Packaging Supply Chain Alert: Three Paper Giants Issue Surprise Notices, Ivory Board and Coated Ivory Board Up RMB 500/Tonne; Listed Papermakers' H1 Net Profit Up to About Threefold

Over the past three days, Chenming, APP and Wanguo Paper, three major mills, issued price-increase notices one after another. All cited stubbornly high costs for raw and auxiliary materials and other inputs, and said they would raise prices of the ivory board and coated ivory board products they produce and sell by RMB 500/tonne. At the same time, many in the industry believe paper prices have already bottomed out and could rebound soon.

Three major mills issue notices in tandem: a uniform RMB 500/tonne increase

APP (China) Industrial Paper Division:

The company said costs for bulk raw and auxiliary materials such as wood pulp, coal and chemicals, as well as transportation, remain high, and market prices for its products are severely inverted against its own selling prices. It plans to raise prices for all ivory board and coated ivory board products made by Ningbo Asia Pulp & Paper Co., Ltd. and Guangxi Jingui Pulp & Paper Co., Ltd. by RMB 500/tonne (tax included), effective July 21, 2021.

Shanghai Chenming Pulp & Paper Sales Co., Ltd.:

Citing higher operating costs and the need to ensure a continuous, stable supply of high-quality products, the company decided to raise ivory board and coated ivory board prices by RMB 500/tonne above current selling prices from July 20.

Wanguo Paper Sun Ivory Board Co., Ltd.:

In view of production cost pressure and rising demand as the market recovers, and to keep providing customers with consistent, high-quality products and services, the company decided that from July 25, 2021, its full range of ivory board and coated ivory board products would be uniformly increased by RMB 500/tonne on top of currently implemented prices.

According to Zhiyin Weilai Network, the ivory board market is currently mixed. A few mills have notified a RMB 500/tonne increase, but the market generally remains bearish, demand has not yet improved, and paper enterprises are struggling to reduce inventories; the main intent is to stop the decline and stabilize. In the short term, the ivory board market is expected to be dominated by mills calling for price increases to halt the slide. Although some have begun taking Mid-Autumn Festival orders, demand is weak, transactions are thin, the market still mostly expects declines, and short-term deals remain flexibly negotiated.

Listed papermakers' first-half net profits soar, with the highest year-on-year gain about threefold

Recently, paper companies in the mainland and Taiwan have successively released first-half performance reports. Based on the financial data disclosed so far, net profit growth at mainland paper enterprises is clearly higher than that of Taiwan's top three paper makers, with the highest increase around threefold and the lowest around onefold. This shows that continuous paper price increases in the first half laid a very solid foundation for paper companies' profits.

Among them, Chenming Paper expects first-half net profit attributable to shareholders of the listed company of RMB 2.0–2.1 billion, up 287%–307% year on year. The company said the change was due to improved industry prosperity, year-on-year price increases for its main paper grades, obvious benefits from price hikes, and substantial year-on-year growth in revenue and profit during the reporting period. As wood pulp prices rose, the cost advantage from its pulp-paper integration strategy stood out further, enhancing profitability.

Huatai Paper's performance announcement shows that it expects first-half 2021 net profit attributable to shareholders of the listed company of about RMB 530–580 million, an increase of about 90%–110% year on year. The main reason is that prices of newsprint, cultural paper, coated paper and other products rose compared with the same period last year, improving profitability.

Senlin Packaging Group Co., Ltd. expects first-half 2021 net profit attributable to shareholders of the listed company of RMB 120–145 million, an increase of 112.22%–156.43% from the same period last year. The main reason is that in the first half of 2021 the company organized production according to market demand, and its main products achieved both higher volume and higher prices year on year.

Jingxing Paper expects first-half 2021 net profit attributable to shareholders of the listed company of about RMB 234–278 million, an increase of 110%–150% from the same period last year. The main reason is that the company organized production according to market conditions, and its main products rose in both volume and price; at the same time, it further strengthened lean management, reasonably implemented raw material procurement and controlled production costs. Production and operations improved, and the industrial paper segment achieved double growth in both revenue and net profit.

In addition, Xianhe Co., Ltd. expects first-half 2021 net profit attributable to shareholders of the listed company of RMB 590–630 million, up 108.90%–123.06% year on year. The main reason is that, leveraging its highly flexible production, the company actively adjusted its product and business structure, further optimizing SKUs in 2021. While capacity for high-gross-margin products gradually increased, capacity for low-gross-margin products was gradually controlled; product flexibility and market adaptability were greatly enhanced, and the comprehensive scale benefits of the paper-based functional materials industry gradually became apparent...

Recently, the June performance of Taiwan's top three industrial paper makers was officially released, all exceeding expectations. Among them, Yuen Foong Yu Investment Holding Co. set same-period highs in June, the second quarter and the first half in revenue. Benefiting from the boost of its two golden-egg-laying units, Yuen Foong Yu Industrial Paper and Shenfeng Applied Materials, Yuen Foong Yu's June revenue was NT$7.462 billion, up 35.4% year on year; second-quarter revenue was NT$22.55 billion; cumulative first-half revenue was NT$43.865 billion, up 30.79% year on year, an increase of more than NT$10 billion over the same period last year.

Rongcheng benefited from simultaneous rises in price and volume of industrial paper and cartons on both sides of the Taiwan Strait. June revenue was NT$4.925 billion, up 39.36% year on year; pre-tax net profit was NT$572 million, up 82% month on month; single-month pre-tax profit reached nearly 90% of the first quarter's level. Cumulative first-half revenue was NT$25.103 billion, up 50.95% year on year, with pre-tax net profit of NT$1.684 billion.

Cheng Loong, in addition to running at full capacity in Taiwan to capture the market, also drove group June revenue to NT$3.892 billion, up 9.49% year on year, on revenue growth in the mainland and Vietnam; cumulative first-half revenue was NT$21.829 billion, up 17.03% year on year, breaking through the NT$20 billion mark in one go.

As industries in Europe and the United States recover and strive for economic growth, the boom in business opportunities after the lifting of lockdowns has triggered a buying spree, driving strong order-pulling at production bases across Asia, especially orders from the United States, described as local retailers' largest restocking campaign; Taiwan's top three industrial paper makers have all been running at full capacity this year.

Looking again at the Taiwan market, since the beginning of this year the stay-at-home economy has driven continuously rising demand for online-shopping home-delivery packaging; especially after Level 3 alert began in May and with a bumper harvest of fruits and vegetables, overall packaging sales in the first six months grew by more than 10%, with the largest use of cartons being for packaging tissue paper, fruits and vegetables, etc.; at the same time, people going out to buy takeaway food prompted a marked increase in the use of packaging paper such as paper boxes, carrier bags and bagging, from which Huazhi under Yuen Foong Yu will also benefit.

Because prices of various papermaking raw materials have been alarmingly rising, imported waste paper has now risen above US$300 per tonne; paper prices in the mainland and Vietnam can respond instantly to international trends, and paper prices in the Taiwan region have also successfully risen twice, entering an era of high paper prices, with the paper industry being the biggest beneficiary group. Paper mills say that this year, affected by the pandemic and sea freight, peak-season order-pulling in Europe, America and China has all been moved forward to June, and it is expected that revenue growth rate in the second half will rise month by month, continuing to fight for new highs.

Source: China Packaging Network (pack.cn); original link: http://news.pack.cn/show-377788.html