The global recession is expected to increase the risk of a decline in carton demand, which indirectly hit the pulp industry as a raw material for papermaking. The world’s largest pulp producer and exporter, the Brazilian company Suzano, recently announced that the price of its eucalyptus pulp in China will be reduced for the first time since the end of 2021. Not only the price of pulp, but also the price of some commodity raw materials will experience a round of decline in 2022 under the expectation of a global economic recession.Many analysts believe that some downstream manufacturing companies are expected to benefit from the expected improvement in domestic demand in 2023. Taking the paper industry as an example, in the second half of 2023, the decline in upstream pulp costs and the rebound in domestic consumption are expected to promote the profit recovery of the domestic paper industry.Related concept stocks:Vinda International(03331)、Nine Dragons Paper(02689)、Sunshine Paper(02002)、Chenming Paper(01812)、Lee & Man Paper(02314)。
Recently, Suzano announced that it would lower the selling price of its eucalyptus pulp in China for the first time since the end of 2021. Since 2022, due to the Russian-Ukraine conflict and the weakening of the North American real estate market, both wood chips and energy supply will be affected. Relevant data show that the cost of chemicals and wood chips in the third quarter of Suzano, the world‘s largest pulp producer and exporter in Brazil, rose 41% and 19% year-on-year respectively.
In addition, in late December 2022, packaging paper companies, including leading paper companies Shanying International and Nine Dragons Paper, have issued price increase letters one after another. Small, but it is called “small steps and fast growth” by the industry, and it is expected or ushered in a wave of “big rise”. At the same time, some bases of large-scale paper mills are also successively releasing shutdown maintenance plans from December 2022 to January 2023.
From the perspective of the demand side, the recovery of terminal demand is weak, and the operating rate of paper companies is low. The operating rate of most domestic paper companies is in the range of 50%-70%, and the overall operating rate of paper mills is low, mainly due to the shrinking gross profit margin. The gross profit margin of coated paper, offset paper, white cardboard, and cultural paper is still negative, and the gross profit rate of household paper is maintained at about 9%. The upstream wood pulp is high and sideways, and the cost pressure is high. Due to the impact of poor domestic transportation and overseas inflation, the downstream demand is weak and recovering, and the start of paper enterprises can only meet the rigid demand.
According to statistics, from January to October 2022, the national machine-made paper and cardboard output was 112.942 million tons, a year-on-year decrease of 1%. The operating income of papermaking and paper products enterprises above designated size was 1,239.7 billion yuan, a year-on-year increase of 1.1%.
GF Futures also stated in the research report that due to the full liberalization of the national epidemic prevention and control policy in mid-December 2022, there is reason to believe that the domestic economic situation in 2023 will be better than that in 2022. Detoxification is beneficial.
Northeast Securities analysts said that the cost of the paper industry has improved, and the future logic of specialty paper and bulk paper is clear. The recent stabilization of the papermaking sector is due to the recovery of market demand after the outbreak of the epidemic has been released, which has been transmitted to the papermaking sector. The decline in pulp prices is a non-driving force for emotional catalysts; the valuation of papermaking targets is at a reasonable level in the short term. Next year, as pulp prices fall to the bottom and demand recovers, the paper sector is expected to usher in a cyclical upward trend.
Guotai JunanRecently said that pulp prices have entered a downward period, and the paper sector is expected to improve its profitability. The marginal demand for overseas commodity consumption is weakening, and the expectations of export supply companies are already at the bottom at this point in time. We should pay attention to the positive signals that overseas retailers have ended their destocking cycle.
Related concept stocks:
Vinda International (03331): The company’s household paper products segment is engaged in the manufacture and sale of household paper products. The company’s products include paper towels, paper napkins, toilet paper, liquid soap, diapers, active pants, diapers, baby wipes and other assistive care items.
Nine Dragons Paper (02689): The company is engaged in the production and sales of cardboard, high-strength corrugated medium paper, coated gray-backed whiteboard and other products, as well as cultural paper, high-priced specialty paper and pulp products. And it has established paper-making bases in China, Vietnam, Malaysia, the United States and other overseas countries.
Sunshine Paper (02002): The company is mainly engaged in the manufacture and sale of paper products, and operates the paper products business through the following business departments: white-faced kraft linerboard department, light-coated white-faced kraftboard board department, paper tube base paper department, special paper products department .
Chenming Paper (01812): The company’s main business is the production and sales of machine-made paper and board paper, paper-making raw materials, paper-making machinery, electricity, and heat. At present, the company is equipped with chemical pulp production lines in Shouguang, Zhanjiang, Huanggang and other major production bases, with a total wood pulp production capacity of 4.3 million tons.
Lee & Man Paper (02314): Lee & Man Paper operates through three segments: packaging paper segment, wood pulp segment and toilet paper segment. Packaging paper includes Kraft cardboard, Lined Kraft cardboard, Coated white cardboard, White faced Kraft cardboard and high-strength corrugated medium paper.
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