With the arrival of the "Golden Nine Silver Ten" peak season, some paper companies have issued letters announcing an increase in paper prices.
On September 18th, Sun Paper Industry announced that starting from September 18th, 2023, the purchase prices of its PM11, PM12, and PM40 machines will be uniformly increased by 300 yuan/ton based on the current execution price. Starting from October 1, 2023, the prices of all new orders will be uniformly increased by 200 yuan/ton based on the prices at the end of September.
Not only that, many paper companies, including Wuzhou
Special Paper and Guanhao High tech, have also issued price increases, with prices of
Specialty Paper, printing paper,
Packaging Paper, and other materials all increasing.
In response, Yang Xingjie, a researcher at Zhongyan Puhua, stated in an interview with China Business Daily that the increase in raw material costs is the main reason for the recent collective price adjustment of enterprises. In addition, September to December is the traditional peak demand season for the paper industry in the second half of the year. With the arrival of the peak demand season for paper products, the demand for paper has increased, and enterprise orders are full. The situation of insufficient supply has led many paper companies to raise prices one after another.
Peak demand season
On September 14th, the price increase letter released by Wuzhou Special Paper showed that on September 15th, all its digital paper products were increased by 500 yuan/ton (including tax) on the basis of existing prices. In addition, from September 15th, Guanhao High tech will increase the prices of the entire series of thermal
Sublimation Transfer Paper products by 500 yuan/ton on the basis of existing prices. MCC Paper Galaxy Co., Ltd. will raise the prices of its
Cultural Paper brands by 200 yuan/ton on the current basis starting from September 15th.
In addition, the commodity market analysis system of the Business Society monitored that the price of corrugated paper continued to rise. On September 15th, the average ex factory price of 140 grams of corrugated base paper was 2776 yuan/ton, an increase of 1.91% compared to the average price of 2724 yuan/ton on September 10th.
Business Society paper analysts believe that the current paper industry market is affected by the "golden nine silver ten" atmosphere, and the market supply and demand performance is relatively good. Some paper mills have also seen price increases due to increased production costs. It is expected that the prices of waste paper and corrugated base paper may be stable in the short term and tend to be stronger.
In an interview with reporters, Yin Ting, an analyst at Zhuochuang Information, stated that from the perspective of the cultural paper market, there are several main influencing factors for paper mills to actively send letters to promote growth. Firstly, in the case of small-scale paper mills preferring to accept orders and low profitability, they actively push up prices; Secondly, publishing bidding work has gradually started in South China, East China, Central China, and other regions. In addition, some foreign trade orders have been followed up, and the demand side benefits are gradually increasing.
A home e-commerce practitioner told reporters that there were hardly any orders before July this year, and since then, the number of orders has doubled, especially some for export. Our products are mostly packaged in cardboard boxes, and they have been in high demand recently
A person from a paper company told reporters that the reason for the collective price increase of paper companies in September was due to the improvement in traditional peak season demand, the completion of the digestion of high priced inventory by paper companies in the first half of the year, and the overall profit level is expected to gradually rebound.
However, from the perspective of the end market, the aforementioned e-commerce practitioners stated, "At the beginning of September, our packaging paper box was 0.9 yuan, which has recently risen to 1 yuan. The packaging paper factory has stated that it will continue to rise in the future
Cost transmission
In fact, the recent continuous increase in raw material wood pulp prices is also one of the main reasons for this round of paper enterprise price hikes.
On September 13th, Wuzhou Special Paper stated that the company's hot transfer printing price has been increased by 1000 yuan/ton, and food white cards, grazin paper, and cultural paper are all increasing in price. Meanwhile, the prices of raw material wood chips and chemical pulp have both increased recently.
According to data from Zhuochuang Information, the price of broadleaf pulp has risen from its lowest point of 5559.29 yuan/ton in early September to 5690.71 yuan/ton on September 6th, with a difference of 2.36% between high and low prices.
Chang Junting, an analyst at Zhuochuang Information, stated in an interview with reporters that the average spot market price of imported coniferous pulp in China continued to rise in September, and daily prices showed a strong trend of volatility. This was mainly due to the sustained rise in external market prices of wood pulp, increased exchange rate fluctuations, and subsequent cost pressures. The increase in downstream raw paper production and the depletion of raw paper inventory have brought stable demand for wood pulp The strong performance of the raw paper market price and an increase in actual orders have supported pulp prices. In addition, under the influence of multiple factors such as the strong operation of pulp futures on the Shanghai Futures Exchange and the limited supply of goods available for sale in the broadleaf pulp spot market, the enthusiasm of paper mills to purchase high priced raw materials has decreased after the middle of the year. Overall, in the market long short game, the price only narrows between 50-100 yuan/ton.
Chang Junting's analysis suggests that the short-term changes in the supply and demand side of the pulp market are limited. Industry insiders consider the cost pressure in the future market and are reluctant to sell at low prices. Downstream, they maintain a strategy of purchasing raw materials at low prices, and the game situation between buyers and sellers remains unchanged. It is expected that the pulp market will mainly absorb the price increase in the early stage, with most prices being adjusted horizontally.
Meanwhile, Yang Xingjie also stated that from the trend of pulp futures, pulp prices have continued to rise since June 2023. With the arrival of the peak demand season for paper products, there is strong support for the cost of raw materials, and it is expected that pulp prices will continue to rise in the near future. Although the overall trend of pulp prices is upward, the fluctuation range of prices may gradually decrease due to factors such as policy regulation and market supply and demand.
Profit pressure
The reporter noticed that from last year to the first half of this year, the profits of the paper industry have been significantly declining, and some enterprises are even in a state of loss.
According to data from the National Bureau of Statistics, from January to November 2022, the operating revenue of enterprises in the paper and paper products industry above designated size was 1376.52 billion yuan, a year-on-year increase of 1.2%, operating costs were 1216.86 billion yuan, a year-on-year increase of 4.1%, and the total profit was 47.8 billion yuan, a year-on-year decrease of 38.6%.
From a corporate perspective, Wuzhou Special Paper achieved a revenue of 2.841 billion yuan in the first half of 2023, a year-on-year decrease of 4.44%; The net loss was 12.1457 million yuan, with a net profit attributable to the parent company of 214 million yuan in the same period last year. In addition, Shanying International achieved a revenue of 13.748 billion yuan in the first half of the year, a year-on-year decrease of 17.52%; The net profit attributable to the parent company was a loss of 271 million yuan, representing a year-on-year shift from profit to loss; Bohui Paper achieved a revenue of 8.657 billion yuan in the first half of the year, a year-on-year decrease of 2.38%; The net profit attributable to the shareholders of the listed company was -346 million yuan, which was converted from profit to loss.
According to the 2023 semi annual report of Bohui Paper Industry, in the first half of the year, the demand side of the paper industry was affected by the slowdown in consumption recovery growth rate and the decline in paper prices. The channels entered a cycle of reducing inventory, and the supply side faced new production capacity investment. The overall market situation of paper products was sluggish. Although domestic paper companies continued the unfavorable situation of "high costs and low prices" at the end of last year in the first quarter, and their paper business generally suffered losses, in the second quarter, with the gradual consumption of low-priced pulp and wood chips in factories, energy prices decreased, unit production costs improved marginally, and paper prices gradually stabilized. Some paper companies showed signs of improvement in their operating performance compared to the previous quarter.
Bohui Paper Industry stated that it has continuously achieved self breakthroughs in the complex and ever-changing market environment. In the first half of this year, the company achieved a double-digit growth goal of product sales increasing by 19% year-on-year, and continued to strengthen control in quality, technology, and marketing services. The net profit per ton of paper in the second quarter improved month on month.
Shanying International stated in its semi-annual report, "The paper industry as a whole is in the recovery stage, and the market performance in the first half of the year was lower than expected. Currently, it is still facing pressure from the supply side to continue adding new production capacity, while downstream consumer demand is recovering slowly
The above-mentioned paper industry insiders believe that the entire industry has been in a long-term downturn, and corporate profits have been under pressure for a long time. At present, during the peak demand season and under the adjustment of supply and demand, enterprises are raising prices in order to improve their profitability.
In Yang Xingjie's view, due to the pressure on pulp prices, the primary factor affecting the prosperity of the paper industry has once again shifted from the cost side to the demand side. The decline in high pulp prices in the first half of the year has sharply reduced the pressure on domestic paper companies. The paper industry may face dual factors such as price hikes and cost declines, and performance is expected to recover.
Shanying International also stated that the second half of the year is usually the traditional peak consumption season for the paper industry. From the perspective of supply and demand, in the second half of the year, it is expected that the potential of major consumer goods such as electronics and home furnishings will be further unleashed, and social terminal demand will fully recover. Combined with the structured recovery of the domestic economy and the restoration of gross profit in the first half of the year, it is expected to return to normal profit levels.
