On the evening of January 30, 2024, Chenming Paper released its 2023 annual performance forecast. According to the announcement, the company's profit in 2023 will record a loss.
The contradiction between supply and demand has put pressure on performance, and the paper industry is slowly bottoming out
From the point of view of paper prices, in the past year, the performance of cultural paper has been stable, and the contradiction between supply and demand of white cardboard is more prominent. In 2023, thanks to the rigid demand of the domestic party and government, as well as teaching materials and teaching aids, cultural paper will rise steadily. Affected by factors such as large new production capacity, white cardboard has declined, and the contradiction between supply and demand has become prominent.
However, it is worth mentioning that as the upstream pulp supply enters the expansion cycle, the pressure on the production cost of paper enterprises is expected to ease. According to Guolian**, ARAUCO added 1.56 million tons of commercial pulp production capacity in January, UPM added 2.1 million tons of commercial pulp production capacity in April, and on September 20, the 1.5 million tons of softwood pulp and hardwood pulp expansion project of Metsä Group's Kemi biological products factory and cardboard factory was officially put into operation, and 6.9 million tons of commercial pulp production capacity is expected to be added overseas in the next two years.
Industry analysts pointed out that in the short term, the demand for cultural paper and packaging paper will recover at different paces, with strong rigid demand for cultural paper and high stability, while white cardboard shows high elasticity. Although, the new production capacity will form a certain pressure on the recovery of white cardboard, but because corporate earnings hit a historical low, it is expected that with the gradual recovery of market demand, the industry is expected to bottom out.
Divest non-core businesses and increase overseas markets
In the face of challenges, the leading enterprises in the paper industry are also constantly adjusting and actively breaking the situation. The relevant person in charge of Chenming Paper said that the company is striving to improve the quality and profitability of the company's operation by stripping and compressing non-main businesses, eliminating backward production capacity, adjusting product structure, and exploring overseas markets. In the short term, affected by factors such as the market environment, corporate profitability is poor. However, in the long run, the company's pulp and paper integration layout remains unchanged, and the cost advantage still exists. Driven by a series of relevant policies, leading enterprises will still have greater development opportunities.
According to public information, in the past ten years, Chenming Paper has successively shut down Chibi Chenming, Yanbian Chenming, Qihe Chenming, Fufu Chenming, Hailar Chenming and other enterprises, transformed 3 newsprint production lines, and eliminated 6 waste paper deinking pulp production lines. At the same time, a number of large-scale wood pulp and paper production lines have been newly established, and three integrated pulp and paper production bases have been built. Haiming Mining, Jinxin ** and other non-main businesses have also completed the divestiture. The financial leasing business, which has attracted much attention, has also been significantly reduced. According to public data, the company's external investment balance has been reduced from 33 billion yuan at the beginning of 2018 to more than 5 billion yuan at the end of June 2023.
In addition, the company has established a number of branches in the United States, Germany and other countries and regions. In October 2023, the company signed strategic cooperation agreements with Korea Paper and Selma of Sweden to further expand overseas markets.
The optimization of the industry pattern is expected to rise in the future
Chenming Paper told reporters that the overall profitability of the paper industry was poor last year due to multiple factors. However, the complex market environment has also promoted the accelerated clearance of low-end production capacity, which is conducive to the continuous optimization of the industry pattern.
Public information shows that in recent years, the number of enterprises in China's paper industry has decreased from about 3,500 in 2012 to about 2,500 in 2022.
Some industry insiders believe that although the paper industry is still facing many external environmental tests, in general, paper and paper products are closely related to the lives of residents, belong to the rigid needs of supplies, can pull all aspects of the upstream and downstream industrial chain, and have great development prospects. In the long run, leading enterprises with a sound industrial chain, perfect sales system and rich industry experience will occupy a development advantage. At present, the upstream cost has fallen, the cultural paper has stabilized, and the industry is expected to have a profit inflection point in 2024 under the trend of gradual recovery of the market.