The Zhitong Finance APP has learned that China Galaxy Securities released a Research Report stating that the current recovery of the papermaking industry is at the bottom, with a reduction in supply of pulp and paper, seasonal demand for waste paper warming up, and continuous price increase notices being implemented, resulting in price increases. Looking ahead, a significant amount of new capacity for double-sided paper and white cardboard is expected in 2025, which may exert some pressure; however, new capacity for double copper paper, corrugated paper, and boxboard is limited. Meanwhile, the central government has expressed a proactive stance, and policies to boost the economy and domestic demand are expected to be continuously introduced in the future. There is a Bullish outlook on the support of future policy implementations on demand, which will drive the papermaking industry upwards.

The main viewpoints of China Galaxy Securities are as follows:

Raw Materials: Regarding wood pulp, on January 8, 2025, the daily external market prices for ARAUCO softwood pulp (Silver Star) and ARAUCO hardwood pulp (Star) in China's main ports were $795 and $570 per ton respectively, showing year-on-year changes of +4.61% and -12.31%, and month-on-month changes of +1.27% and +3.64%. On January 8, 2025, the daily average prices for softwood pulp, hardwood pulp, and chemical pulp in China showed year-on-year changes of +8.84%, -6.1%, and -17.54%, with month-on-month changes of +2.37%, +6.61%, and +0.82%. Regarding waste paper, on January 8, 2025, the daily average price for waste cardboard (Grade A) in China was 1,570 yuan per ton, showing a year-on-year decrease of -0.57% and a month-on-month decrease of -1.2%. In December, the import prices for U.S. waste #12 recycled fiber pulp in Southeast Asia increased slightly, with the market mainstream prices ranging from $250 to $270 per ton.

Cultural Paper: On January 8, 2025, the daily average prices for double-sided paper and double copper paper in China were down 6.28% and 4.16% year-on-year, while month-on-month changes were +0.93% and +1.1%. Shandong Chenming Paper limited production, thus alleviating industry supply pressure. Leading paper companies issued price increase notices, which continuously led to rising prices. Looking forward, there will be 1.55 million tons (Joyson 1.3 million tons, Wuzhou Special Paper Group 0.25 million tons) of new capacity for double-sided paper in 2025, which is an increase of 8.71%, indicating certain supply pressure. Double copper paper production has remained stable since 2016; it will benefit from reduced supply in the short term, but attention should still be given to the performance of end demand.

White Cardboard: On January 8, 2025, the daily average price of white cardboard in China was down 10.04% year-on-year and up 1.9% month-on-month. Benefiting from the reduced supply by Shandong Chenming Paper, the industry expectations have improved, leading to a stabilization and rebound in prices. The demand for white cardboard remains weak, with consumption in September, October, and November 2024 all down approximately 20% year-on-year. There is still considerable capacity pressure expected in the future, with an estimated 4.5 million tons and 3.7 million tons of new capacity to be released in 2025 and 2026, respectively, continuously increasing competitive pressure.

Corrugated Boxboard: On January 8, 2025, the daily average prices for corrugated paper and boxboard in China were up 0.95% and down 1.71% year-on-year, while month-on-month changes were +2.18% and +1.67%. In December, as the Spring Festival and New Year approached, large paper mills continuously issued price increase notices, and nearby small and medium-sized paper mills showed high enthusiasm to follow suit, while downstream packaging plants maintained a relatively stable order situation and supplemented inventory as needed. Demand-side is providing support for paper prices. Paper companies’ inventory levels are still at a medium-low level, large paper mills have announced plans for price increases in early January, and with some paper mills scheduled for maintenance in mid to late January, the supply side is still expected to be supported.

For household paper: On January 8, 2025, the daily average price of China’s wood pulp household paper decreased by 4.2% year-on-year and remained stable month-on-month. In the Shandong region, local paper companies are still experiencing shutdowns or production cuts, but the influx of low-price foreign sources has led to a slight decline in market prices; in the Hebei region, market competition continues with sporadic low prices still present, but due to rising raw material prices, cost pressures have increased, leading to stable market prices; in the Henan region, paper companies are delivering Orders, with production and sales relatively stable, and paper prices are quite stable; in the Sichuan-Chongqing region, the delivery pace of paper companies has slowed, but due to shutdowns and production reductions at some paper companies in the middle and late months, market prices primarily fluctuate within a Range; in the Guangxi region, the delivery pace of paper companies is average, combined with upstream raw material prices falling, dragging the paper prices down slightly.

Investment suggestion: It is recommended to pay attention to leading companies in the pulp and paper sector such as Shandong Sun Paper (002078.SZ) and Yueyang Forest & Paper (600963.SH), leading household paper companies HENGAN INT'L (01044) and C&S Paper Co., Ltd. (002511), and leading special paper companies Hangzhou Huawang New Material Technology (605377.SH), Xianhe Co.,Ltd. (603733.SH), and Wuzhou Special Paper Group (605007.SH).

Risk reminder: The risk that downstream demand may not meet expectations; the risk of significant increases in raw material prices; the risk that production capacity may not be realized as expected; the risk of intensified Industry competition.