Due to the current decline in pulp prices on the cost side, the papermaking sector has ushered in dual catalysts of price increases and cost declines, and performance is expected to recover in the Asia Pacific area.
The Asia-Pacific paper industry has ushered in a new round of price increases recently. A number of papermaking companies issued price increase letters, with price increases ranging from 100 to 200 yuan per ton, and some paper types even raised prices by 1,000 yuan per ton.
Intensive Price Increases for Various Paper Products
According to the previous price increase notices of four major specialty paper manufacturers, Xianhe Co., Ltd., Guanhao High-tech, Five Continents Special Paper, and JiangHE Paper, starting from March 5, the prices of inkjet paper, sublimation heat transfer paper, and digital paper in the factory will increase by 1,000 yuan/ton.
As early as February 5, these paper companies issued the same price increase letter; the increase is also 1,000 yuan/ton. As for a reason for the price increase, many companies said that due to the impact of high and volatile raw material prices, the cost of production and operation continued to rise.
In addition, Sun Paper Group, Chenming Paper, and Bohui Paper also adjusted the prices of their white cardboard, household paper, cultural paper, and other products.
According to Ye Le, an analyst at CITIC Construction Investment, since February, white cardboard, cultural paper, and some special paper categories have issued price increase letters. In February 2023, the papermaking sector will usher in the dual catalysis of price increases and cost declines, and the sector's profitability will gradually recover.
The reason is that the price increase of paper companies may be a helpless move.
In the past year, pulp prices have continued to run at high levels. For example, 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%; during the same period, hardwood pulp rose from 5,070 yuan/ton to 6,446 yuan/ton, an increase of 27.14%.
In papermaking, the cost of pulp accounts for 60% to 70%, and some paper types even reach 85%. Therefore, once the pulp rises, the profits of downstream papermaking enterprises are under pressure, and they have to raise prices to pass on the cost pressure.
After entering March, with the domestic economy gradually improving, the downstream demand of the paper industry is expected to pick up, and the willingness of paper companies to raise prices is also stronger.
According to statistics, the sales volume of various domestic finished paper markets increased rapidly in February. Among them, the sales of corrugated paper increased rapidly, with a month-on-month increase of 259.5%. In addition, containerboard, whiteboard, and bobbin paper sales increased by 95%, 91.3%, and 79.3% month-on-month, respectively.
According to industry insiders, as long as the finished paper is produced, it will be taken away by customers directly, so the inventory level is relatively low.
Since the beginning of this year, the continuous decline in pulp prices has brought respite to paper companies. From the cost perspective, the prices of imported wood pulp and wood chips will continue to decline in 2023. With the addition of exchange rate changes, the cost of paper companies is expected to fall gradually. With the arrival of low-priced imported wood pulp in Hong Kong, the price may usher in a significant decline in the second quarter.
With Backward Performance in 2022, Paper Companies Fasten Production Expansion in 2023
Looking back on 2022, most enterprises will have a difficult life under poor macroeconomic prosperity and low demand in the terminal market. Judging from the 2022 annual performance forecast released by listed companies in the paper industry, the profits of many paper companies dropped sharply last year.
For example, Chenming Paper (000488. SZ) is expected to achieve a net profit of 160 million to 200 million yuan in 2022, a year-on-year decrease of 90.32% to 92.25%; Profit was 221 million to 290 million yuan, down 83% to 87% year-on-year.
Overall, in 2022, the total profit of the papermaking and paper products industry will be 62.1 billion yuan, a year-on-year decrease of 29.8%. Among them were 1,799 loss-making enterprises, a year-on-year increase of 40.9%.
For 2022, when the performance has fallen sharply, in 2023, paper companies seem to usher in spring. With the price of raw materials falling, product prices have been raised one after another, and paper companies have started expansion plans.
On the evening of March 6, Qifeng New Materials disclosed that it plans to issue shares to the actual controller Li Xuefeng, and CNNC Titanium Dioxide to raise funds of no less than 400 million yuan and no more than 615 million yuan for the special paper project with an annual output of 200,000 tons (Phase 1).
Qifeng New Materials said that the company plans to introduce CNNC Titanium Dioxide as the company's strategic investor by issuing stocks to specific targets and carrying out in-depth cooperation in the research, development, and application of titanium dioxide. After the issuance, CNNC Titanium Dioxide will hold more than 5% of the company's shares.
According to the announcement, the total investment of the "200,000 tons of special paper project (Phase I)" is 756 million yuan, and the construction period is 2 years. After the project is produced, the annual sales income will be 878 million yuan, and the normal annual total profit will be 160 million yuan.
Qifeng New Materials said that through this strategic cooperation, the two parties will rely on their leading advantages in their respective fields to explore the development model of the entire industrial chain from titanium dioxide to decorative base paper. At the same time, vigorously promote pre-impregnated paper products with zero formaldehyde and low energy consumption, enhance the independent controllability of the industrial chain and supply chain, and promote the coordinated development of all parties based on resource sharing and complementary advantages.
In addition, C&S Paper Co., Ltd, a household paper company, is also striving to increase production capacity.
On February 15 this year, C&S Paper Co., Ltd disclosed that the first phase of the 100,000-ton household paper project will be put into production in early 2024.
The project currently under construction is the first phase of the 300,000-ton bamboo pulp paper project in Dazhou, Sichuan, mainly for household paper products. After the first phase of the 100,000-ton project is completed, the company's production capacity will reach more than 900,000 tons.
C&S Paper Co., Ltd said in an agency survey that the company's production capacity is more than 800,000 tons. With the continuous expansion of sales channels, the production capacity has been unable to meet the growing sales demand. Capacity expansion is based on the company's rapid sales growth. The company's capacity utilization rate is very high, but there is still a capacity gap.
In recent years, under the circumstances of a tight supply of imported pulp and high prices for a long time, China's leading domestic enterprises have gradually expanded to the upstream of the industrial chain, integrating the initially separated three links of afforestation, pulping, and papermaking, and promoting the integration of forestry, pulp, and paper. The layout of chemical projects will increase the supply capacity of its raw material pulp to ensure the stability of raw material supply and further reduce production and operation costs.
At present, among listed companies, leading paper companies such as Sun Paper, Chenming Paper, Yueyang Forest & Paper, and Nine Dragons Paper have established an integrated forestry-pulp-paper industrial chain, which can supplement some pulp raw materials.
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