Staggered Power Rationing Across Multiple Regions Halts Leading Mills; Paper Prices Rise in Clusters and Paper Stocks Rally

Since the beginning of this year, the waste import ban has moved into full enforcement, keeping fiber supply for papermaking tight. To bridge part of the raw material gap, papermakers have stepped up purchases of wood pulp, wood chips and recovered paper pulp—a shift that has also accelerated changes in the industry's raw material mix.

September marks the sector's long-standing Golden September and Silver October window, with market demand and order volumes both rising noticeably. Mid-Autumn has passed and National Day is approaching, keeping demand for corrugated paper and containerboard firm; at the same time, Double 11 express packaging needs are adding to consumption. Downstream secondary plants are buying more actively, mills are shipping smoothly, and the market is seen as likely to stay active with paper prices holding high and edging upward, giving papermakers' results a lift.

Mills Issue Price Hikes in Clusters as Staggered Power Rationing Forces Leaders to Halt Production

As the second-half peak season got underway, many Chinese paper companies—including Bohui Paper and Chenming Paper—have since August issued a wave of price increase notices, lifting prices by 50 to 200 yuan per tonne. CCTV Finance reported that a Shandong paper company said corrugated paper prices rose four times in less than 20 days since August, with the ex-works price climbing from 3,680 yuan per tonne to almost 4,000 yuan and now standing between 3,850 and 4,000 yuan.

Several mill executives attributed the rise in corrugated paper prices largely to higher domestic recovered paper raw material costs. In addition, following the implementation of the comprehensive ban on solid waste imports, papermakers' recovered paper import quotas were cut to zero from January 1 this year, further tightening domestic recovered paper supply. Statistics show that China's national average price for AA-grade corrugated paper is currently about 3,870 yuan per tonne, up about 15% year on year.

Notably, energy consumption dual control has recently triggered red alerts in many parts of China. Insufficient coal supply has strained electricity, prompting power rationing in multiple regions. September is traditionally the industry's peak season, with demand and orders expected to rise, but for paper mills rationing means lower operating rates. Several leading producers have already announced shutdown or production suspension plans. Shanying International, along with Nine Dragons Paper, Lee & Man Paper and Jinzhou Paper—which had previously announced stoppages—has joined maintenance shutdowns lasting between 5 and 10 days.

At present, multiple forces—including imported inflation across global energy and chemicals and newly introduced dual control policies in various provinces—are pushing up pulp and other raw material prices, adding to papermakers' costs, and these pressures will gradually feed into end-product paper prices. To help price increases take hold, mills are also using shutdowns and output curbs to keep channel supply balanced, a common industry practice. Taken together, staggered power rationing, regional COVID-19 outbreaks and surging prices for raw materials and coal are all affecting paper prices. Industry insiders say the cluster of price increase notices is partly aimed at easing cost pressure and partly a tentative move before the peak season. Historically, when price increase notices and shutdown notices appear together, prices tend to be more stable and the high-price period tends to last longer.

Industry Sentiment Improves, Papermakers Post Stronger Results

Alongside rising raw materials, papermakers' operating performance has strengthened significantly. Data from the Ministry of Industry and Information Technology show that in January-June 2021, China's papermaking and paper products industry generated operating revenue of 714.20 billion yuan, up 24.7% year on year, while total profit reached 48.43 billion yuan, up 77.2%. In terms of output, national production of machine-made paper and paperboard totaled 67.425 million tonnes in January-June 2021, up 16.0% year on year; June output was 11.902 million tonnes, up 5.8% year on year.

East Money Choice data show that China's 25 A-share paper companies recorded combined first-half revenue of about 93.6 billion yuan, with 23 posting year-on-year growth and 7 growing more than 50%. Nineteen companies exceeded 1 billion yuan in revenue, while three topped 10 billion yuan—Chenming Paper, Sun Paper and Shanying International—all above 15.1 billion yuan. Their combined revenue reached about 48.2 billion yuan, more than half of the industry total. On a vertical basis, the vast majority of companies reported their best-ever first-half revenue. The top 10 listed paper companies by first-half revenue were Chenming Paper, Sun Paper, Shanying International, Bohui Paper, Huatai Stock, Zhongshun Jierou, Yueyang Linzhi, Xianhe Co., Jingxing Paper and Qifeng New Material; Chenming Paper led with 17.173 billion yuan.

All 25 companies were profitable at the net profit level, and 14 saw net profit attributable to parent companies rise by more than 100% year on year. The top 10 by net profit were Sun Paper, Chenming Paper, Bohui Paper, Shanying International, Xianhe Co., Huatai Stock, Zhongshun Jierou, Yueyang Linzhi, Jinglin Paper and Wuzhou Specialty Paper. Four companies posted net profit above 1 billion yuan—Sun Paper, Chenming Paper, Bohui Paper and Shanying International—with combined net profit of 6.771 billion yuan, equal to 65% of the industry's total net profit of 10.422 billion yuan. Sun Paper earned 2.232 billion yuan in the first half, making it the industry's profit leader; Chenming Paper ranked second with 2.021 billion yuan, and Bohui Paper third with 1.514 billion yuan.

Several listed paper companies noted that under the carbon peak, carbon neutrality framework, the competitive balance in China's paper industry has shifted toward leading players, with scale and intensive development becoming the trend. Higher industry concentration brings advantages in carbon neutrality and environmental management, makes government oversight easier, and is expected to reverse the lose-lose situation caused by malicious competition and low-price, low-quality market grabs. In addition, first-half industry sentiment improved, lifting paper product prices; steadily rising wood pulp prices also benefit large integrated pulp-and-paper firms, and the sector's profitability has increased notably.

Paper Sector Stages Strong Rally to Lead Both Markets

Shanxi Securities said that in the near term, Mid-Autumn Festival and National Day are traditional peak demand periods for corrugated paper and containerboard, while Double 11 adds express packaging demand. Downstream secondary plants are therefore active buyers, mills are shipping smoothly, and follow-up market trading is expected to be brisk with a greater chance of paper price gains. A paper analyst at Sublime China Information said the fourth quarter remains a traditional consumption peak, and continued tight supply of domestic recovered yellow board paper will support prices; corrugated containerboard prices in Q4 are expected to be mainly range-bound with an upward bias.

In the secondary market, price hikes have driven many paper sector stocks up more than 10% over the past month. Huatai Stock gained more than 57%, Meili Cloud more than 28%, Qingshan Paper more than 20%, while Sun Paper and Chenming Paper rose more than 14% and more than 11%, respectively.

On September 23, boosted by price increase news, the paper sector rallied sharply again and led both markets, with the sector index up nearly 7%. By midday, 15 stocks hit the daily limit up, including Jingxing Paper (002067.CN), Yueyang Linzhi (600963.CN), Huatai Stock (600308.CN), Yibin Paper (600793.CN), Sun Paper (002078.CN), Qingshan Paper (600103.CN), Bohui Paper (600966.CN), Wuzhou Specialty Paper (605007.CN), Chenming Paper (000488.CN) and Shanying International (600567.CN). Kelao Co. (301009.CN) rose more than 16%, while Forest Packaging (605500.CN), Rongsheng Environmental Protection (603165.CN) and others followed sharply higher.

Source: China Packaging Network (pack.cn); original link: http://news.pack.cn/show-378331.html