China Paper industry: Energy consumption restrictions for various types of paper implemented; significant decline in market prices for culture paper and white cardboard

China Paper industry: Energy consumption restrictions for various types of paper implemented; significant decline in market prices for culture paper and white cardboard

- From January to June 2025, among industrial enterprises above the designated size nationwide, revenue of the manufacture of paper and paper products amounted to RMB681.21 billion.
- The purchasing price index for manufactured goods: timber and paper pulp stood at 96.9 from January to June 2025, representing a year-on-year decrease of 3.1%

The Pulp and Paper Times

The paper industry is an important basic industry of the national economy and an industry that guarantees people’s livelihood. It has the characteristics of a technology-capital-resource intensive industry. Its product applications penetrate all aspects of social and economic activities. They are deeply integrated into the defence and military industry (special functional materials), cultural communication (publishing and printing), industrial and agricultural production (supporting materials), modern logistics (packaging products) and other key areas of the national economy and are closely related to residents’ daily consumption. The paper industry as a typical cyclical industry is closely tied to the overall state of the economy. The consumption level of paper and paperboard has become one of the important indicators to measure a country’s level of modernisation and civilised development, and is widely recognised by the international community as a “social and economic barometer”.

In recent years, the contradiction between supply and demand has been prominent due to the concentration of new production capacity in the paper industry coming into production, and the weakened support from end-user demand. In the first half of 2025, new production capacity in the paper industry in China gradually came into production, leading to a continuous increase in supply. The structural imbalance between supply and demand persisted, resulting in a significant decline in market prices for machine-made paper products such as culture paper and white cardboard. Meanwhile, although the prices of raw materials such as wood chips and pulp decreased, the decline in operating costs lagged behind the drop in revenue, making it difficult to effectively pass on cost pressures, further squeezing profit margins, leading to growth falling short of expectations. According to the data released by the National Bureau of Statistics, from the perspective of price performance, the producer prices for industrial products (PPI): manufacture of paper and paper products continued its downward trend in June 2025, with a cumulative year-on-year decline of 3.2%. From the perspective of raw material costs, the purchasing price index for manufactured goods: timber and paper pulp stood at 96.9 from January to June 2025, representing a year-on-year decrease of 3.1%, which was smaller than the decline in the producer prices, indicating weakened cost-side support for paper products and further pressure on market prices. From January to June 2025, among industrial enterprises above the designated size nationwide, revenue of the manufacture of paper and paper products amounted to RMB681.21 billion, representing a year-on-year decline of 2.3%, the operating costs amounted to RMB601.73 billion, representing a year-on-year decline of 2.1%, and the total profit amounted to RMB17.57 billion, representing a year-on-year decline of 21.4%. The decline in revenue was greater than the decline in operating costs, and the total profit declined significantly year on year.

In the medium to long term, the outlook for the paper industry is expected to improve, due to the dual forces of the deepening implementation of the “dual carbon” strategic goals and the policy aiming at curbing “rat race competition”, coupled with the ongoing improvement of the domestic economic circulation system and the gradual recovery of the domestic market. The new national standard, which has been implemented since May 2025 has strengthened energy consumption restrictions for various types of paper, which significantly raises energy consumption limits for existing production capacity, and includes auxiliary and ancillary production systems within the scope of statistics. The implementation of this standard substantially increases environmental compliance costs for outdated production capacity, and accelerate the phasing out of high energy consuming and inefficient equipment.

It is worth noting that, on 25 June 2025, the Shanghai Futures Exchange issued a public consultation announcement regarding the futures contracts, options contracts and business rules for offset paper, and, on 1 July, the sixth meeting of the Central Commission for Financial and Economic Affairs explicitly called for “governing enterprises’ disorderly low-price competition in accordance with laws and regulations, guiding enterprises to improve product quality, and promoting the orderly exit of outdated production capacity”, which will gradually improve the industry self-discipline mechanism and further optimise the market environment. Under the combined effect of policy guidance and the market mechanism, the paper industry will see accelerated elimination of outdated production capacity, undergo profound supply-side restructuring, sustain capacity structure optimisation and achieve further market concentration. Meanwhile, with the continued implementation of national policies aiming at expanding domestic demand, expectations for improvements in the demand side of the paper industry have strengthened, and overall operating performance is expected to gradually improve.

The above report has been extracted from Shandong Chenming Paper Holdings Limited’s interim review from January to June 2025
 

Published at : May 15, 2026 06:52 AM (IST)

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