According to the Zhitong Finance APP, China Galaxy Securities released a research report stating that the current paper industry is experiencing a bottom recovery in prosperity, with a reduction in supply from the pulp and paper sector, a seasonal demand rebound for waste paper, and continuous price increase notices leading to price hikes. Looking ahead, there will be significant new capacity for double glue paper and white cardboard in 2025, which is expected to exert some pressure; however, the new capacity for double copper paper, corrugated paper, and boxboard paper is limited. Meanwhile, the central government has expressed a positive stance, and it is expected that policies to boost the economy and domestic demand will continue to be introduced in the future, supporting demand and driving the paper industry upward.

The main points of China Galaxy Securities are as follows:

Raw Materials: As of January 8, 2025, the daily external market prices for ARAUCO softwood pulp (Silver Star) and ARAUCO hardwood pulp (Star) in China's main port market were USD 795 and USD 570 per ton, respectively, representing year-on-year changes of +4.61% and -12.31%, and month-on-month changes of +1.27% and +3.64%. On January 8, 2025, the daily average prices for softwood pulp, hardwood pulp, and chemical pulp in China were year-on-year +8.84%, -6.1%, and -17.54%, and month-on-month +2.37%, +6.61%, and +0.82%, respectively. For waste paper, on January 8, 2025, the daily average price for waste yellow board paper (Grade A) in China was CNY 1,570 per ton, down -0.57% year-on-year and -1.2% month-on-month. In December, the import prices for US waste #12 recycled fiber pulp in Southeast Asia rose, with mainstream market prices reported at USD 250-270 per ton.

Cultural Paper: On January 8, 2025, the daily average prices for double glue paper and double copper paper in China were down -6.28% and -4.16% year-on-year, and up +0.93% and +1.1% month-on-month, respectively. Chenming Paper has limited production and halted operations, alleviating supply pressure in the industry. Major paper companies have issued price increase notices, which have been continuously implemented, driving prices up. Looking ahead, there will be 1.55 million tons of new capacity for double glue paper in 2025 (Jiu Long 1.3 million tons, Wuzhou Special Paper 250,000 tons), an increase of 8.71%, which will exert some pressure on the supply side; double copper paper has maintained stable capacity since 2016 and will benefit in the short term from reduced supply, but future attention should be paid to end-demand performance.

White Cardboard: On January 8, 2025, the daily average price for white cardboard in China was down -10.04% year-on-year and up +1.9% month-on-month. Benefiting from the reduction in supply from Chenming Paper, industry expectations have improved, and prices have stabilized and rebounded. Demand for white cardboard remains weak, with consumption in September, October, and November 2024 down approximately 20% year-on-year. There is still significant capacity pressure in the future, with an expected 4.5 million tons and 3.7 million tons of capacity to be released in 2025 and 2026, respectively, leading to ongoing competitive pressure.

Corrugated Boxboard Paper: On January 8, 2025, the daily average prices for corrugated paper and boxboard paper in China were up +0.95% and down -1.71% year-on-year, and up +2.18% and +1.67% month-on-month, respectively. In December, as the Spring Festival and New Year holidays approached, large paper mills continuously issued price increase notices, and smaller paper mills in the vicinity showed high enthusiasm for following suit. The downstream packaging factories maintained relatively stable order-taking, replenishing inventory as needed, which provided support for paper prices. The inventory levels of paper companies remain at a medium-low level, and large paper mills have announced price increase plans for early January. As paper mills begin to halt operations for maintenance in mid to late January, it is expected that the supply side will continue to have support Household Paper: On January 8, 2025, the daily average price of household paper made from Chinese wood pulp decreased by 4.2% year-on-year and remained flat month-on-month. Local paper companies in Shandong still face shutdowns or production cuts, but the increase in low-priced external supplies has led to a slight decline in market prices; competition in the Hebei region continues, with sporadic low prices still present, but due to rising raw material prices, cost pressures have increased, stabilizing market prices; in the Henan region, paper companies are delivering orders, with production and sales relatively stable, and paper prices are stable; in the Sichuan-Chongqing region, the shipping pace of paper companies has slowed, but due to shutdowns and production cuts at some paper companies in the middle and late months, market prices fluctuate within a range; in the Guangxi region, the shipping pace of paper companies is average, and the decline in upstream raw material prices has dragged down paper prices, resulting in a slight downward adjustment.

Investment Suggestions: It is recommended to pay attention to leading companies in the pulp and paper sector such as Sun Paper (002078.SZ) and Yueyang Forest & Paper (600963.SH), leading household paper companies like Hengan International (01044) and Zhongshun Jierou (002511), and leading specialty paper companies such as Huawang Technology (605377.SH), Xianhe Co., Ltd. (603733.SH), and Wuzhou Special Paper (605007.SH).

Risk Warning: Risks of downstream demand falling short of expectations; risks of significant increases in raw material prices; risks of production capacity not meeting expectations; risks of intensified industry competition