Three Paper Giants Issue Sudden Notices as Paper Prices Jump 500 Yuan/Tonne; Listed Papermakers' First-Half Net Profits Soar, with the Biggest Gain at Roughly Threefold Year-on-Year

Over the past three days, three major mills — Chenming, APP and Wanguo Paper — successively issued price-increase letters, stating that due to persistently high costs of raw and auxiliary materials and other factors, they will raise prices of the ivory board and coated ivory board products they produce and sell by RMB 500/ton. At the same time, quite a few people in the industry believe that paper prices have now bottomed out and will soon rebound.

The three giants issue price-increase letters, jointly raising prices by RMB 500/ton

APP (China) Industrial Paper Division:

At present, the company's costs for bulk raw and auxiliary materials such as wood pulp, coal and chemicals, as well as transportation, remain high, and the market selling price of the company's products is seriously inverted relative to the company's selling price. The company now plans to raise prices for all ivory board and coated ivory board products produced by Ningbo Asia Pulp & Paper Co., Ltd. and Guangxi Jingui Pulp & Paper Co., Ltd. by RMB 500/ton (tax included), effective July 21, 2021.

Shanghai Chenming Pulp & Paper Sales Co., Ltd.:

Affected by increased operating costs, and in order to ensure the continuous and stable supply of high-quality products to customers, after study our company will raise prices of ivory board and coated ivory board products by RMB 500/ton on top of current selling prices, effective July 20.

Wanguo Paper Sun Ivory Board Co., Ltd.:

In view of the production cost pressure on our company's products and the increase in demand as the market recovers, and to ensure the continuous and stable supply of high-quality products and services to customers, our company has decided: effective July 25, 2021, the full range of ivory board and coated ivory board products produced by our company will be uniformly increased in price by RMB 500/ton on the basis of currently implemented prices.

According to Zhiyin Weilai Network, the ivory board market is currently showing divergent trends. A few paper mills have sent letters notifying a price increase of RMB 500/ton, but the market generally remains bearish, demand has not yet improved, and it is hard for paper enterprises to reduce inventories, so the intent is mainly to stop the decline and stabilize. It is expected that in the short term the ivory board market will be dominated by paper mills calling for price increases to stop the decline; although some have begun taking Mid-Autumn Festival orders, demand is not strong, transactions are thin, the market still mostly expects declines, and short-term transactions will remain flexibly negotiated.

Half-year net profits of listed paper industry companies soar, with the highest year-on-year increase about 3 times

Recently, companies in the paper industry in the mainland and Taiwan regions have successively published their first-half performance reports. Judging from the financial data published so far, the net profit growth of mainland paper enterprises is clearly higher than that of Taiwan's top three paper makers, with the highest increase reaching about 3 times and the lowest also about 1 time. This shows that the continuous rise in paper prices in the first half laid a very solid foundation for the profits of paper companies.

Among them, Chenming Paper expects net profit attributable to shareholders of the listed company in the first half of RMB 2.0–2.1 billion, up 287%–307% year on year. The company pointed out that the reasons for the change in performance were that the paper industry's prosperity improved, the prices of the company's main paper grades rose year on year with obvious price-increase effects, and revenue and profit in the reporting period achieved substantial year-on-year growth. As wood pulp prices rose, the cost advantage brought by the company's pulp-paper integration strategy stood out, further enhancing the company's profitability.

Huatai Paper's performance announcement shows that it expects net profit attributable to shareholders of the listed company in the first half of 2021 of about RMB 530–580 million, an increase of about 90%–110% year on year. The main reason is that prices of products such as newsprint, cultural paper and coated paper rose compared with the same period last year, improving profitability.

Senlin Packaging Group Co., Ltd. expects net profit attributable to shareholders of the listed company in the first half of 2021 of RMB 120–145 million, an increase of 112.22%–156.43% compared with the same period last year. The main reason is that in the first half of 2021 the company organized production according to market demand, and its main products achieved both higher volume and higher prices year on year.

Jingxing Paper expects net profit attributable to shareholders of the listed company in the first half of 2021 of about RMB 234–278 million, an increase of 110%–150% compared with the same period last year. The main reason is that the company organized production according to market conditions and its main products rose in both volume and price; at the same time, the company further strengthened lean management, reasonably implemented raw material procurement and controlled production costs, so production and operations improved and the industrial paper segment achieved double growth in both revenue and net profit.

In addition, Xianhe Co., Ltd. expects net profit attributable to shareholders of the listed company in the first half of 2021 of RMB 590–630 million, up 108.90%–123.06% year on year. The main reason is that, leveraging its highly flexible production, the company actively adjusted its product business structure, so that its SKUs were further optimized in 2021; while capacity for high-gross-margin products gradually increased, capacity for low-gross-margin products was gradually brought under control, product flexibility and market adaptability were greatly enhanced, and the comprehensive scale benefits of the paper-based functional materials industry gradually became apparent...

Recently, the June performance of Taiwan's top three industrial paper makers was officially released, all exceeding expectations. Among them, Yuen Foong Yu Investment Holding Co. created new same-period highs in June, the second quarter and the first half in revenue. Benefiting from the boost of its two golden-egg-laying units — Yuen Foong Yu Industrial Paper and Shenfeng Applied Materials — Yuen Foong Yu's June revenue was NT$7.462 billion, up 35.4% year on year; second-quarter revenue was NT$22.55 billion; cumulative first-half revenue was NT$43.865 billion, up 30.79% year on year, an increase of more than NT$10 billion over the same period last year.

Rongcheng, meanwhile, benefited from simultaneous rises in price and volume of industrial paper and cartons on both sides of the strait: June revenue was NT$4.925 billion, up 39.36% year on year, pre-tax net profit NT$572 million, up 82% month on month, with single-month pre-tax profit reaching nearly 90% of the first quarter's; cumulative first-half revenue was NT$25.103 billion, up 50.95% year on year, with pre-tax net profit of NT$1.684 billion.

Cheng Loong, in addition to grabbing the market with full capacity in the Taiwan region, also drove group June revenue of NT$3.892 billion, up 9.49% year on year, on revenue growth in the mainland and Vietnam; cumulative first-half revenue was NT$21.829 billion, up 17.03% year on year, breaking through the NT$20 billion mark in one go.

As industries in Europe and the United States revive and strive for economic growth, the boom in business opportunities after the lifting of lockdowns has triggered a buying spree, driving strong order-pulling at production bases across Asia, especially orders from the United States, described as local retailers' largest restocking campaign; Taiwan's top three industrial paper makers have all been running at full capacity this year.

Looking again at the market within Taiwan Province, since the beginning of this year the stay-at-home economy has driven continuously rising demand for online-shopping home-delivery packaging; especially after Level 3 alert began in May and with a bumper harvest of fruits and vegetables, overall packaging sales in the first six months grew by more than 10%, with the largest use of cartons being for packaging tissue paper, fruits and vegetables, etc.; at the same time, people going out to buy takeaway food prompted a marked increase in the use of packaging paper such as paper boxes, carrier bags and bagging, from which Huazhi under Yuen Foong Yu will also benefit.

Because prices of various papermaking raw materials have been alarmingly rising, imported waste paper has now risen above US$300 per ton; paper prices in the mainland and Vietnam can respond instantly to international trends, and paper prices in the Taiwan region have also successfully risen twice, entering an era of high paper prices, with the paper industry being the biggest beneficiary group. Paper mills say that this year, affected by the pandemic and sea freight, peak-season order-pulling in Europe, America and China has all been moved forward to June, and it is expected that the revenue growth rate in the second half will rise month by month, continuing to fight for new highs.

——This article is reproduced from China Packaging Network (pack.cn), original link: http://news.pack.cn/show-377788.html