The Zhitong Finance App learned that Changjiang Securities released a research report saying that 2024Q1 is still expected to be the stage where the paper industry chain digests inventory, and the price increase for cultural paper is expected to be superior to wrapping paper after the Spring Festival. Cultural paper gradually enters Xiaoyangchun (tender season for fall textbooks) after the Spring Festival. Improved demand is expected to drive price increases. The first half of the year for wrapping paper is a traditional low season, and demand is generally driving price increases. It is worth noting that prices for broadleaf pulp from overseas pulp mills have risen recently. On the one hand, demand for wood pulp in the European and American markets has increased since the beginning of the year. On the other hand, at present, Chinese paper companies' wood pulp stocks are generally low, and demand for cultural paper is expected to increase in the future. It is necessary to track the implementation of price increases in the future.
Related targets: Optimistic about Sun Paper (002078.SZ), which is pro-cyclical and has flexible performance; Huawang Technology (605377.SH)'s high profit sustainability is expected to exceed expectations, and there is an increase in dividend ratios and dividend rates; Bohui Paper (600966.SH) has room for short-term repair and strong long-term flexibility. Focus on specialty paper labels such as Wuzhou Special Paper (605007.SH) and Xianhe Co., Ltd. (603733.SH), etc., and 2023Q4 profits are expected to increase month-on-month.
Changjiang Securities's views are as follows:
Papermaking Current location: Low in the big cycle, there is Xiaoyangchun after the Spring Festival
In February, in the context of the off-season, there was no significant change in supply and demand in the paper industry, and the cycle was low in various aspects such as paper companies' profits, paper prices, and operating rates; judging from the inventory cycle, by the end of January, total paper inventory was in a high position. The current positive change is that the price of pulp increased after the Spring Festival due to improved domestic and overseas market demand and low inventory (overseas pulp companies such as Suzano raised prices for broadleaf pulp), which in turn pushed paper prices to usher in “Xiaoyangchun.” Price increase letters for white cardboard and cultural paper have been partially implemented since late February.
Profit per ton: Currently, with the exception of Sun and Huawang, which is higher than the historical center, the remaining paper companies have not recovered to the historical center level; paper prices: Currently, the prices of white card paper and box tile paper are significantly lower than the historical center, while the prices of wood pulp and coated paper are slightly higher than the historical center; operating rate: Affected by production line maintenance during the Spring Festival, the overall operating rate of the industry in February was at a historically low level.
Paper: Price increase letter partially landed, cultural paper entered Xiaoyangchun
Supply: The operating rate declined month-on-month, and no additional production capacity was put into operation. In February, due to the influence of the Spring Festival, the production rate of paper products declined month-on-month. Currently, they are all at historically low levels, which is a normal seasonal fluctuation. In terms of production capacity, there was no new production capacity for bulk paper or specialty paper in February.
Inventory: Cultural paper declined slightly, and many other types of paper increased. At the inventory level, as of the end of February 2024, due to the impact of the Spring Festival, terminal demand was limited. Apart from a slight decline in cultural paper stocks, stocks of other types of paper had increased.
Demand: Cultural paper is gradually entering Xiaoyangchun, and demand for wrapping paper is low. Looking ahead, March-May is the traditional peak season for cultural paper. With the launch of tenders for fall textbooks and teaching aids, the price increase letter is expected to be further implemented; wrapping paper is currently in the traditional low season. It is worth noting that in the context of overseas pulp mills raising prices for broadleaf pulp, white cardboard has issued a new round of price increase letters, and subsequent implementation needs to be followed up.
Wood pulp: Strong in the short term, focusing on domestic and external demand restoration in the medium term
Price: The price of inner plate pulp rebounded, and the price of outer disc pulp increased. Prices of inner-plate needles and broad-leaved pulp rebounded; prices of outer-plate broad-leaf pulp rose, and prices of coniferous pulp stabilized. The supply side of dimensional broad-leaved pulp was relaxed throughout the year, and the current price increase for external broad-leaved pulp exceeded expectations. Taking into account the above two points, the overall supply side of broadleaf pulp is relaxed. It is expected that the price increase this time is mainly due to improved downstream storage demand and terminal demand, and the price increase has exceeded expectations. Short-term: Domestic and overseas demand is improving in stages, and pulp prices are strong. Wood pulp stocks on the production side and European ports fell to a low level at the end of 2023, and demand from European terminals rose in early 2024, driving up the price of broad-leaf pulp in Europe by 80 US dollars/ton, which also led to an increase in domestic broad-leaf pulp prices. Mid-term: The supply of broad-leaved pulp is loose, and attention should be paid to internal and external demand restoration. The cash cost of broadleaf pulp is generally around 400 US dollars. There is a downward trend with process improvements in large pulp mills, and there is still room for subsequent decline in cash costs. In the full year of 2024, slurry prices are expected to fluctuate, focusing on domestic and external demand restoration and new production capacity investment. On a long-term basis, demand and inventory are guiding indicators for pulp prices. I am optimistic that slurry prices will enter a new upward cycle as global economic demand recovery and inventory removal.
Risk warning: 1) The industry's new production capacity has increased dramatically; 2) raw material prices have fluctuated greatly.