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[Paper Industry News] Cost pressures on cultural paper continue to rise; paper companies raise prices to stabilize the market.
Release time:
2024-05-20
Recently, leading cultural paper manufacturers such as Huatai Shares (600308.SH), Chenming Paper (000488.SZ), and Jianghe Paper have successively announced plans to raise prices for cultural paper starting in June, with an increase of up to 300 yuan per ton.
Recently, leading cultural paper manufacturers such as Huatai Shares (600308.SH), Chenming Paper (000488.SZ), and Jianghe Paper have successively announced plans to raise prices for cultural paper starting in June, with an increase of up to 300 yuan per ton.
A representative from a listed paper company told a reporter from the China Business News that this price hike is aimed at addressing the pressure posed by rising raw material costs, which have narrowed profit margins, and is intended to maintain industry stability. At the same time, the representative pointed out that for leading companies with their own pulp production capabilities, the increase in paper prices will further enhance their ability to expand profit margins.
Pressure from rising costs
Cultural papers—including coated art paper, double-coated paper, lightly coated paper, and newsprint—are core materials used in fields such as printing and publishing. Recently, due to a sharp rise in raw material prices, the production costs of cultural papers have increased significantly.
In its announcement, Huatai Shares stated that, effective June 1, the prices of all cultural paper products will be raised by 300 yuan per ton. Meanwhile, Chenming Paper Industry also announced that, effective June 1, the company will raise the prices of its cultural paper products by 300 yuan per ton.
“The primary reason for the recent price increase in cultural paper products is rising costs,” Hong Qianjin, a researcher at Zhongyan Puhua, told reporters. The raw materials for paper products mainly include wood and chemical fibers, and the prices of these raw materials have risen sharply recently, driving up production costs and, consequently, pushing up the prices of paper products.
Yin Ting, a market analyst specializing in cultural paper at Zhuochuang Information, further explained that upstream raw material prices remain persistently high, putting significant cost pressure on paper mills. In particular, over the past two months, pulp prices have continued to stay at relatively high levels. To alleviate production cost pressures and safeguard profit margins, paper mills have therefore adopted a pricing increase strategy.
According to data from Zhuochuang Information, as of May 16, the average market prices for softwood pulp, hardwood pulp, and chemical mechanical pulp were RMB 6,463 per ton, RMB 5,782 per ton, and RMB 4,050 per ton, respectively. These prices rose by 0.65% and 0.30% from the end of April, while chemical mechanical pulp prices fell by 0.61%. As a result of these combined effects, the cost of major raw materials increased by approximately 0.28% compared to the end of April.
Improve profitability
In fact, since the beginning of this year, the profitability of the cultural paper industry has remained at a relatively low level. Therefore, this price hike is also seen as a measure to alleviate the companies’ profit predicament.
According to statistics from Zhuochuang Information, as of May 16, the theoretical gross profit margin for the domestic 70g wood pulp double-adhesive paper industry stood at -4.81%, down 9.72 percentage points from the beginning of the year and down 204.24 percentage points year-on-year. For the 157g double-copper paper industry, the theoretical gross profit margin was at -1.95%, down 9.61 percentage points from the beginning of the year and down 12.40 percentage points year-on-year.
It is worth noting that the above data represent only theoretical estimates based on current pulp and paper prices. Since different paper mills have varying raw material inventory cycles and differ in how they implement paper prices, actual profitability may vary accordingly.
Yin Ting stated that, from the beginning of the year to date, the market for cultural and printing paper has generally followed a trend of “initial decline, followed by a rebound, and then another decline.” Before the Spring Festival, the industry engaged in low-price promotions aimed at boosting volume, causing paper prices to fall somewhat. After the Spring Festival, as trading activity resumed and some paper mills actively pushed for price increases, paper prices did rebound—but this upward movement was limited in duration. Since April, due to slower release of publishing orders and the combined impact of relatively weak social demand, some distributors have once again resorted to exchanging price reductions for increased volume, leading to a downward adjustment in prices.
Data monitoring by Zhuochuang Information shows that as of May 16, the annual average price of 70g wood pulp double-adhesive paper in China (since early January) was 5,803 yuan per ton, down 4.87% year-on-year; meanwhile, the annual average market price of 157g double-copper paper was 5,794 yuan per ton, up about 3.39% year-on-year.
The aforementioned paper industry insider told reporters that price increases will be even more advantageous for leading companies with the advantage of self-produced pulp, further expanding their profit margins.
Take Chenming Paper, one of the leading paper manufacturers that has made it onto the Fortune China Top 500 list, as an example. By implementing an integrated pulp-and-paper strategy, Chenming has successfully achieved a balance between its pulp production and paper-making capacity. This vertically integrated production model enables Chenming Paper to better withstand rising raw material costs and maintain robust profitability.
Source: China Business News
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