Weak Recovery in the Paper Industry in the First Half of the Year: 17 Companies See Year-on-Year Net Profit Growth
In the first half of this year, the domestic paper market experienced overall weak performance but has shown signs of recovery compared to the same period in 2023.
According to statistics from Eastmoney Choice Data, as of the evening of August 29, 20 out of 23 listed paper companies on the A-share market had released their 2024 semi-annual reports. Among them, 17 companies reported year-on-year growth in net profit attributable to shareholders of listed companies. Of the three companies that have not yet announced their semi-annual reports, all have issued performance forecasts: one expects increased profits, one expects increased losses, and one is reporting a loss for the first time. Overall, nearly 80% of listed paper companies saw improved profitability in the first half of this year.
Notably, Sun Paper led the industry with a revenue of 20.524 billion yuan and a net profit attributable to shareholders of 1.758 billion yuan in the first half of the year. This strong performance highlights the company’s long-standing development advantages from its active promotion of an integrated “forest-pulp-paper” model. The advantage of high-end differentiated development was evident as the paper industry in China began to recover from its recent downturn, driven by improved downstream demand.
Data from the National Bureau of Statistics shows that in the first half of this year, China’s production of machine-made paper and paperboard reached 76.613 million tons, a year-on-year increase of 11.8%. This is the first time in recorded history that the production of paper and paperboard in the first half of the year has exceeded 70 million tons. Additionally, the paper and paper products industry achieved a total profit of 22.79 billion yuan in the first half of the year, a year-on-year increase of 104.9%.
However, the performance varied across different types of paper. Xuling, an analyst at Zhuochuang Information, told the Securities Daily reporter, “Cultural paper performed relatively well in the first half of the year, while the market price of packaging paper primarily trended downward, especially in the second quarter. This decline was mainly due to multiple negative factors, including the exacerbation of supply-demand imbalances.”
Amid these challenges, leading paper companies continued to invest in research and development and project construction to enhance their high-end product offerings, achieving some success.
A representative from Sun Paper told the Securities Daily reporter, “The advantage of high-end products in our Shandong base’s containerboard segment continues to grow, and the quality of containerboard produced at our Nanning base in Guangxi has become more stable during the reporting period, with a strong focus on high-end development. As a result, the proportion of high-end products in our containerboard business is steadily increasing, further solidifying our differentiation advantage.”
Bohui Paper also noted that in the first half of the year, consumption demand in various sectors continued to strengthen, with demand for food packaging and paper tableware growing significantly faster than for daily necessities packaging. “Currently, all paper mills are expanding their food-grade card production capacity, leading to increased competition. However, customized food-grade cards and liquid packaging white cards, which benefit from high technical barriers, have relatively stable market positions.”
The trend towards high-end and differentiated development in the paper industry is also reflected in the industry’s efforts to upgrade productivity through new quality production capabilities. For instance, both Sun Paper and Huatai Group have been selected as pilot enterprises for the “Papermaking Industry Brain” construction project in Shandong Province for 2024. Both companies stated their commitment to deepening digitalization and intelligent manufacturing to achieve “new technology transformation and upgrading of traditional industries” and to promote the high-end, intelligent, and green development of the industry.
Performance Divergence Among Paper Types in the Second Half of the Year
As the second half of the year progresses and the peak consumption season approaches, the paper industry is gradually entering its busy season. Recently, several paper companies, including Sun Paper, announced plans to implement a new round of price increases for related paper products starting September 1. For cultural paper, the continued advancement of new textbook revision tenders in the second half of the year is expected to inject new vitality into the offset paper market during the peak season, driven by rigid textbook demand.
In contrast, Bohui Paper believes that with the peak consumption season approaching, there may be a slight increase in demand for consumer goods packaging, potentially providing a modest boost to the market. As the domestic and international consumer retail markets gradually recover, the demand for containerboard may see some improvement.
However, since August, what was expected to be the peak season for domestic packaging paper demand in preparation for the Mid-Autumn Festival has turned out to be less robust. According to multiple institutions and listed companies, the typical “peak season” for packaging paper demand has been lackluster this year, with finished paper demand in August appearing relatively flat, and price increases have been limited.
Fang Juntao, an analyst at Zhuochuang Information, told the Securities Daily reporter, “On the one hand, the pressure on the demand side for packaging paper has increased in recent months, leading to limited destocking of finished paper inventories by paper companies. On the other hand, consumer willingness remains weak, which may place some downward pressure on the packaging paper market prices in September.”
For the household paper industry, the second half of the year is also expected to face pressure from the release of new production capacity. Chang Junting, an analyst at Zhuochuang Information, told the Securities Daily reporter, “In the second half of the year, about 1 million tons of new production capacity will be released in the household paper segment. Although there is room for demand growth, driven by the ‘Golden September and Silver October’ market, the rate of demand growth is still expected to lag behind supply growth, making it difficult to change the current situation of supply exceeding demand, which could negatively impact household paper prices.”
