The market demand potential is huge, and the process of equipment localization is accelerating

First, the manufacturing industry as a whole has recovered to a good development, and the industry's operating income has increased steadily

Since 2022, under the influence of high international commodity prices and repeated outbreaks of the epidemic in many places, the domestic manufacturing industry has been impacted to a certain extent, but under the overall control of the State, China's manufacturing industry has shown a good trend of recovery. In 2022, the national industrial production above designated size will maintain a steady recovery, with the added value increasing by 3.6% over the previous year. Paper making equipment is a subdivision of the special equipment manufacturing industry, since 2022, the growth rate of the added value of China's special equipment manufacturing industry and the growth rate of industrial added value are basically consistent. From January to April 2022, affected by the rise in energy prices caused by the epidemic in many places and the Russia-Ukraine conflict, the operation of special equipment manufacturers has been greatly impacted, and the growth rate of industry added value has dropped to -5.5%, which is below the critical point. From May to June, with the package of policy measures to stabilize the economy, the resumption of work and production of enterprises accelerated, and the added value of the special equipment manufacturing industry increased rapidly. From July to September, the state introduced a series of measures to promote the steady and healthy development of the industrial economy, and the growth rate of the special equipment manufacturing industry maintained stable growth. From October to December, external uncertainty rose, the manufacturing industry faced greater pressure, and the growth rate of the special equipment manufacturing industry continued to decline; Among them, in December, with the optimization and adjustment of epidemic prevention policies, the number of new coronavirus infections increased significantly, and the growth rate of special equipment manufacturing industry dropped to -0.5%, which fell below the critical point, and the industry production fell.

Industry operating income grew steadily. The paper industry is closely related to national life, and the market size of China's paper industry has grown steadily from 2018 to 2022. In 2020, due to the impact of the new coronavirus epidemic, the prosperity of the paper industry is overall at a low level, and the industry income fell by 2.67%. In 2021, the domestic economy will recover, and the operating income of the paper and paper products industry above designated size in China will increase by 15.32%, and the operating profit will increase by 7.03%. In 2022, the domestic economy was greatly affected by the epidemic, the future supply chain of the industry was hindered, and the operating income of the paper and paper products industry above scale slowed down, increasing by 0.4% year-on-year, which was 14.92 percentage points lower than that in 2021. In terms of profits, affected by the conflict between Russia and Ukraine, international energy prices have increased significantly, the production cost of the industry has increased, and the operating pressure of the industry is larger, and the operating profit of the paper and paper products industry above the scale is 62.1 billion yuan, down 29.80% year-on-year. Looking forward to 2023, with the acceleration of the landing rhythm of the "steady growth" policy, the vitality of market players is expected to be further stimulated, and industry revenue and profits are expected to rise.

Second, the industry's independent innovation ability has been strengthened, and the process of equipment localization has been accelerated

The paper industry is an important basic raw material industry closely related to the development of the national economy and social undertakings, and the consumption level of paper and paperboard is a sign to measure the level of modernization and civilization of a country. Papermaking equipment as an important market segment in the middle reaches of the papermaking industry, its technical level is related to the overall development level of the industry.

Papermaking equipment mainly includes crushing equipment, transmission equipment, wet pulp machine, extrusion machine, folding machine, crushing conveyor and baler. According to the process flow of pulp and paper making, paper making machinery can be divided into material preparation equipment, pulp equipment, paper machines and finishing processing machinery. Among them, the material preparation equipment is the equipment that pretreats and processes according to the requirements of the cooking or grinding process before cooking or grinding, which is divided into non-wood fiber material preparation equipment and wood fiber material preparation equipment, including grass cutter, reed cutter, peeling machine, chipper, etc. Pulping equipment is the equipment used in the process of separating plant raw materials into fibers, including digester, wood grinder, hot mill, pulp washing machine, pulp bleaching machine, beater and waste liquid recovery equipment. The complete equipment of the paper machine includes the flow box, the mesh department, the press department, the drying unit, the calendering machine, the paper winder, and the main engine such as the transmission department and the auxiliary system such as water, vacuum, lubrication and heat recovery.

Papermaking equipment is a highly professional industry, involving machinery, chemicals, materials, anti-corrosion and other technical fields. China's papermaking equipment industry has a short development history, the overall technical level of the industry is relatively lagging behind, and the market size is small. From the international market, paper equipment manufacturers are mainly concentrated in Germany, the United States, Italy, Japan and other manufacturing developed areas, compared with the international paper equipment leading enterprises, domestic paper equipment suppliers in terms of scale, technology and quality, there is a big gap, for a long time large paper machinery and equipment are dependent on imports. In recent years, the state has introduced a number of policies to promote the innovation and development of technology and equipment in the paper industry and green transformation. Among them, in order to improve the technical level of China's paper machine and speed up the process of localization of large and medium-sized paper machines, the state has also arranged technical transformation funds supported by national debt to introduce some technical projects. Under the guidance of the "manufacturing power" strategy and related policies, participants in the paper equipment industry have gradually increased. With the paper equipment manufacturers have increased research and development efforts and aviation, shipbuilding and other cross-industry investors to participate in the layout of paper machinery and equipment research and development and production, the technical level of the industry has gradually improved. By the end of 2022, China has a total of 2,273 patents related to papermaking equipment, including 1,670 utility model patents and 578 invention patents. Among them, 164 new paper equipment patents will be added in 2022. And research and innovation of waste paper pulping complete sets of technical equipment, drum pulper, new closed screening equipment, double disk pulper, super calender and other equipment, equipment localization process continues to accelerate. In 2022, 164 new paper equipment technology patents were added in China, a slight decline from the previous two years, but it is still at a high level compared with before 2016, and industry research and development is accelerating. In recent years, with the continuous improvement of the level of papermaking equipment, China's market share is also gradually increasing. It is expected that in 2022, China's paper equipment market share will increase to about 28% of the global total, and the industry localization process will further accelerate.

Third, the downstream market is developing steadily, and the industry demand has great potential

The downstream market has an important role in promoting the development of the paper equipment industry, and the continuous expansion of the downstream industry is conducive to the market development and product research and development of the industry. Among them, pulp is the most important raw material in the paper industry, and there are many types of pulp production equipment, mainly including pulp grinding machine, scuttling and winding machine, pulp drying machine, compressor and other papermaking equipment. From 2017 to 2022, China's pulp production and consumption continue to increase. In 2021, China's pulp production and total consumption increased by 10.83% and 7.94%, respectively. In 2022, with the increasing demand for downstream paper, pulp production and consumption continued to grow, with a year-on-year growth rate of about 15% and 10.85%. In the future, with the continuous expansion of the scale of domestic pulp production lines and the continuous improvement of pulp quality requirements, the demand for pulp manufacturing equipment will further rise.

China's forest resources are relatively scarce, the forest coverage rate is far lower than the global average of 31%, and the per capita forest area is only 1/4 of the world's per capita level. Among them, the annual growth of timber forests that can be harvested is less than 100 million cubic meters, resulting in a greater dependence on pulp imports in China. In 2021, China will import 29.69 million tons of pulp, accounting for about 27% of the country's pulp consumption. After the Ministry of Ecology and Environment of China announced a total ban on the import of waste paper in 2021, China's pulp imports have declined, and 29.16 million tons of pulp will be imported in 2022, down 4.8% from 2020. In the case of limited pulp imports and rising demand, increasing the capacity of pulp production line is an important way for the paper industry to increase production, and the new pulp production capacity will drive up the demand for pulp production equipment.

Machine-made paper and paperboard are widely used in many fields, and data from the National Bureau of Statistics show that from 2018 to 2022, the production of machine-made paper and paperboard in China has risen steadily. In 2022, the national production of machine-made paper and cardboard 136.914 million tons, an increase of 0.79%, the industry continues to grow, the huge domestic demand for paper equipment provides a broad space for development.

Household paper is a huge consumption of daily consumer goods, with China's economic development level and people's living standards are increasing, the consumption of household paper in all regions of the country has shown a steady growth trend. Data show: in 2021, China's household paper consumption reached 11.62 million tons, an increase of 10.77%, the domestic household paper market size of about 14.66 billion yuan, is the world's largest consumer of household paper. With the continuous improvement of residents' living standards and the increasing awareness of consumers' health and hygiene, the consumption of household paper will continue to grow in 2022, reaching 12.36 million tons, which will further boost the demand for paper making equipment. At the same time, as people have higher and higher requirements for the quality of household paper, the papermaking industry has gradually increased the technical requirements for papermaking equipment, which will further promote the upgrading and transformation of papermaking equipment, and the industry has greater development potential.

China is the world's largest consumer of household paper, the overall consumption of household paper is huge, but the per capita consumption is relatively low, the per capita consumption of household paper is much lower than the United States and other developed countries. In 2022, the per capita consumption of household paper in China will be about 8.kg, an increase of 6.1%. Compared with 29kg in the United States, 16-17kg in Western Europe and Japan, the per capita consumption of domestic household paper still has great room for improvement. Overall, in the future for a long period of time, China's paper equipment industry will maintain a high boom, industry demand potential is huge.