Industry situation(box of cigarettes )
Economic data in December showed that both domestic and external demand continued to grow steadily. The total retail sales of consumer goods increased by 7.4% year-on-year (November: +10.1%). Excluding the low base factor at the end of 2022, the two-year average growth rate in that month was +2.7% (November: +1.8%). The growth of automobile and catering consumption is still relatively strong, with the two-year average growth rate in December reaching +7.9% and +5.7% respectively, while consumption in other categories has also improved (the two-year average growth rate in December was +0.8%, and in November +0.0%). The export value in December was +2.3% year-on-year, further accelerating from November (+0.5%). As the papermaking industry gradually enters the off-season, the prices of pulp and paper products have generally declined recently. However, we believe that the current steady growth in demand is relatively stable. As the strong supply growth in 2022-2023 is gradually digested and new production capacity is generally reduced in 2024, the industry is gradually approaching the inflection point of supply and demand balance.
Corrugated box-board: price recovery is unfavorable before the Spring Festival, and the relationship between supply and demand is still fragile.(box of cigarettes )
The price of box board and corrugated paper increased by 50-100 yuan/ton in December, but this round of price recovery did not go smoothly. Leading companies offered rebate discounts during the New Year’s Day holiday and continued to implement them thereafter, driving the overall market price to fall since 2024. The unfavorable price recovery during the peak stocking season before the Spring Festival reflects that the supply and demand relationship in the industry is still relatively fragile. The CIF price of imported kraft paper continued to rise slightly in December. The price advantage over domestic kraft paper has been at its smallest level since the beginning of 2023. The growth of imported finished paper is expected to slow down. Although the current supply-demand relationship remains weak, as supply expansion slows down, we expect that rebalancing industry supply and demand will become less difficult to achieve.
White cardboard: market competition may be a concern after 2025.(box of cigarettes )
Since late December, the price of white cardboard has turned from rising to falling. As of January 17, the price dropped by 84 yuan/ton (1.6%) compared with the end of 2023. Thanks to the more active downstream inventory replenishment, the average inventory of manufacturing companies has dropped to 18 days (24 days in the same period in 2023). We expect that driven by the trends of “replacing plastic with paper” and “replacing gray with white”, the demand for white cardboard is expected to maintain strong growth. With supply growth declining in 2024, the contradiction between supply and demand for white cardboard is expected to ease in stages. However, in the medium to long term, investment enthusiasm in the field of white cardboard is still high. Since December, two projects with an annual capacity of more than 1 million tons per year, Jiangsu Asia Pacific Senbo Phase II and Hainan Jinhai, have announced preliminary progress. If the follow-up progress goes smoothly, six large-scale million-ton projects for white cardboard.
Cultural paper: The price decline has accelerated since the end of 2023.(box of cigarettes )
Since the end of 2023, the price of cultural paper has fallen faster. As of January 17, the price of offset paper has dropped by 265 yuan/ton (4.4%) compared with the end of 2023, which is the largest decline among major paper types since the beginning of the year. Manufacturer inventory also rose to 24.4 days (25.0 days in the same period in 2023), which is at a historical high for the same period. Due to the concentrated release of production capacity in late 2023 and early 2024, the replenishment of inventory by downstream users in 2023, and the concentrated release of demand brought about by the recovery of travel, it may be difficult to replicate in 2024. Cultural paper may be the main paper type with the most severe challenges in 1H24.
Wood pulp: External strength and internal weakness continue, and potential supply disturbances deserve attention.(box of cigarettes )
Domestic spot pulp prices have fallen further since December, external quotations have generally remained stable, and commercial pulp has continued the trend of being strong externally and weak internally. As of January 17, the domestic spot prices of broadleaf and soft-leaf pulp have been 160 yuan/ton and 179 yuan/ton lower than the external market respectively. Due to the tight shipping market caused by the detour of the Red Sea channel, we expect that the shipment of imported wood pulp may gradually be more affected. Considering the impact of the transportation cycle, the resulting supply disruption to the domestic pulp market will be greater in the next few months. Reflect, thereby changing the current situation of pulp prices that are externally strong but internally weak. In the medium term, domestic and foreign pulp production capacity will be at a high level in 2024, and the downward trend in pulp prices may continue.
Starting from 2022, Chinese country’s paper industry will set off a wave of expansion. Paper companies such as Nine Dragons Paper, Sun Paper, Xianhe Paper, and Wuzhou Special Paper have all invested in tens of billions of projects, pushing the wave of production expansion to its peak. [This round of production expansion from 2022 to 2024 is expected to involve 7.8 million tons of new production capacity. Among them, at least 5 million tons of paper-making production capacity will be built in 2024. ]
It is worth noting that the aforementioned production capacity data are all project planned production capacities. Considering that it generally takes about two years for a paper-making project to reach production after being put into operation, the aforementioned 5 million tons of production capacity cannot be fully implemented this year. However, at the moment when demand is weak, any “turbulence” on the supply side is enough to affect the psychology of downstream buyers, thereby forming an expectation that base paper will be “difficult to rise but easy to fall”, exacerbating the pressure on upstream paper companies.
This round of expansion is more focused on the future and seizing production capacity indicators. “Most of the new production capacity is concentrated in Guangxi and Hubei. It is very likely that only these places can get project approval (indicators).” It is reported that in the statement of the relevant paper companies, These two provinces can radiate the South China and East China markets and both have certain pulp resources. They can build supporting pulp production lines and have convenient shipping. It is expected that the project will have a greater advantage on the cost side.
But in the short term, the sudden arrival of the peak period of capacity release will undoubtedly intensify the market’s concerns about the imbalance between supply and demand in the paper industry. A person from a listed paper company told a reporter from the Financial Associated Press that some investment institutions have expressed similar concerns, but from the perspective of paper companies, there is a lot of room for control on how to control the progress of project construction and production. “It is unlikely that there will be a downturn in market demand.” At this time, companies are focusing on releasing new production capacity.”
In fact, the continued sluggish demand has forced the market to re-examine paper companies that have aggressively expanded production. Many listed companies have suffered a “double kill” (both declines) in performance and stock price. Industry leader Sun Paper also admitted in an institutional survey that the industry has overcapacity. , concentrated release is one of the negative factors affecting the development of enterprises. Another negative factor is the rising costs of pulp, energy, etc.
This round of expansion by paper companies is to occupy scarce production capacity indicators. Once large-scale projects are approved and implemented, they will gradually establish advantages in subsequent cost competition, intensify the replacement of old and new production capacity in the region, and prepare for the rise of enterprises in the next prosperity cycle. But it is unavoidable that if the market trough continues, the short-term surge in supply pressure will intensify corporate operating risks.
In fact, this round of expansion of domestic paper-making has also invisibly increased its own cost burden. In the current downturn of the global paper industry, China has become the best market for global pulp suppliers. In 2023, the rigid replenishment demand of domestic paper companies will provide obvious support to the pulp market. Compared with the European and American markets, the increase in my country’s downstream production capacity has brought more rigid replenishment demand, and has made domestic pulp prices the first to rebound ahead of other countries in the world.
Jinsheng Environmental Protection recently announced that for development needs, the company has invested in the construction of an environmentally friendly pulp molded products project with an annual output of 40,000 tons in Xingwen County Economic Development Zone, Sichuan Province. The total investment in the project is 400 million yuan, including 305 million yuan in fixed assets investment. The working capital is 95 million yuan. It is planned to be constructed in two phases, of which the first phase will invest approximately 197.2626 million yuan to build a plant fiber molded product production line with an annual output of 17,000 tons. The project is planned to be completed within 4 years
The total land area of the project is about 100 acres. After the project is completed, it is expected to achieve sales revenue of 560 million yuan, profit of 98.77 million yuan, and taxes of 24.02 million yuan. After the completion of the first phase, sales revenue of 238 million yuan and profit of 27.84 million yuan were achieved.
Basic information on investment targets(box of cigarettes ):
Name: Sichuan Jinshengzhu Technology Co., Ltd.
Registered address: No. 5, Taiping East Road, Gusong Town, Xingwen County, Yibin City, Sichuan Province
Main business: General projects: new material technology promotion services; manufacturing of grass and related products; manufacturing of bio-based materials; sales of bio-based materials; import and export of goods; manufacturing of bamboo products; sales of bamboo products. (Except for projects that require approval according to law, business activities can be carried out independently with a business license in accordance with the law) Licensed projects: production of sanitary products and disposable medical supplies; production of plastic packaging containers and tool products for food; production of paper packaging and container products for food. (Projects that require approval according to law can only be carried out with the approval of relevant departments. Specific business projects shall be subject to the approval documents or licenses of relevant departments).
Sichuan’s bamboo pulp resources account for more than 70% of the country’s total. Xingwen County is located in the regional center of bamboo resources, which can form a cost advantage in providing raw materials for the company’s products. At the same time, the direct processing technology of wet pulp can reduce production costs; The county also produces abundant natural gas and hydropower resources, which saves costs for the energy consumption of the company’s products.
According to data from Huabei.com, Jinsheng Environmental Protection’s main products and services are general items: manufacturing of grass and related products; manufacturing of bio-based materials; sales of bio-based materials; new material technology promotion services; and import and export of goods. Licensed projects: production of sanitary products and disposable medical products; production of paper packaging and container products for food; production of plastic packaging, container and tool products for food.
Post time: Apr-28-2024