Slurry price resumption and deduction, this round of costs into the decline cycle

First, pulp price resumption and deduction: this round of cost into the decline cycle

1.1. Stock price fluctuation

Since 2017, pulp prices have risen three times: 2017.1-2018.1 (supply side) : Supply-side reform has led to a sharp contraction of downstream paper production capacity, and the price of terminal pulp has driven up upstream paper prices; 2020.11-2021.5 (demand side) : After the impact of the first wave of the epidemic, the demand for pulp and paper varieties accumulated in the first half of the year began to be released. Superimposed from the situation that the epidemic in China has been controlled but overseas has gradually gotten out of control since Q3 2020, the export share of consumer goods has increased significantly, driving the export demand for related paper products. Overall, pulp prices are rising driven by the increase in demand for terminal papermaking; 2021.11-2023.1 (supply + demand superposition) : natural disasters on the supply side led to the suspension of pulp mill production, the outbreak of the Russia-Ukraine war led to the disruption of Northern Europe + Russia conleaf pulp production capacity, and the relaxation of overseas epidemic prevention and control on the demand side caused a rapid rebound in demand, pushing up the price of pulp.

2017.1-2018.1 Upward (supply side) : Supply-side reform led to a sharp contraction of downstream paper production capacity, and the skyrocketing price of terminal pulp system led to a rise in upstream paper prices. In 2017, the cumulative investment growth of fixed assets in the paper industry slowed down significantly, and the growth rate was below 10%. 2019.1-2020.1 Downlink (supply side) : After the supply-side reform, upstream paper enterprises plan to release a large amount of production capacity during this period, resulting in a decline in the price of pulp and paper varieties, lowering upstream costs; 2020.11-2021.5 Upward (demand side) : After the impact of the first wave of the epidemic, the demand for pulp and paper varieties accumulated in the first half of the year began to be released. Superimposed from the situation that the epidemic in China has been controlled but overseas has gradually gotten out of control since Q3 2020, the export share of consumer goods has increased significantly, driving the export demand for related paper products. Overall, pulp prices are rising driven by the increase in demand for terminal papermaking; 2021.5-2022.3 Down (supply side) : pulp prices are down, mainly because overseas pulp plants are expected to put into operation, and supply is expected to keep up after the demand is completed;

2021.10-2022.12 Upward, high sideways (supply + external demand) : Pulp prices began a new round of rising trend, we believe that this round of rise is mainly due to the continuous tightening of the supply side and the rebound of overseas demand. As of December 16, 2022, the CFR outer price of coniferous pulp (Chilean Silver Star) and broadleaf pulp (Brazilian goldfish) was $940 / ton and $820 / ton (broadleaf pulp was lowered by $40 on December 13). (1) Supply side contraction: Under the influence of natural disasters (such as floods in Canada, fires in Chile), regional strikes (Finland's leading UPM strike nearly 4 months), supply chain bottlenecks, and commodity embargo caused by the Russia-Ukraine incident, the supply of raw wood chips is in short supply, pulp mills continue to reduce, and there is basically no new large-scale trade pulp capacity in the world in 2019-2020. Some of the planned production capacity continues to be delayed due to the impact of the epidemic.

(2) Demand side: Overseas epidemic prevention and control is relaxed, and terminal demand in Europe is facing a strong rebound. Driven by supply and demand, the price of European pulp has risen strongly, and because of the higher price of European pulp, wood pulp has priority to be sent to Europe rather than China, so China's imports are at a low level, domestic supply and demand are also in a tight balance, and pulp prices remain high. The overall raw material end has caused great pressure on the downstream finished paper enterprises, and the prosperity continues to be depressed, and the gross profit of double adhesive paper, coated paper, and white cardboard paper has significantly decreased or even lost money.

1.2, this round of downward inference: supply side production capacity release, 23 years of broadleaf pulp increased 10% capacity increment

According to public information, the production of two million-ton broadleaf pulp projects that were significantly delayed by the epidemic in the early stage is more certain: Chile Arauco 1.56 million tons of broadleaf pulp project put into production in January 23, UPM in Uruguay 2.1 million tons of broadleaf pulp project is expected to put into production in 2023Q1, according to the rhythm, is expected to gradually climb from 23Q1-Q2 release, 2023 from the supply tight pattern is expected to gradually improve. In addition, according to public information, Suzano Brazil's 2.55 million tons of broadleaf pulp project in 2024 and Pacacel's 1.8 million tons of broadleaf pulp project in 2025 are also expected to be put into production one after another, and the supply of more than one million tons of broadleaf pulp is expected to be better. Conifer pulp expansion is relatively weak, Sodra from the end of 2022 to the beginning of 2023 only 10 tons of renovation projects into production, 2023 Finland Metsa Fibre Kemi renovation is expected to add 800,000 tons of capacity.