Cathay Pacific Haitong: Optimistic about the continuous price increase in the pulp and paper industry chain in the context of anti-internal rolls, leading integrated pulp and paper enterprises are expected to benefit

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that the increase in paper prices for waste paper is catching up with the cost increase and is optimistic about the sustainability of price increases. At the same time, supply and demand drive the rapid rise in waste paper prices in the short term, prompting small and medium-sized paper mills to actively follow up. The increase in paper prices in the off-season in July lags behind cost increases, and the increase in paper prices in August is expected to continue to rise, driven by demand and costs during the peak season, and the gap with raw material costs will widen again, and profits are expected to improve. The bank believes that under the current price difference between pulp and paper, if pulp prices start rising later, leading paper mills are expected to be more motivated to follow the increase, paper prices during peak season are expected to achieve cost transmission, and leading pulp and paper integrated enterprises are expected to benefit with a high proportion of self-produced pulp.

Cathay Pacific Haitong's main views are as follows:

The contradiction between paper supply and demand still exists, and paper price profits are at a historically low level

As of the first week of August, the price of double adhesive paper and white cardboard was at a new low. The gross profit loss per ton was lower than the 20% quantile in history. After the price increase of box tile paper, it was at the historical 11-12% quantile level, and gross profit was below the 10% quantile.

The price increase for box tile paper faucet has been raised in multiple rounds, and the price increase was implemented at an accelerated pace from the end of July to the beginning of August

Since July, 9 Dragon's various bases have issued multiple rounds of price increase letters. Prices for corrugated board have increased by a total of 30-140 yuan/ton, while prices for corrugated paper have increased by 60-140 yuan/ton, driving a cumulative increase of 60-85 yuan/ton in East China, North China, and a cumulative increase of 105-130 yuan/ton for AA-grade high watts. Judging from the pace of implementation of price increases, implementation accelerated markedly at the end of July. The bank believes that it is mainly due to the steady rise in domestic waste prices on the cost side, which prompted small manufacturers to actively follow the price increase from mid-late July.

The increase in the price of corrugated paper gradually caught up with the increase in costs, and profits began to pick up

The profit of box tile paper peaked in the first quarter of '25. The recovery in paper prices in July fell short of the cost increase, and profits declined. The increase in corrugated paper in August gradually caught up with the increase in cost, and profits began to pick up. Since box board paper mainly rose in the early period, the increase in high-end box board paper was limited, and overall profit was still narrowing.

The US exempts Brazilian wood pulp tariffs. Leading pulp mills announced production conversions and production cuts, supporting the rise in pulp prices

On July 30, the US exempted Brazilian wood pulp from imposing 40% tariffs, avoiding potential supply-side effects on China. Pulp prices are bullish and are expected to rise marginally. On August 1, Bracell announced plans to convert a broadleaf pulp production line to dissolved pulp for 70 days in September-November, which is expected to reduce 300,000 tons of broadleaf pulp production. On August 6, Suzano announced that in the next 12 months from now, the company's commercial pulp production will drop by 3.5%. International pulp mills have announced production cuts and production conversions to boost market confidence and support the upward shift in external market focus.

Domestic and foreign pulp mills have risen one after another, and the bottom of the spot for broadleaf pulp has rebounded 125-150 yuan/ton

On July 31, the app announced an increase of 20 US dollars/ton for broadleaf pulp. On August 7, Suzano informed customers that it would immediately increase eucalyptus pulp by 20 US dollars/ton in the Asian market. On August 8, the domestic broad-leaved pulp Asia Pacific Sembo announced an increase in the order price of broad-leaf pulp by 150 yuan/ton. Domestic and foreign pulp mills have risen one after another. On August 11, the spot market price of broadleaf pulp rose 125-150 yuan/ton from the bottom in early July.

Risk warning: Overseas wood pulp supply chain disturbances, downstream consumer demand falling short of expectations, etc.