--- title: "Cathay Securities and Haitong Securities: The paper industry is highly competitive with significant profit pressure; the new national standards are expected to catalyze a new round of supply-side clearing in the industry" type: "News" locale: "en" url: "https://longbridge.com/en/news/247736908.md" description: "CITIC Securities released a research report stating that the competition in the paper industry is fierce, with significant profit pressure and worsening overcapacity. The new national standards will promote the clearing of the supply side in the industry, which may increase paper prices and the profitability of paper companies. It is expected that from 2020 to 2025, the industry will add 6.41 million tons of new capacity, with leading enterprises accelerating their diversification layout, facing lower paper prices and profit levels" datetime: "2025-07-09T02:42:03.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/247736908.md) - [en](https://longbridge.com/en/news/247736908.md) - [zh-HK](https://longbridge.com/zh-HK/news/247736908.md) --- # Cathay Securities and Haitong Securities: The paper industry is highly competitive with significant profit pressure; the new national standards are expected to catalyze a new round of supply-side clearing in the industry According to the Zhitong Finance APP, Guotai Junan has released a research report stating that the current paper industry is facing intense competition and significant profit pressure. Historically, the industry's capacity growth has accelerated, exacerbating the surplus situation. However, the continuous losses from outdated capacity have also accelerated the clearing of supply in the industry, driving a substantial increase in paper prices and profitability for paper companies. The new national standards have strengthened energy consumption restrictions, giving leading paper companies a clear advantage in both old and new capacities, which may catalyze the industry into a new round of supply-side clearing cycle. At the same time, new capacity is more difficult to meet the level 1 energy consumption requirements, which is expected to increase production costs or reduce new production capacity. ## Guotai Junan's main points are as follows: **Oversupply in the paper industry, with paper prices and profits at low levels** Currently, the prices and profits of major paper types are at low levels, with operating rates and inventory levels relatively stable in the short term. In the long term, the oversupply situation in the paper industry has worsened since 2020, leading paper companies to adopt competitive strategies of exchanging price for volume and seizing market share, resulting in significant profit pressure in the paper-making segment. **Accelerated capacity growth in the industry, further exacerbating the surplus situation** From 2010 to 2020, domestic capacity growth generally outpaced domestic demand growth, leading to a gradual oversupply in the industry. The period from 2014 to 2016 saw a relative low point in capacity growth rates. Since 2020, the capacity growth of major paper types has accelerated, further worsening the oversupply situation. **Taking double offset paper as an example, leading companies in other paper types have also increased production efforts since 2020** From 2020 to 2025E, the industry is expected to add a cumulative capacity of 6.41 million tons, with traditional leading double offset paper companies such as Sun Paper (1 million tons), Asia Pacific Resources (950,000 tons), Yueyang Forest & Paper (450,000 tons), and Huatai Co., Ltd. (400,000 tons) accounting for only 44%. Other leading companies, such as the black paper leader Nine Dragons Paper (1.85 million tons), Liansheng Pulp & Paper (500,000 tons), as well as the white card paper leader Bohui Paper (450,000 tons) and Wuzhou Special Paper (550,000 tons), are also increasing production efforts. The firm believes this is mainly due to the saturation of various segmented paper types in the domestic market, prompting leading paper companies to accelerate their diversification in paper types. Additionally, new production capacities are often paired with self-produced pulp lines, such as Guangxi Sun Paper's 800,000 tons of chemical pulp, Hubei Nine Dragons' 600,000 tons of chemical pulp, and Fujian Liansheng's 1.66 million tons of chemical pulp, leading new entrants to adopt low-price competition strategies based on cost advantages, significantly impacting paper prices. The profitability of paper machines in the industry has been operating below the breakeven line since the second half of 2023, with the industry's operating rate at historical lows, mainly due to a large production line's phased shutdown in the fourth quarter of 2024, which has not yet fully resumed operations, temporarily relieving supply pressure in the industry. **Reviewing history** The firm believes that the high prosperity experienced by the paper industry from 2015 to 2018 was mainly driven by supply-side influences, including environmental policies, such as the release and implementation of the "Energy Consumption Quotas for Pulp and Paper Units" mandatory national standard, which was an important influencing factor. This led to restrictions on both existing and new capacities in the industry from 2016 to 2018. Additionally, the continuous losses from outdated capacity accelerated the clearing of supply in the industry, driving a substantial increase in paper prices and profitability for paper companies. **Outlook for the future** Since 2021, this cycle has experienced rapid expansion in industry capacity and the number of enterprises, as well as new highs in losses and new lows in total profits. However, the industry supply side currently faces several challenges: 1) Some paper types have small production line scales and low entry barriers, such as corrugated paper and household paper, while their transportation radius is small, leading to dispersed capacity, making it difficult for leading paper mills to leverage cost advantages to eliminate smaller mills. 2) Leading paper companies are entering other paper types, intensifying industry competition, such as duplex paper, white cardboard, and boxboard. Most of the new capacity from leading enterprises has cost advantages, and they adopt low-price competition strategies when entering new paper types, causing the price-cost difference to remain low, with little convergence in new capacity release. The new national standards have strengthened energy consumption restrictions, especially with a significant increase in energy consumption limits for existing capacity. Leading paper companies have a clear advantage in both new and old capacity compared to small and medium-sized paper companies, which may catalyze the industry into a new round of supply-side clearing cycle. At the same time, new capacity is more difficult to meet the level 1 energy consumption requirements, which is expected to increase production costs or reduce new capacity. **Risk Warning:** Disruptions in overseas wood pulp supply chains, downstream consumer demand falling short of expectations, etc ### Related Stocks - [600963.CN](https://longbridge.com/en/quote/600963.CN.md) - [600308.CN](https://longbridge.com/en/quote/600308.CN.md) - [605007.CN](https://longbridge.com/en/quote/605007.CN.md) - [02689.HK](https://longbridge.com/en/quote/02689.HK.md) ## Related News & Research - [TABLE-EU Commission sells 3-month EU-Bills at average yield of 2.189%](https://longbridge.com/en/news/287046315.md) - ['Am I out?' Drought and rising costs from Iran war deepen pain for US farmers](https://longbridge.com/en/news/287042948.md) - [ZAWYA: Sahm App exceeds 2mln users, marking a new milestone in its growth journey](https://longbridge.com/en/news/287084031.md) - [15:37 ETMuse Communications Celebrates 10 Years of Award-Winning Legal Marketing and Public Relations](https://longbridge.com/en/news/286811115.md) - [TECHNICALS-CBOT wheat may fall into $6.49-3/4 to $6.55-1/4 range](https://longbridge.com/en/news/287027776.md)