China's paper companies announce price hikes as first-half losses mount

Recently, Sun Paper, Chenming Paper, Bohui Paper and many other paper companies issued a price increase letter, announcing a price increase for their paper products. Shanghai Securities News reporter was informed that a number of paper companies and research institutions are more optimistic about the performance of the paper industry in the second half of the year. In the first half of this year, the overall performance of the paper industry has been sluggish due to the slower-than-expected recovery of downstream consumer demand.

"We initially predicted a faster recovery of market demand in the first half of the year, but in reality it was slower, so the industry as a whole performed poorly." A staff member of Chenming Paper told reporters that "the second half of the year is the peak season of the paper industry, superimposed on the price increase factor, the company's second half of the probability of better performance is still relatively large".

Deppon Securities believes that the industry is currently in the active de-inventory stage, and the first half of the cycle is bottoming out, in alignment with the interpretation of the inventory cycle logic. Additionally, due to unexpected cost improvement, the pulp prices have exceeded expectations this year. However, these prices will gradually reflect in the later stages, and the overall performance of the paper industry is expected to improve quarter by quarter.

Paper companies have sparked a surge in prices

Following the price hike of corrugated paper roses last month, white cardboard, whiteboard, coated paper, double-glued paper and other paper types have also experienced increased prices. This is part of the company's September price increase plan, as outlined in a letter released in advance.

August 25th marks Nine Dragons Paper's announcement that due to the recent high costs of raw and auxiliary materials for papermaking, product prices have been long disconnected from the true value of the product. As a result, the company has decided to increase the prices of its white cardboard series of products by ¥20 per metric ton starting from the 1st of September.

On the same day, Bohui Paper sent a notice informing customers of a price increase. The company stated that due to the recent rise in raw material costs that have led to increased production expenses, it will raise the prices of all cardboard products by ¥200 per ton (including tax) from September 1.

Jinguang Group, another prominent paper manufacturer, announced on August 15 that the company would adjust prices accordingly. Due to the recent increase in raw material prices, production costs have risen. To continue providing stable, high-quality products and services to our customers, our company decided to increase the price of our copy paper products, including OEM products, by ¥200 per metric tonne from 1st September.

Chenming Paper, Sun Paper, Universal Paper, and other companies have also announced a ¥200 per metric tonne price increase.

Widespread industry losses in the first half of the year

In the first half of this year, the overall performance of the paper industry under pressure, profitability levels fell sharply year-on-year. Statistics show that the Shenwan paper industry in the first half of the operating income of ¥90.3 billion, down 9.55% year-on-year; net profit of ¥1.046 billion, a year-on-year decline of 77.43%.

China paper industry leader Mountain Eagle International first half of operating income of 13.748 billion yuan, down 17.52%; net profit of ¥271 million loss, year-on-year from profit to loss, which is the company more than a decade first half of the net profit for the first time a loss.

In this regard, Mountain Eagle International said in the half-yearly report: "the paper industry as a whole is in the recovery stage, market conditions in the first half of the performance is lower than expected, is still facing the supply side of the new production capacity continues to be put into production, while the downstream consumer demand recovery slow pressure. In the first quarter, the industry's new production capacity release superimposed on the landing of the import tariff policy, the paper industry, the domestic supply-side pressure gradually increased, coupled with the demand side of the recovery is less than expected, the market supply and demand contradictions highlighted. The downward pressure on paper prices in the first quarter, paper mills have to control the operating rate, downtime led to rising costs, gross margins fell year-on-year."

Bohui Paper half-yearly report shows that the company achieved operating income of ¥8.657 billion in the first half of the year, a year-on-year decrease of 2.38%; net profit attributable to shareholders of listed companies was ¥-346 million, from profit to loss. Bohui Paper explained that in the first half of the year, the company's main raw and auxiliary materials imported pulp and woodchip costs decreased compared to the same period last year, but by the overall consumer market environment, the decline in prices of finished products is greater.

In addition, chenming paper, huatai shares and many other listed paper companies performance decline.

Performance expected to improve in the second half of the year

The reporter learnt from a number of paper enterprises and a number of industry researchers, in the traditional consumption season and the positive role of policy, superimposed on the release of cost pressures, the paper industry is expected to usher in the dawn of performance improvement.

Mountain Eagle International is more optimistic, the company said the second half of the year is usually the paper industry's traditional consumption season. From the supply and demand point of view, the second half of the year, is expected to electronics, home and other bulk consumption potential will be further released, the social end demand for a full recovery. Combined with the structural recovery of the domestic economy, after the first half of the gross profit repair, is expected to return to the normal level of profitability.

Bohui Paper said on the investor interactive platform, the economy and the consumer market is currently in a state of gradual restoration, the market and customer demand resilience is still there, the development of enterprises facing short-term phased challenges. With the steady increase in production and sales, the cost of wood pulp and wood chips fell, the company's cost reduction and efficiency gains will be gradually realised in the future.

Haitong securities, paper industry is a typical pro-cyclical industry, boom and macroeconomic trends show significant positive correlation, is expected to usher in the overall demand recovery under the promotion of stable growth. From the cost side, imported wood pulp, woodchip prices in this year or continue to decline, superimposed on the exchange rate changes, the cost of paper enterprises is expected to gradually fall; from the paper price point of view, the recovery of domestic demand to drive the paper price continues to rise. If the cost improvement and paper prices at the same time to achieve, the paper industry earnings are expected to repair significantly.

Declaration: This article comes from the Shanghai Securities News. If copyright issues are involved, please contact us to delete.

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