Shandong Chenming Paper advances 'pulp-paper integration,' connecting northern and southern China with a 300,000 TPA softwood pulp expansion

Shandong Chenming Paper advances 'pulp-paper integration,' connecting northern and southern China with a 300,000 TPA softwood pulp expansion
- Chenming Paper will further focus on its major operation of pulp and paper making, put greater efforts in the disposal of assets in non-major operations.
- Its major production bases located in Shouguang, Zhanjiang, and Huanggang are equipped with chemical pulp production lines, with total production capacity of wood pulp reaching 4.30 million tonnes.
- In 2023, SCPHL completed machine-made paper output of 4.78 million tonnes and sales volume of 4.74 million tonnes, realised revenue of RMB26,609 million
The Pulp and Paper Times

Shandong Chenming Paper Holdings Limited (SCPHL) is a large modern conglomerate principally engaged in pulp production and paper making and committed itself to implementing a pulp and paper integration strategy. At present, the Company has production bases in Shandong, Guangdong, Hubei, Jiangxi, Jilin and other places, with annual pulp and paper production capacity of 11 million tonnes, including pulp production capacity of 4.3 million tonnes. It is the first domestic paper making enterprise that achieves a balance between pulp production and paper making capacity in general. During FY 2023, the Company realised revenue of RMB26,609 million. The machine-made paper business is the major source of revenue of the Company.

The Company owns “CHENMING CLOUDY MIRROR”, “CHENMING CLOUDLY LION”, “CHENMING SNOW SHARK”, “CHENMING EAGLE”, “CHENMING GONGHAO”, “XINGZHILIAN” and other famous brands, with each major product ranking among the highest in terms of market share in China. It is the enterprise with the largest variety of products and the most complete products in the domestic paper making industry.

Tortuous road but improving momentum

In 2023, the global economic recovery was bumpy, and the pandemic, geopolitics and hyperinflation had aggravated the market uncertainty. Under the conflict, the major economies showed clear differentiated trends, and economic development faced many challenges. The world is an organic whole. Every internal and external policy adjustment, the changes of the regional situation and the inflation fluctuation affect the companies as market micro-subjects. Each company as a market micro-subject is constantly enduring and trying to adapt to the changing market environment.

In 2023, papermaking enterprises suffered from both the high upstream cost squeeze and the weak downstream demand. Facing the unprecedented complex situation, the Company further consolidated its self-pulping supply advantage, retained existing customers while developed new customers, improved its product system and optimised its product structure, and explored overseas markets and expanded sales coverage. Although the Company incurred a loss, it had a solid foundation and its development momentum was improving.

Mr. Chen Hongguo, Chairman of (SCPHL) said in the annual report for FY 23, that, In recent years, the Company has followed the policy and market trend, eliminated a number of backward production capacities, built multiple new large-scale pulp and paper production lines, and gradually established a circular development model. Relying on the market and targeting the demand, the Company has taken initial shape in the “pulp-paper integration” layout linking northern and southern China. The Company has divested and reduced non-principal activities, and focused on the pulp and paper industry. For example, the relocation of Wuhan Chenming has been completed. The Company has transferred its equity interest in Goldtrust Futures, and reduced the financial leasing business size by more than RMB20 billion compared with the peak level. The Company has introduced high quality strategic investors such as CCB Investment, Chuanfa Investment, BOCOM Investment and Xiamen International Trade to optimise its capital structure. In addition, with a foreign trade recovery, the Company has reached strategic cooperation with major clients from Korea, Sweden and other countries to further expand overseas markets.

“I believe that as long as we keep working and make progress, we will have a promising road ahead. In the future, Chenming will further focus on its major operation of pulp and paper making, put greater efforts in the disposal of assets in non-major operations, enhance asset utilisation efficiency, consolidate its supply chain advantages, research and develop new products, develop new customers, scientifically manage operating costs, and continue to strengthen the profitability of the Company,” he said.

Shandong Chenming Paper has unwaveringly implemented a pulp and paper integration strategy. At present, its major production bases located in Shouguang, Zhanjiang, and Huanggang are equipped with chemical pulp production lines, with total production capacity of wood pulp reaching 4.30 million tonnes. It is the first modern large-scale paper making company that basically realises wood pulp self-sufficiency in China. A complete supply chain not only creates cost advantage for the Company, but also safeguards the safety, stability and quality of upstream raw materials, and renders strong support for the Company to maintain its long-term competitiveness.

The annual report of Shandong Chenming Paper for FY 2023 stated that, during FY 2023, the sales volume of the Company’s machine-made paper decreased year on year due to the weak downstream demand in the paper industry. At the same time, the prices of machine-made paper, especially that of white cardboard, fell sharply year on year due to the concentration of new production capacity. The prices of raw materials such as wood chips, raw coal and chemicals were still running at a high level, which seriously squeezed the Company’s profitability. In 2023, the Company completed machine-made paper output of 4.78 million tonnes and sales volume of 4.74 million tonnes, realised revenue of RMB26,609 million, and net profit attributable to owners of the Company of RMB-1,281 million. As a typical pro-cyclical industry, the paper industry has a positive correlation with the macroeconomic trend. At present, China economy is in a good development trend. With the continuous national macroeconomic policy efforts, the paper industry downstream demand will gradually pick up, the short-term supply and demand imbalance will be alleviated, and the industry prosperity is expected to improve.

“In 2024, SCPHL will seize market opportunities, strengthen channel construction, increase direct customer development, reinforce overseas contract management, closely maintain customer relationships, and further expand domestic and overseas markets. The Company will take market orientation, actively look for profit growth points, closely connect with production departments to develop and produce high-grade and high value-added new products, and ensure the promotion and increase of key products, especially liquid package cardboard, food package board and coated cardboard. The Company will optimise business processes, increase risk control points, conduct quarterly sorting out processes, and strengthen risk management and control,” the report stated. 

Future capital requirements of SCPHL will mainly focus on: the continuous investment in existing production facilities due to technology upgrade or production expansion; and capital requirement for business expansion and daily operation. The phase II whole industry chain project of Huanggang Chenming, the softwood bleached chemical pulp project with annual production capacity of 300,000 tonnes and the special paper project with annual production capacity of 180,000 tonnes of Zhanjiang Chenming planned and constructed by the Company will be partly funded by self-owned funds of the Company, as well as government guide funds, policy support funds and syndicated loans.

SCPHL has always adhered to the marketing concept of “Good faith, Win-Win and Sharing” while wholeheartedly serving its customers. The Company has a relatively mature sales network, and has set up specialised sales companies responsible for the development of domestic and overseas markets, product sales, and formulation of sales policies. The sales companies’ management systems are divided into product lines, product companies, management areas, and branches to achieve matrix management. The sales companies are divided into product companies of culture paper series, coated paper series, white cardboard series, electrostatic paper series, special paper series and household paper series according to product line. Each product company has its administrative district. A regional general manager is responsible for his/her administrative district, under which branch companies are set up. The chief representatives of the branch companies have full authority to deal with branch business.
 

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