China’s Paper Industry in 2023: Overview, Trends, and Price Scenarios

China’s Paper Industry in 2023: Overview, Trends, and Price Scenarios

-National output of machine-made paper and paperboard was 144,055,300 tonnes from January to December, 2023
-Revenue of papermaking and paper product enterprises above designated size was RMB1,392.6 billion, down 2.4% year on year
The Pulp and Paper Times:

As an important basic raw material industry, the paper industry plays an important role in various fields of the national economy of China. After nearly 30 years of accelerated progress, China’s paper industry has made remarkable results and achieved landmark development, but is also facing new challenges in its new journey.

During the reporting period, the overall profitability of the paper industry improved but its momentum was slightly weaker due to the sluggish downstream demand, raw material price fluctuation, increased supply and other factors. According to the data of the Ministry of Industry and Information Technology, from January to December 2023, revenue of papermaking and paper product enterprises above designated size was RMB1,392.6 billion, down 2.4% year on year; their operating costs were RMB1,222.8 billion, down 3.1% year on year; and their total profit was RMB50.84 billion, up 4.4% year on year.

On the supply side, the domestic and overseas supply growth had a great effect on paper price fluctuation. Domestically, new paper production capacity in China had been drastically high in the past two years. Overseas, the import volume of machine-made paper and paperboard increased year on year as a result of the “zero tariff” policy. The domestic and overseas factors boosted the machine-made paper supply. According to the data of the National Bureau of Statistics, the national output of machine-made paper and paperboard was 144,055,300 tonnes from January to December, 2023, which exceeded the 140 million tonnes mark for the first time and reached a record high.

During the year 2023, the prices of cultural paper and white cardboard prices were mixed. In terms of price, the white cardboard price rebounded slightly in October and November, and showed an overall fluctuating downward trend. The cultural paper price had a “V”-shaped trend that fluctuated downward in the first half of the year and floated upward in the second half.

In terms of cost, the paper raw material prices and energy prices had fluctuated downward since 2023. However, due to a higher price base and the cost transmission delay, the paper enterprise production cost was still at a high level in 2023. Coupled with the weak product demand, enterprises faced a greater pressure to realise profit.

In the short term, the paper product prices still face some upside resistance under the sufficient supply. However, the fierce competition will prompt leading enterprises to exploit the scale and cost advantages, and will facilitate the liquidation of small and medium-sized enterprises to improve the industry operational efficiency, thus further enhancing the industry concentration. In the long run, China’s paper industry concentration is still at a low level. The data shows that the CR10 in China’s paper industry remained at about 45% in 2022, compared with about 90% for the CR10 in the United States, which means much room for improvement.

Outlook on the future development of the Company:

Paper industry is a typical pro-cyclical industry. During the reporting period, the paper product price faced greater downward pressure due to the production capacity expansion, weak demand and other factors. Coupled with the raw material prices and energy cost increase year on year, the paper enterprises’ profit margin faced squeezing. When we step into 2024, the wood pulp price has fell, the paper product demand has recovered, and corporate profitability has shown obvious signs of gradual improvement. Due to the strong expectation of new capacity release, the major raw material prices and energy prices still have downward pressure, which may further ease the cost pressure, and the industry is expected to continue its recovery.

From an industry structure perspective, China’s paper industry is expected to increase its concentration ratio. Driven by market competition and environmental protection policies, the mid– to low-end production capacity in the industry will accelerate to be phased out, and the paper industry market concentration has steadily increased, but there is still a considerable gap compared with developed countries. According to public data, the CR10 in China’s paper industry remained at about 45% in 2022, compared with about 90% for the CR10 in the United States, indicating much room for industry concentration improvement.

According to the national “double circulation” strategy and the goal of China’s GDP per capita heading for the level of a medium-level developed country by 2035, China’s paper market demand in the future will still grow greatly, indicating market potential. The industry has continuously improved the resource utilisation rate, and transformed towards the use of clean, renewable, high energy density and low emission resources. It is inevitable for large companies to enhance their comprehensive competitiveness through the whole industrial chain development. The leading player have the advantages such as industrial chain, scale, and production management efficiency, and will undoubtedly become long-term beneficiaries under the trend of sustainable and healthy development.

The above report has been extracted from SHANDONG CHENMING PAPER HOLDINGS LIMITED’s Annual report for FY 2023

Web Title: China’s Paper Industry in 2023: Overview, Trends, and Price Scenarios