According to a research report released by Debang Securities, based on the deductive logic of the inventory cycle, it is estimated that the paper industry has entered the active destocking stage in December 2022, with each stage running for 10-14 months. It is expected that the paper industry will enter the passive destocking stage as early as the second half of the year, with the main characteristics being that raw material inventory remains stable or increases, and finished product inventory decreases; The prices of raw materials have decreased, while the prices of finished paper have remained stable or slightly increased, indicating signs of recovery in the profits of paper companies.
The main viewpoints of Debang Securities are as follows:
Pulp and paper series:
Cultural Paper is expected to recover first, and white cardboard companies have a strong willingness to increase prices
In terms of cultural paper, in mid July, leading companies such as Sun Paper, Huatai Paper, Chenming Paper, and APP released a new round of price increase letters. As of August 25, 2023, the prices of double copper paper and double adhesive paper were 5360/ton and 5625/ton respectively, with an increase of 180/250/ton compared to early July. The overall implementation of the price increase letter is good. Benefiting from the positive expectations of the upcoming bidding for teaching materials in the spring of the following year, there is some positive support for the demand side in the short term. In September, the paper mill may still have new price increases, and cultural paper is expected to recover first under the support of rigid demand.
In terms of white cardboard, in order to alleviate the dilemma of cost and price inversion of white cardboard, leading enterprises such as APP, Bohui Paper, Chenming Paper, and Wanguo Sun have issued three rounds of price increase letters since July, with each round of increase being 200/ton. The paper mills have a strong willingness to raise prices to repair profits. As of August 25, 2023, the price of white cardboard was 4430/ton, an increase of 250/ton compared to early July. The price increase letter has been partially implemented, and the ton surplus has been slightly repaired. Although downstream stocking attitudes have rebounded, with marginal improvements in inventory and operating rates, white card supply pressure remains high, and inventory remains at a historically high level. It is necessary to closely monitor the recovery of downstream demand.
Special Paper: Q2 paper prices are under pressure and pulp prices are declining, and some paper companies' profit elasticity still needs to be realized
Q2 special paper prices are under pressure and are declining. High priced pulp inventory is still being consumed, and some paper companies are slowly releasing their profit elasticity. On August 10th, Wuzhou Special Paper, Jianghe Paper Industry, and Zhejiang Xianhe respectively issued notice letters on the price increase of Grassin, raising the price of Grassin raw paper by 500/ton from August 15th. Looking ahead to Q3, with the recovery of demand, the price of special paper may stabilize and rebound, and the dividend of low-priced pulp is expected to be fully released. The trend of quarterly improvement in profits is relatively clear.
Waste paper series: prices continue to be low, and the traditional peak season is approaching and the supply-demand contradiction may ease
Since 2023, the corrugated and cardboard market has shown an overall trend of fluctuation and decline, with market prices currently at the lowest historical level in the same period in five years. August is the turning point of the traditional peak season in the
Packaging Paper industry. Since August, large-scale paper mills such as Jiulong, Liwen, and Huatai have issued price increase letters to increase their prices, resulting in high market sentiment towards price increases. During the peak holiday season, there is an expected increase in demand and a decrease in operating rates, which is conducive to easing the supply-demand contradiction. The price of corrugated cardboard has the possibility of a narrow upward trend in the short term.
