What is the future of China's paper industry?

More than ten leading paper companies, including Chenming Paper, Sun Paper and Bohui Paper, have recently issued price hike letters. Following the gray bottom white, special paper, and household paper, cultural paper also ushered in a price increase of 200 yuan/ton, and China's paper industry "rose".

Since the second half of 2021, pulp prices, shipping costs, and energy costs have been rising, geopolitics, and the epidemic situation are fickle, and China's paper industry, which is under pressure from both sides of supply and demand, has had to seek self-rescue in one round after another of price increases.

This is an industrial re-arrangement and optimization, and some leading enterprises have seen the dawn of recovery.

Have to rise

From toilet paper to copy paper, from kraft paper to corrugated paper, since 2022, the paper industry has received one letter after another.

According to the main source of raw materials, paper can be divided into waste paper and pulp paper two categories, one with waste paper pulping, one with wood pulping.

Look at the wood pulp first.

Starting from the second half of 2021, under the interaction of a series of factors such as the epidemic, supply chain problems, international logistics, and policy news, wood pulp prices have risen sharply.

In 2021, the price of coniferous wood pulp increased by about 10%, and the price of hardleaf wood pulp increased by nearly 20%.

▲ Hardwood pulp price trend

Under the epidemic, the factory operating rate is difficult to guarantee, the "dual carbon" policy for paper pollution emissions, coupled with large fluctuations in domestic coal prices, but also make many small enterprises can not continue to supply raw materials for downstream enterprises. The contradiction between coordinating "double carbon" and production capacity supply has already formed. In 2021, the number of pulp manufacturing enterprises in the paper industry chain is 11,522, a reduction of 25.9% from 2020, and the domestic pulp gap is nearly 30 million tons.

Not only is the capacity of domestic factories difficult and expected, but the difficulty of wood pulp imports is also increasing.

Since 2022, multiple overseas events such as the Russia-Ukraine war, the Finnish general strike, and the Canadian floods have jointly brought supply chain tensions, and the price spike and efficiency reduction of ports and shipping on an international scale are also worrying. Shipping schedules have been extended sharply, and shipping costs are rising, nearly tripling from a year earlier.

As a large importer of wood pulp, China's external dependence on wood pulp is close to 65%, several major import sources of black swan events, mixed with the skyrocketing prices of international commodities, so that imported wood pulp has become an expensive business.

In the first quarter, the price of outer plate coniferous pulp rose from $710 / ton to about $900 / ton; The price of broadleaf pulp has gradually risen from about 560 US dollars/ton to 700 US dollars/ton.

In addition to wood pulp, waste paper is another main raw material for paper making.

In the past, a quarter of the waste paper raw materials used in papermaking in China relied on imports. However, the "ban on waste" issued in 2017 will be fully implemented by 2021, and the import of waste paper will be completely halted. The raw material gap can not be completely filled by domestic waste paper, for paper enterprises, the higher price of waste pulp or imported pulp has become the only alternative.

▲ Price trend of waste paper

However, the sluggish global economic performance in the past two years has caused a sharp decline in the amount of waste paper recycling and exports in Asia, Europe and North America.

According to data from the Shanghai Futures Exchange, the highest price of pulp futures market in March this year is 7462 yuan/ton, from the average monthly price in the first quarter, an increase of nearly 12%, although pulp prices have fallen in April, the monthly settlement reference price is still as high as 7049 yuan/ton.

▲ Price trend of pulp ending value

The high price of raw materials has made the price of downstream paper enterprises frequent, which in turn has further supported the pulp and wood pulp market.

A market that doesn't follow

In general, in the face of rising raw material costs, companies can pass some of the pressure on to consumers by raising terminal prices. However, despite a wave of price increases in the paper industry, paper enterprises soon found that the consumption downturn under the epidemic, the chain reaction of the policy, together with the increasingly fierce competition in the industry, so that the entire Chinese paper industry had to face the dual dilemma of demand and supply.

An obvious example is that in mid-2021, the "double reduction" policy in the education industry was formally implemented, and the demand for teaching aid workbooks dropped sharply, making the corresponding cultural paper products coated paper and double-tape paper sell poorly.

At the same time, since the second quarter of 2021, a large influx of imported finished paper has impacted the domestic market, and the price of cultural paper has dropped sharply, and the gap once reached 2000 yuan/ton.