"Gold nine silver ten" is the traditional peak season of the paper industry, but compared with the optimistic market of the industry bottoming out in the first half of the year, this October has shown a "peak season is not prosperous" atmosphere.
A number of industry insiders told reporters that the current market environment facing the paper industry is difficult to be optimistic, in addition to the background of the contradiction between supply and demand, pulp prices, industry volumes and policies and other factors also affect the industry operations. In this context, how do paper companies cope with the fourth quarter?
Multiple factors disturb industry operation
In the first half of 2024, with the economic recovery and growth, the overseas market entered the replenishment cycle, and the domestic paper exports continued to rise, which jointly promoted the prosperity of the paper industry in the first half of the year. From the performance of A-share listed paper enterprises, many companies gained growth in the first half of the year, such as Sun Paper, Bohui Paper, Mountain Eagle International and other enterprises' profits increased significantly year-on-year.
In this context, in the third quarter of this year, paper companies once set off a wave of price increases, and many companies announced an increase in product prices. But the effect of the price increase was not ideal. Zhuo Chuang information white cardboard analyst Kong Xiangfen told reporters that the price of white cardboard in the third quarter rose slightly under the influence of the paper mill, but the continuity of the rise is not long.
"At present, the average price of 250G-400g white cardboard in the domestic market is 4146 yuan/ton, down 6.83% from the third quarter high of 4450 yuan/ton." Within the year, the highest price of white cardboard appeared in early January 4790 yuan/ton, the lowest price appeared at the end of October 4146 yuan/ton, the maximum price fluctuation of 644 yuan/ton." Kong Xiangfen analysis, from the driving factors of price volatility, in the first half of the year due to the slow recovery of market demand, continuous expansion of production capacity brought about by increased market competition, paper prices mainly fell. In the second half of the year, the market bottomed out under the influence of factors such as losses in the industry and the limited production of paper mills, but the traditional demand season is expected to fall, coupled with the bearish psychological factors brought about by the upcoming release of new production capacity in South China, paper prices once again turned into a falling channel.
Kong Xiangfen believes that the reasons for the current "low peak season" phenomenon, on the one hand, in recent years, under the background of global economic growth slowdown, domestic terminal consumption weakened, while terminal foreign trade orders contracted, as well as downstream peak season centralized stocking habits change and other factors, traditional demand peak season orders release concentration weakened; On the other hand, domestic production capacity continues to be put in, and some new entrants in the finished paper market have increased, and market share has been squeezed.
The price fluctuation of pulp is another important factor affecting the paper industry. As the core raw material of the paper industry, the value fluctuation of pulp is directly affected by the market supply and demand relationship. Looking back at this round of pulp price cycle, the end of 2023 rose from the low, continued to rise in the first half of this year, the paper industry stock price also ushered in a rise, but with the pulp price decline since the third quarter of this year, demand contraction, stock price performance fell quickly.
Zhuo Chuang information pulp analyst Chang Junting said that in the third quarter, the spot market price of imported wood pulp showed a downward trend of shock, which was related to the limited improvement of supply and demand, the shock decline of the cost end of the outer plate price, and the lack of profit improvement of the downstream base paper industry. "The third quarter for the market traditional off-season to peak season stage, on the one hand, the base paper industry's own overcapacity and the base paper shipping pressure brought the base paper industry operating rate decline, on the other hand, the cycle within the base paper new capacity release to provide some positive support, so the total demand growth narrowed."
Looking forward to the fourth quarter, Chang Junting believes that "from late October to December, although the current supply and demand data continue to improve, the pressure brought by the release of new pulp capacity at home and abroad and the downstream base paper industry's peak season is not booming or off-season characteristics are obvious, especially under the drag of the base paper industry's insufficient profit improvement, pulp prices are expected to fall under pressure."
"Forest, pulp and paper integration" anti-risk
From the reporter's interview with industry practitioners, the operating pressure of paper enterprises does exist.
The person in charge of a large white cardstock company told reporters that the white cardstock industry has a high concentration, but in recent years, due to the promotion of the plastic limit order, a number of paper mills announced new expansion plans, including some head enterprises and leading enterprises in other market segments. The new capacity could have an impact on the market.
Under the background of pressure in the industry, enterprises have turned inward to cultivate internal skills, constantly optimize management, and improve costs. Taking Bohui Paper industry as an example, the aforementioned person in charge told reporters that in view of recent policy changes and market environment changes in the paper industry, Bohui Paper industry has adopted a series of coping strategies to adapt to possible demand recovery and raw material price volatility risks, "The first is to deeply tap the production potential, by improving the production efficiency of existing paper machines, to achieve greater economies of scale." Ensuring rapid market response when demand recovers; Secondly, we continue to optimize the raw material procurement strategy and reduce the cost of raw material supply by establishing stable cooperative relationships with suppliers." In addition, strategies such as reducing operating and management costs, accelerating technological innovation and transformation, and carrying out futures hedging business have also become candidate "toolkits" of the company.
In addition to tapping their own operational potential to practice internal skills, promoting the layout of the whole industry chain of "forest, pulp and paper integration" has become a strategic choice for leading enterprises.
The so-called "integration of forest pulp and paper" refers to the integration of the three links of forest, pulp and paper that were originally separated by paper enterprises to form a complete industrial chain. "Through the integration of forest pulp and paper, domestic paper enterprises can further reduce the dependence on imported wood pulp and reduce raw material costs, enhance the right to speak in the field of wood pulp procurement, and reduce the impact of industry cycle fluctuations." Industry insiders told reporters. In the past two years, many head paper enterprises have frequently acted in this regard, and the extended chain layout has set off a climax.
According to statistics, at present, among the A-share listed companies, Sun Paper, Bohui Paper, Chenming Paper and other paper enterprises have carried out "forest pulp and paper integration" or "pulp and paper integration layout", and many of them said that relevant construction projects or technical transformation projects will be put into operation in the fourth quarter.
Securities research report believes that under the influence of the overall market is slightly flat in the third quarter, the paper industry is still facing no small challenges in the fourth quarter, and the integrated enterprises of forest pulp and paper that build a complete supply chain will have more competitive advantages in the industry, which will help enterprises smooth the cycle fluctuations.
Demand in many fields is expected to form support
At present, although the paper industry is still facing a lot of pressure, but looking forward to the fourth quarter, the industry believes that a number of subdivided paper species still have new demand to provide support.
Kong Xiangfen said that in terms of market demand for white cardboard, from the perspective of subdivision, orders such as pharmaceutical packaging show an increasing trend; The demand in catering and other fields is still stable, and the food card orders are supported to a certain extent. However, overall, the current market demand is limited, and industry trading is still not strong. Next, it is expected that the effect of New Year's Day, Spring Festival and other festivals will still exist, the downstream construction will be improved, and the demand for white cardboard will show a slight rebound trend.
Zhuo Chuang Information corrugated board paper analyst Lv Yanshuo believes that the current demand for corrugated and box board paper is in a slow recovery stage, and the future development mainly looks at two general directions.
First, corrugated and box board paper are recyclable environmentally friendly packaging materials, in line with the green packaging characteristics implemented by the state, and the concept of carbon peak and carbon neutrality in the future is more consistent. With the improvement of environmental awareness in the market and the product development and innovation of the corrugated and box board industry itself, the future development prospects of corrugated box board paper in the packaging industry are still foreseeable.
Second, as an important packaging paper, corrugated and box board paper terminal is widely used, in addition to the traditional industry to drive its demand, with the development of new energy vehicles, the spare parts industry for related packaging will still increase. The development of relevant segments of the industry will also drive the development of its packaging. For example, with the development of coffee drinks and other related products, their demand for packaging in the proportion of beverages or increased.
Looking at the longer term, the industry believes that the industry still has considerable growth points. Lin Xinyang, chairman of Bohui Paper Industry, told reporters that the paper industry was originally a capital, labor, resource-intensive industry, and now through the transformation of digital intelligence, gradually transformed into a technology-intensive, resource-efficient allocation industry. "At present, paper companies are focusing on sustainable development and circular economy, developing and using sustainable raw materials to improve energy efficiency, reduce water and energy consumption, while improving waste treatment and recycling technology, and promoting the development model of circular economy has great potential for the paper industry. In addition, in terms of international cooperation and expansion, through international cooperation and overseas market expansion, the use of global resources and markets will further improve the international competitiveness of Chinese paper enterprises."
