Pulp Market Review in 2022 and Outlook in 2023

From some public information, there are a large number of paper production capacity in China from January to November 2022. Among them, white cardstock and paper production capacity is more, white cardstock new or converted production capacity of 1 million tons, Zhuo Chuang information statistics in 2021 China's white cardstock production of about 9 million tons, 2022 new production capacity increase of more than 10%, and 2021 according to statistics newly released high-grade white cardstock production capacity of 2.82 million tons, The new production capacity of white cardboard in two years is close to 4 million tons, which can account for about 40% of the production in 2020, which also makes the white cardboard operating rate fall, but the output continues to increase. In the first 11 months of 2022, the new capacity of household paper is also more, and the new capacity can be counted to be close to 990,000, the paper association statistics 2021 household paper production of 11 million tons, the proportion of new capacity is close to 10%, although the price of household paper this year is better than other paper classes, but the operating rate has not been increased, and the capacity is more abundant. In addition, there are 620,000 tons of cultural paper and special paper production capacity put into production, and in December 2021, according to statistics, there are 320,000 tons of household paper and 50,000 tons of special paper production capacity put into production in the past two years, more domestic new paper production capacity, accounting for more than 10% of paper production, but the same period demand growth is affected by public health events, the economy and other difficult to match. Resulting in a sharp fall in the profits of paper mills, operating rates are low.

Six, weak consumption of finished paper demand is general

Demand for finished paper performance is general, mainly from the weakness of the domestic economy, as the demand distribution is more dispersed commodities, industries are involved in the demand for paper, this year under the impact of public health events, real estate, domestic demand has been poor, but also bring weak demand for finished paper. Taking the retail sales data of major consumer goods as an example, the growth rate from January to October was 0.6%, much lower than the growth rate of 12.5% in 2021, and lower than the average growth rate of 3.5% in 2020-2021. By industry, the growth rate of retail sales of optional consumer goods from January to October was generally lower than the average growth rate in 2021 and the past two years. Beverages, tobacco and alcohol, clothing, shoes and hats, cosmetics, daily necessities, cultural office supplies growth rate fell, the growth rate of retail sales of essential goods rose, such as grain and oil, and drugs that benefit from public health events, and these are the main demand terminals of white cardboard, wrapping paper and some cultural paper, after its growth rate fell or turned negative, the relevant paper consumption growth rate also fell or declined year-on-year. China's GDP growth rate in the first three quarters was 3%, 0.6% in the same period in 2020, and 2.2% in the whole year, the spread of public health events in many places in the fourth quarter, and the economic growth rate in 2022 is only better than that in 2020, in addition to the weak annual price of wood pulp paper, some non-wood pulp paper, such as corrugated paper and box board paper prices also continued to fall throughout the year.

The growth rate of supply and demand is obviously differentiated, making domestic paper prices and profits poor in 2022, and paper mills have to lower the inventory of raw pulp under the influence of low profits and weak shipments. However, the production capacity of the paper industry has increased, and the output has increased, so that the demand for pulp has been passively increased, that is, the speculative demand is weak but the demand is just increased. According to the simple calculation based on the sample data, China's wood pulp imports in the first 10 months decreased by 800,000 tons, the domestic broadleaf pulp and chemical pulp production increased by about 1.7 million tons year-on-year, and the total supply increased by about 900,000 tons. The visible wood pulp inventory that can be counted decreased by about 100,000 tons, and the inventory of paper mills should be lower than 2021 according to the data of the Bureau of Statistics. Domestic wood pulp demand increased year-on-year.

7. Strong external demand is not expected to last

The strength of exports is a big change in the paper market this year, from January to October, the export volume of white cardboard, cultural paper and some household paper has increased significantly, the current problem of tight energy supply in Europe still exists, resulting in high costs of paper mills, which continue to benefit China's paper exports, but at the same time, the downward trend of the European economy is more obvious. Eurozone PMI data has been below 50 for several months, the economy and demand will be negative for China's paper exports, it is expected that the high export volume in 2023 or difficult to continue, domestic demand pressure will also increase.