanjiang, Guangdong approved by the State Council. This project is a large-scale key project for the country to promote the integrated construction of forestry, pulp and paper. It is located in the Leizhou Peninsula at the southernmost tip of mainland China. It has obvious location advantages in terms of market, transportation and resources. Good location. Since then, Chenming Paper has successively deployed pulp and paper integration projects in Shouguang, Huanggang and other places. At present, Chenming Paper's total wood pulp production capacity has reached 4.3 million tons, basically realizing the matching of pulp and paper production capacity.

In addition, Sun Paper is also building its own "pulp line" in Beihai, Guangxi, importing wood chips to produce pulp, increasing the proportion of self-produced pulp and reducing costs. In addition, the company actively expands the construction of overseas forestry bases to provide guarantee for the future supply of raw materials.


On the whole, the paper industry seems to be coming out of the trough, and some paper types have started to rise in price. If the downstream recovery process exceeds expectations, an inflection point in the paper industry's prosperity may appear.

In the past few years, some small and medium-sized backward paper production capacity has been eliminated after environmental protection and production capacity reduction. In the future, with the trend of integrated layout, the market share of leading paper companies is expected to continue to increase, and related companies may usher in double restoration of profitability and valuation.


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