Current status of wood pulp raw materials for paper tray packaging
Our wood pulp is imported from abroad for two reasons:
(1) Overseas wood is of higher quality and wood pulp is of better quality, which can be used to produce paper products;
(2) Due to the low forest holdings in our country, deforestation is restricted. The scarcity of forest resources determines my country's low wood pulp output, limited supply, and low self-sufficiency rate. China's complete cessation of commercial logging of natural forests is divided into three steps. Natural forest logging will be completely stopped by the end of 2017.
Waste paper: orderly supply, insufficient demand.
Mergers and acquisitions of global pulp companies are accelerating, and industry concentration is increasing
Increase the concentration of large overseas pulp companies and gain a say in pulp prices. Since 2018, mergers and acquisitions in the global paper pulp industry have occurred frequently, and the concentration of upstream manufacturers has continued to increase. Pulp prices can be controlled by controlling the production capacity investment rate. China is the main importer of wood pulp, and more than 60% of it relies on imports. It has a large demand gap, high import dependence, and lack of pricing power. Domestic pulp price trends follow international pulp price trends.
Supply side: Global production capacity slows down, and the pressure of pulp price correction eases
On the supply side, global propeller production is expected to maintain a low growth rate, and new production capacity will be lower than the current growth rate. The new production capacity mainly comes from major propeller producing countries such as Brazil, Canada, and Indonesia. According to our calculations, the new production capacity in 2017-2018 will be approximately 3 million tons per year. However, it is expected that new production capacity will decrease in 2019. New foreign wood pulp production capacity is expected to be about 1 million tons, and domestic production capacity is expected to be 700,000 tons (Chenming 600,000 tons and Sun 100,000 tons).
Taking into account the elimination of backward production capacity, it is expected that the new production capacity in 2019 will not exceed 1.5 million tons.
Demand side: Tissue paper and waste paper replace demand.
On the demand side, as the main consumer of new production capacity in the Chinese market, the dividends of the paper industry are declining. In the past, due to the impact of consumption upgrading, the requirements for paper quality have increased, which has promoted the consumption of tons of pulp and expanded the demand for paddles. However, in the context of declining profitability of paper companies, the increase in ton pulp consumption will become relatively limited.
In our view, the demand for paddles mainly comes from the increase in household paper and the replacement demand for waste paper. There is basically no new demand for traditional cultural paper - offset paper and coated paper.
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