The overall development of the domestic paper industry in 2024 is good, and the market is showing an overall trend of recovery. Despite facing downward pressure on the macro economy, the paper industry, as a strong cyclical industry, still demonstrates a certain degree of resilience.

Segmented fields of papermaking industry

The paper industry is an important basic raw material industry in China, characterized by intensive capital and technology, and significant economies of scale. The paper industry can be subdivided into multiple fields, mainly including pulp, machine-made paper and paperboard, processed paper and paper products. From upstream to downstream in the industrial chain, it can be divided into pulp, paper, and paper products. The upstream pulp industry mainly provides raw materials, including wood pulp, non wood pulp, and waste pulp. The midstream papermaking process can be divided into four sub industries based on product categories: news paper, cultural paper, packaging paper, and specialty paper. The downstream is the application of paper products, including packaging paper consumption and cultural printing consumption. The entire industrial chain is closely connected, jointly promoting the development of the paper industry.

Upstream raw material pulp industry - wood pulp

According to the monitoring of the commodity market analysis system of SunSirs, the prices of coniferous pulp and broad-leaved pulp will fluctuate in 2024. As of December 31, 2024, the average market price of coniferous wood pulp in Shandong Province was 6,400 RMB/ton, an increase of 9.4% compared to the average price on January 1; The average market price of broad-leaved wood pulp in Shandong region is 4,610 RMB/ton, a decrease of 8.53% compared to the average price on January 1st.

Affected by the supply-demand game, wood pulp prices will fluctuate in 2024

On the supply side, in the first half of the year, there were consecutive unexpected factors such as work stoppages and explosions in international supply countries, leading to expectations of supply tightening. The news of union shutdowns and pulp mill maintenance in Finland, Chile, Canada and other places has increased production uncertainty, thereby pushing up pulp prices. Subsequently, a new batch of domestic pulp production capacity increased supply pressure, while the weakening of overseas demand also put pulp production enterprises under inventory pressure. In terms of demand, downstream raw paper enterprises have a slow ramp up of new production capacity, and the enthusiasm of operators for raw material procurement is insufficient, resulting in limited growth in wood pulp consumption. In addition, the low operating rate and demand in the paper industry have led to a lack of significant increase in the actual consumption of wood pulp, resulting in a disruption of the market supply-demand balance and continuous fluctuations in prices. As the end of the year approaches, the release of positive market supply and demand news has driven a rebound and upward trend in domestic wood pulp spot prices.

What will be the trend of wood pulp in 2025

On the supply side, there is still pressure to invest in new production capacity, but the growth rate of imports may slow down

In 2024, the price difference between coniferous and broad-leaved pulp will significantly increase, leading to the substitution of coniferous pulp by broad-leaved pulp. Currently, the substitution of coniferous pulp by broad-leaved pulp has reached its limit, so the marginal impact of loose supply of broad-leaved pulp on the price of coniferous pulp in 2025 is limited. Starting from July 2024, Suzano Cerrado in Brazil with a production capacity of 2.55 million tons of broad-leaved pulp and Liansheng Zhangzhou in China with a production capacity of 1.7 million tons of broad-leaved pulp will be put into operation successively, and it is expected to reach full production in the first half of next year. Despite measures taken by the pulp mill to reduce operating rates, extend downtime for maintenance, and switch production, the increase in new production capacity is still difficult to digest.

In 2024, the new production capacity of other broad-leaved pulp in China will mainly be supported by the integration of pulp and paper. It is planned that 2.55 million tons of broad-leaved pulp will be put into operation in China by 2025. It is expected that the production capacity of broad-leaved pulp will increase by 1.6 million tons in 2025, with the same increment as previous years, maintaining the trend of continuous expansion of production capacity in the past three years; The production capacity of coniferous pulp has increased by 100,000 tons, maintaining the trend of almost unchanged production capacity in the past five years.

Import volume: China has a high degree of dependence on foreign pulp, especially on the import of bleached needle pulp, and overseas production capacity is relatively concentrated. The import dependence of coniferous pulp exceeds 95%, and that of broad-leaved pulp is about 60%. According to data from the General Administration of Customs, the cumulative import volume of pulp in China from January to November 2024 was 31.111 million tons, a year-on-year decrease of 6%. Among them, the cumulative import volume of broad-leaved pulp from January to October was 12.5313 million tons, a year-on-year decrease of 5.62%; The cumulative import volume of coniferous pulp from January to October was 6.9322 million tons, a year-on-year decrease of 8.94%. The export volume of major pulp mills to China has declined, and international pulp mills have reduced production due to previous force majeure, which may slow down the growth rate of pulp imports. It is expected that the import volume of pulp in 2025 will continue to be affected by the supply-demand game, and the overall range will remain fluctuating.

On the demand side: Domestic paper production capacity continues to expand, with moderate growth in domestic demand

According to incomplete statistics, the domestic production capacity of finished paper in 2024 will increase by 1 million tons for double adhesive paper, 1.3 million tons for white cardboard, and 1.36 million tons for household paper as of the third quarter. Some plans have been postponed until 2025. The total production capacity increased by 10% compared to the previous year, with the fastest growth rate in the past five years. Due to the difference between new production capacity and new demand, the utilization rate of various paper types' production capacity has declined compared to previous years.

In 2025, it will still be the peak period for the production capacity of finished paper in China. Even though the saturation of the finished paper industry has led to a decrease in industry profits and capacity utilization in recent years, new production capacity will still bring rigid demand for wood pulp. Currently, it is planned to produce 1.6 million tons of double adhesive paper, 3.1 million tons of white cardboard, and 800,000 tons of specialty paper next year, with a total production capacity growth rate of 8%, which is not much different from 2024 and is in a relatively high position overall.

Midstream Paper Raw Paper Industry - Corrugated Paper

According to the monitoring of the Commodity Market Analysis System of SunSirs, the price of corrugated paper will show a "U" - shaped trend in 2024, and will usher in a strong upward trend at the end of the year. On December 31, 2024, the average ex factory price of 140g corrugated paper was 2,918 RMB/ton, an increase of 3.04% compared to the average price on January 1.

The supply-demand imbalance pattern will become prominent in 2024, with corrugated paper prices first weak and then strong

Starting from the beginning of 2024, due to the market's oversupply pattern and the unexpected decline in the prices of major raw materials such as waste paper, the price of corrugated paper has continued to fluctuate downward. With the gradual introduction of new production capacity and the continued implementation of zero tariff policy on imported paper, the supply performance is relatively sufficient. However, the recovery of market demand is slow, effective demand follow-up is insufficient, the market is under pressure to decline, and the downward trend of paper prices continues to expand. After entering the fourth quarter, with the increase of holiday factors, it boosted market demand and provided upward support for paper prices. Subsequently, with the continuous rise of large-scale paper mills and the dual support of low inventory, the market's bullish sentiment was stimulated, and the price increase continued to expand and further climb.

What will be the trend of corrugated paper in 2025

Cost wise: Supported by favorable market conditions in the future, there may be upward momentum

The rise and fall of upstream raw material waste paper prices are basically linked to the price of corrugated paper. On December 31, 2024, the average purchase price of A-grade waste yellow board paper in Zhejiang region was 1,686 RMB/ton, an increase of 4.33% compared to the average price on January 1.

In 2024, the price of wastepaper also showed a trend of first suppressing and then rising, with prices showing a significant increase from November until the end of the year when prices continued to rise. It is expected that in the first quarter of 2025, the waste paper market will be affected by the Spring Festival holiday, and the inventory reserve plan for paper mills' waste yellow board paper may accelerate. Some paper mills may raise the purchase price of waste yellow board paper to stimulate an increase in delivery volume, which will help to boost the price of waste yellow board paper in the market. Therefore, it will play a supporting role in the price of corrugated paper on the cost side.

On the supply side, there are still expectations of an increase in production capacity and output, and a decline in imports is easing supply pressure

Capacity: With the current market demand recovering, the inventory pressure of paper mills is gradually easing, and major paper mills are also building and putting into operation small production capacity. The total new production capacity for 2024 is 2.35 million tons. With the increasing downstream demand and gradual standardization of industry standards, it is expected that the domestic corrugated paper production capacity will reach 38.19 million tons by 2025.

Production: Based on historical data, the average annual growth rate of paper and cardboard production from 2019 to 2023 is 2.4%, and the average annual growth rate of consumption is 3.02%. The overall production and consumption of paper and cardboard in China show a steady growth trend. From January to November 2024, the national production of machine-made paper and cardboard was 144.181 million tons, a year-on-year increase of 9.1%. Therefore, it is expected that there will still be pressure on the supply of corrugated paper in 2025.

Import volume: According to data from the General Administration of Customs, the cumulative import volume of corrugated paper from January to November 2024 was 2.4601 million tons, a year-on-year decrease of 23.83%. From the data, it can be seen that the import volume of corrugated paper will significantly decline in 2024, which will alleviate the pressure on domestic corrugated paper supply. It is expected that by 2025, due to factors such as poor sea transportation, rising freight rates, and increased production and supply capacity of domestic paper mills, the import cost of corrugated paper may increase, and import enthusiasm may decrease.

On the demand side: Rising exports drive increased demand

The weak demand in the first three quarters of 2024 is the main characteristic of the sluggish corrugated paper market. However, in the fourth quarter, driven by the price increase letter from large-scale paper mills, the market's bullish sentiment gradually heated up, and the expansion of domestic manufacturing also had a positive impact on the demand for corrugated paper. Subsequently, the driving force of Western holiday consumption and the accelerated export pace of domestic exporters further increased the demand for corrugated paper. According to data from the General Administration of Customs, the cumulative export quantity of corrugated paper from January to November 2024 was about 87,900 tons, an increase of 93.34% year-on-year, and the domestic export volume significantly increased. In addition, with the booming development of e-commerce and express delivery industries, the market demand for corrugated paper as the main packaging material continues to rise. In summary, driven by export demand, domestic manufacturing expansion, and peak consumption season, the demand for corrugated paper is expected to continue to grow in 2025.

Based on the rebound performance of paper industry prices in 2024, the supply side of the paper industry will enter the end of its production capacity cycle in 2025, and supply may gradually balance. On the demand side, the rigid demand brought about by the production capacity of finished paper provides a bottom line for pulp prices, and the demand increment brought about by macro stimulus policies may cause seasonal trends in both wood pulp and finished paper during the peak consumption season. Whether it is the pressure changes on the supply side or the policy push on the demand side, the market is undergoing a transition from fatigue to recovery. It is expected that the paper industry will usher in a restoration of supply-demand balance and moderate growth by 2025.

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