Paper prices are rising and falling rapidly, and the paper industry will usher in the era of super giants

In 2021, sharp rises and falls in paper prices have become the norm in the paper industry. Among them, the price of white cardboard fell rapidly after doubling in the first half of the year. Industry insiders believe that APP (China)'s acquisition of Bohui Paper indicates that the paper industry is rapidly breaking away from the reckless era, entering a deep-water period of reshuffle, and is about to usher in the era of super giants.

Paper prices are rising and falling

On December 30, 2021, Chenming Paper and Bohui Paper issued a price increase letter at almost the same time, announcing that starting from January 1, 2022, the current price of cardboard products will be increased by 200 yuan/ton.

"The main reason for the rise of white cardboard is based on rising costs and market demand." The above-mentioned listed paper company executives told reporters, but the substantial increase was due to the "unification of pricing power" in the white cardboard market.

According to China Securities Pengyuan’s credit data, in 2019, my country’s total white cardboard production capacity was approximately 10.92 million tons. Among the top four paper companies, APP (China) had approximately 3.12 million tons and Bohui Paper had approximately 2.15 million tons. Ming Paper is about 2 million tons and IWC is about 1.4 million tons, which together account for 79.40% of the country's total white cardboard production capacity.

From the perspective of market structure, since APP (China) acquired Bohui Paper, the former has become the absolute leader of domestic white cardboard. The competitive landscape of the white cardboard market seems to usher in a "dominant family" situation.

In addition, the industry has a high degree of concentration and good market synergy. From the second half of 2020, the market has maintained a rising market, laying the foundation for a good inventory of paper mills in early 2021. However, as the market develops, the buyer's voice has gradually increased, and the key influence of market trends has shifted to supply and demand factors. According to data from Zhuochuang Information, the average annual price of 250g~400g white cardboard market in 2021 is 7397 yuan/ton, which is an increase of 23.12% compared with the average price of the same period in 2020.

At the same time, senior paper market expert Zhuang Xiangqun reminded that in 2021, due to inflation expectations and the paper mills have a high degree of voice, the price fluctuations of white cardboard will be more vivid. The sharp rise and fall will also cause the downstream printing and packaging industry. It must hurt. In a weakly balanced market, excessive price increases will bring more harm.

Accelerated production capacity concentration

It is not difficult to see from the high degree of right to speak of the white cardboard paper mills that the further integration of various subdivided paper industries is an inevitable trend in the future.

On the whole, the number of domestic paper companies is large but small in scale, and the industry concentration is not high. Compared with some mature foreign markets, the gap in the production capacity concentration of my country's paper industry is very obvious.

Statistics from the China Paper Association show that in 2020, Nine Dragons Paper's paper product output will still rank first in the country, with an annual output of 16.15 million tons, accounting for 14.34% of the country's total output; Lee & Man Paper and Chenming Paper will follow closely behind. Later, the output was 6.3 million tons and 5.77 million tons, accounting for 5.60% and 5.12% of the country's total output, respectively.

In fact, all major paper brands have already made full efforts to compete for tickets to the "super giant era".

In 2021, paper companies will accelerate their capacity expansion, and new investment will basically revolve around corrugated boxes and white card packaging. Among them, Nine Dragons Paper's annual production capacity of nine major domestic production bases and overseas pulp and paper has reached more than 18 million tons, and it is firmly in the leading position in the country. Nine Dragons Paper's 2021 annual report shows that its total designed annual paper production capacity will reach 23.82 million tons by the end of June 2024.

Shanying International also maintains a high degree of expansion as Nine Dragons Paper. Its 2021 semi-annual report shows that the company currently has five major papermaking bases in China: Ma'anshan in Anhui, Jiaxing in Zhejiang, Zhangzhou in Fujian, Jingzhou in Hubei, and Zhaoqing in Guangdong. The landed production capacity is about 6 million tons, ranking among the top three in the industry. At the same time, there are a number of paper-making-related projects under construction.

According to statistics, from 2021 to 2024, China will add 5 million tons of self-produced pulp and 22 million tons of paper production capacity.

In addition, the “dual carbon” and “dual control” policy in 2021 will further accelerate the industry reshuffle.

A person from a listed paper company told reporters that the industry's concentration has continued to increase after the formation of a leading effect, and the collaboration between the companies is greater than the competition. The leading paper-making companies jointly respond to fluctuations in downstream market demand through short-term price reductions, adjustment of corporate inventories, refurbishment of production lines, and long-term control of new production capacity, to balance the total supply of the industry and maintain a relatively benign price cycle.