The Zhitong Finance App learned that Orient Securities released a research report stating that starting at the end of 2023, the European and American paper industry chains are coming to an end, and demand for pulp is gradually picking up. Global pulp supply disturbances have been frequent since March. The mismatch between global pulp supply and demand is expected to be prominent in the second quarter. Combined with pulp inventories throughout the industry chain, the pulp inventory in the entire industry chain is at a medium to low level, and pulp prices are expected to maintain a strong trend in the second quarter. In terms of bulk paper, we are currently in the traditional peak season for cultural paper. If pulp prices continue to be strong, cultural paper prices are expected to achieve cost transmission, and cultural paper industry leaders, which account for a relatively high proportion of self-supply pulp, are expected to benefit from this round of rising paper prices and achieve profitable expansion.
Incident 1: On March 22, Suzano announced that the price of broadleaf pulp in the Asian market will rise by 30 US dollars/ton in April 2024, 80 US dollars/ton in the European market, and 100 US dollars/ton in the North American market.
Incident 2: Russian needle announced that the price of coniferous pulp in the Chinese market in April was 790 US dollars/ton, and supply was halved due to pulp mill maintenance and conversion; Mercer's Canadian Moon softwood pulp price was 820 US dollars/ton in April.
The main views of Orient Securities are as follows:
Global pulp prices continued to rise above expectations after the Spring Festival. The increase in Europe and the US was greater than in the Chinese market
In the Chinese market, the price of broadleaf pulp remained flat at the historical median level from January to February 2024, and the price of coniferous pulp fell slightly; after the Spring Festival, overseas pulp mills raised prices in the Chinese market month by month, and external prices for broadleaf pulp rose in March and April, exceeding market expectations. In the European and American markets, Suzano, the leading South American broad-leaved pulp market, has raised prices in the European and American markets for 8 consecutive months since September 2023. Currently, the net prices of broad-leaved pulp and coniferous pulp in the European market are higher than in the Chinese market.
Demand in Europe and the US is picking up, supply disturbances are frequent, and industrial chain inventories remain low. Pulp prices may continue to strengthen in the second quarter
Beginning at the end of 2023, the European and American paper industry chains came to an end, and demand for pulp gradually picked up. Global pulp supply disturbances have been frequent since March. It is expected that the mismatch between global pulp supply and demand will be prominent in the second quarter. Combined, pulp inventories in the entire industry chain are at a medium to low level, and pulp prices are expected to maintain a strong trend in the second quarter:
① On the demand side, the removal of the European and American paper industry chains since the beginning of 2024 is nearing its end. Combined with the impact of the Red Sea incident, overseas demand for pulp has improved markedly. Demand in China is relatively stable. Domestic wood pulp paper production capacity will be put into operation or demand for pulp will increase. The impact of new domestic pulp lines on commercial pulp demand is still relatively small this year.
② On the supply side, there are currently many unplanned shutdowns in production capacity around the world (such as the strike in Finland, the explosion at the Kemi plant, and the potential strike of UPM), combined with the permanent withdrawal of coniferous pulp production lines and centralized maintenance of large pulp mills. The global supply of pulp is expected to be tight in the second quarter, and the supply of coniferous pulp is particularly tight.
③ On the inventory side, the current global pulp mill and port pulp inventory is still at a low level in history, and the pulp inventory of Chinese paper mills is also below the median since 2021, and the industry as a whole has some room to replenish stocks.
The supply and demand pattern of cultural paper is optimal, and the cost transmission capacity is the strongest
The paper supply and demand pattern is the core factor that determines its cost transmission capacity. The current supply and demand pattern in the cultural paper industry is superior to white card paper and box board paper, and may be the variety that will benefit the most from this round of rising pulp prices. After the Spring Festival, against the backdrop of a continuous rise in pulp prices, the price of cultural paper rose smoothly, while the prices of white cardboard and box board still fluctuated at a low level. In terms of bulk paper, we are currently in the traditional peak season for cultural paper. If pulp prices continue to be strong, cultural paper prices are expected to achieve cost transmission, and cultural paper industry leaders, which account for a relatively high proportion of self-supply pulp, are expected to benefit from this round of rising paper prices and achieve profitable expansion.
Related targets:
We recommend Sun Paper (002078.SZ), the leading integrated leader in Lin pulp and paper. We recommend focusing on Chenming Paper (000488.SZ) and Bohui Paper (600966.SH). In the specialty paper industry, the current price of high-end decorative base paper is still high, and there are frequent price increase letters for consumer paper for daily use. Higher pulp prices help enhance the price stability of decorative base paper and promote the implementation of price increases for consumer paper products for daily use. We recommend Huawang Technology (605377.SH), the leader in the specialty paper industry, Xianhe Co., Ltd. (603733.SH), the leader in the specialty paper industry, and Wuzhou Special Paper (605007.SH).
Risk warning
The risk of weakening terminal demand; the risk of overseas strikes falling short of expectations; the risk of delays in the introduction of additional production capacity; and the risk that changes in assumptions will affect the calculation results.