Can the hottest follow-up paper price rise

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Can the subsequent paper price rise

as a midstream manufacturing industry, the upstream is connected with pulp, and the downstream is the packaging industry. The paper industry has a strong cyclical nature. From 2007 to now, it has experienced a complete cycle under the influence of macroeconomic and production capacity. At present, with the tightening of environmental protection and the continuous impact of the trade war, the limited supply of raw materials has led to rising costs, while downstream demand is sluggish, and the industry is in a downward stage

what kind of fluctuations has the paper industry experienced in the past decade

the paper industry is affected by the macro-economy and has long-term volatility; In terms of industry supply and demand, capacity construction has a cycle of about 2 years; At the same time, demand is also affected by festivals, seasons and academic floods, which form regular fluctuations within a year. Therefore, the paper industry has a typical cyclical attribute. From the perspective of the large cycle, the industry has experienced complete fluctuations since 2007:

2007 operating procedures for impact testing machines - in 2008, the economy was booming, driven by strong downstream demand, prices rose, supply grew steadily, and the industry took the initiative to replenish inventory

In, affected by the financial crisis, downstream demand fell rapidly, supply side adjustment lagged behind, overcapacity, and the industry was in the stage of passive inventory replenishment

In, the state introduced a number of economic stimulus policies to boost downstream demand, prices rebounded significantly, and the construction of industrial capacity reached a peak

in, with the gradual digestion of stimulus policies, demand returned to normal, and production capacity was under construction. The expectation of large-scale production capacity in the future led enterprises to reduce prices, take the initiative to remove inventory, and the fluctuation of industrial inventory decreased

in, the production capacity entered the release stage, the excess supply of the industry led to the downturn of paper prices, the liquidation of small enterprises, and the industry was in the passive destocking stage

in, with the national supply side reform and the increase of environmental protection pressure, some production capacity was shut down, the industry supply fell, and the inventory was at a long-term low state, resulting in a sharp rise in paper prices, a significant improvement in corporate profitability, and entering the stage of active inventory replenishment

since 2018, affected by the trade war and the continuous tightening of environmental protection, the supply of raw materials is limited, the production cost of enterprises has increased, while the downstream demand is sluggish, and the profitability has declined

breakdown of the current supply and demand of raw materials and competition pattern in the paper industry

from the current paper price, as of November 30, 2018, the prices of box board/corrugated/white board/copper plate/double glue/white cardboard were 4477/3790/4300/6300/6567/5143/ton, respectively, -5.42%/+2.78%/-0.58%/-17.11%/-11.65%/-23.61% compared with the same period last year. The price of corrugated box board stopped falling and stabilized. Generally speaking, the prices of various sub categories of paper are still at a relatively high level in history

1. Industry supply and demand: supply and demand are generally stable, and the industry continues to differentiate under the supply side reform

from the overall supply and demand situation of the industry, the annual national paper and paperboard output increased from 65 million tons to 111.3 million tons, with cagr=5.01%. In recent years, the output growth has slowed down, and the industry supply has basically remained stable; The sales volume is basically synchronized with the output every year, and the production and sales rate remains above 96%

production capacity determines supply, and the industry is differentiated under the pressure of supply side reform + environmental protection. Based on the high production and sales rate of the industry, the progress of production capacity has played a decisive role in the expectation of supply. Since 2016, under the pressure of supply side reform, the small capacity of the industry has been cleared, and the supply pattern has improved. At the same time, under the catalysis of the general trend of environmental protection, the supply of raw materials has tightened, driving up the price of raw materials, damaging the profitability of small enterprises, and further accelerating the liquidation of production capacity. On the other hand, based on their capital and resource advantages, leading enterprises have a strong ability to obtain raw materials, and the production capacity investment continues to advance. Judging from the production plans of leading enterprises in the coming years, the production capacity of waste paper box board/corrugated paper is put in more, while the production capacity of cultural paper remains relatively stable due to the rigid demand

terminal retail is sluggish, and industry demand is under pressure. For the demand side to support the construction of a batch of qualified express demonstration parks into green parks, the retail situation of end consumer goods can reflect the demand changes at the macro level. Since 2017, the year-on-year growth rate of total retail sales of social consumer goods has fluctuated and declined, with a year-on-year growth rate of 8.6% in October of 2018, which is the low point in recent years. The sluggish terminal demand has hindered the demand for box board corrugated and other packaging paper

inventory reflects downstream demand. As the downstream packaging industry of the paper industry is relatively scattered, the demand situation is mainly reflected according to the inventory situation. In terms of paper types, taking carton board and white card as examples, the inventory of carton board society and enterprises has fluctuated and increased since 18 years, reflecting the relative shortage of downstream demand; The demand for white cardboard is relatively stable, and the inventory fluctuation in 18 years is not large

2. Raw materials: supply tightening supports the price of waste paper, and the pulp price is expected to peak. Among the costs of the paper industry, 60% - 70% are raw materials, 10% - 15% are energy and power such as coal and electricity, and the rest are labor, depreciation and other auxiliary material costs. Waste paper is about 1.2 tons of waste paper to produce 1 ton of base paper, and pulp is about 0.8 tons of wood pulp to produce 1 ton of base paper. Therefore, the price and supply and demand of raw materials have a very significant impact on the production of the paper industry

the supply of foreign waste has been tightened, and the leader has long-term advantages. For the box board/corrugated/whiteboard of waste paper system, the main raw material is waste paper. One third of China's waste paper depends on imports. With the tightening of environmental protection policies in the past 17 years, the issuance of foreign waste quotas has been significantly tightened, and the trend of concentration to the leader is obvious, and the import of low-grade waste paper is prohibited. In 2018, the first 25 batches of waste quotas were 18.2757 million tons, and the three waste paper leaders of Nine Dragons Paper, Liwen paper and Shanying paper received quotas accounting for 63%, significantly higher than 48% in 2017. In the long run, the import of foreign waste is the general trend, and enterprises also solve this problem by seeking alternative raw materials. The leading enterprises rely on capital advantages and forward-looking layout, have a deep layout in the raw material side, and obtain raw material supply through overseas capacity construction, which has a comparative advantage

the internal and external waste price difference helps the cost dividend of the leading enterprises. The reduction of foreign waste has led to an increase in the demand for domestic waste paper, driving the national waste price to continue to rise since 17 years. Leading enterprises can have a cost advantage over the industry because they can obtain more foreign waste quotas and enjoy relatively low foreign waste price dividends. At present, as it is close to the end of the year, some leading enterprises that have obtained quotas have stepped up the purchase of foreign waste, resulting in a decrease in the demand for domestic waste. At the same time, the exchange rate fluctuations have led to an increase in the price of foreign waste and a narrowing of the price gap between domestic and foreign waste. In the long run, the tightening of waste paper supply can support the high price of waste paper. Through the sensitivity analysis of the difference between the net profit per ton of large and small packaging paper enterprises, under the current situation of the price difference between internal and external waste/ton, the leading enterprises with the proportion of external waste of about 50% can have higher net profit per ton than the enterprises without quotas

pulp futures have been listed, and the market pricing mechanism has been continuously improved. On November 27, bleached kraft softwood pulp futures were officially listed. As of December 5, the futures price of pulp 1911 was 5000, down 17% from the first day of listing, reflecting the market's expectation that the pulp market will be weak and the pulp price will decline next year, but we believe that it is mainly affected by market sentiment. At present, the market participants are mainly traders, and large enterprises are still in the wait-and-see stage. In the later stage, with the increase of market participants, the guiding role of pulp futures for spot prices will be enhanced. At the same time, it improves the pricing ability of pulp in China, improves the traditional pricing model, promotes the formation of pulp market-oriented pricing mechanism, and provides hedging and other risk aversion means for paper enterprises

exchange rate changes affect costs, and the cost of RMB depreciation increases. Due to the large proportion of wood pulp imports in China, the depreciation of RMB has led to the rise of raw material costs of enterprises. Through the sensitivity test of the impact of exchange rate on the net profits of leading paper enterprises, the depreciation of RMB has a great impact on the raw material costs of enterprises, among which the raw material costs of Shanying paper and Taiyang paper are more affected by the exchange rate. The current RMB exchange rate is about 6.94, with a depreciation of nearly 6.2% compared with last year. Based on the net profit of 17 years, the comprehensive impact of RMB depreciation on the net profit of various enterprises is about 10% - 20%

3. Competition pattern: under the supply side reform, the concentration has gradually increased

from the perspective of the competition pattern of each subdivision of paper, the main enterprises of box board corrugated paper are nine dragons paper, Liwen paper and Shanying paper, and the market concentration is relatively high; In terms of cultural paper, sun paper, Chenming Paper and Jinguang app are leading enterprises in production capacity

the supply side reform has promoted the concentration to increase steadily. In, the market share of Cr5 in the paper industry increased from 20.49% to 28.56%, and CR10 increased from 28.70% to 39.95%. The market concentration increased steadily. With the advance of supply side reform and the increasing pressure of environmental protection lines, some small enterprises withdrew, and the number of Enterprises above Designated Size also decreased from 2962 in 2014 to 2754 in 2017. It is expected that the market concentration is expected to continue to increase when the production capacity is further cleared and leading enterprises get more integration opportunities

the industry boom is down, and the leading companies have significant advantages in forward-looking layout.

h1 with the supply side reform and the tightening of environmental protection, the liquidation of small production capacity is accelerated, coupled with the lower inventory level, the paper price has experienced a significant rise, the profit elasticity of leading enterprises has been gradually released, the net profit per ton has increased significantly, and the asset liability ratio has improved. Since 18q3, due to the impact of the trade war, the actual arrival of American waste with relatively low price in Hong Kong has been limited, resulting in the increase in the actual use proportion of waste paper from the leading countries with quotas (expected to increase from 50% to 60%), while downstream demand is weak, paper prices are lower, gross profit margins are significantly damaged, and net profit per ton has declined since the high level of 18h1. In the short term, there is no obvious sign of the reversal of the bottom of the industry. In the long term, leading enterprises rely on their own capital and scale advantages to obtain the comparative advantage of the industry through forward-looking layout, and to a certain extent, indicate the development direction of the industry, with long-term investment value

1. The balance of multiple paper types resists the fluctuation of a single paper type

a single paper type may be greatly affected by the industrial production capacity and the fluctuation of raw material prices, so that the profits of enterprises fluctuate. Through the layout of multiple paper types, it can effectively resist the cyclical fluctuations of the industry. Among them, sun paper is a representative enterprise. The company has a multi paper layout of double glue, coated paper, household paper and coated base paper. At the same time, it has the capacity of dissolved pulp and chemical mechanical pulp, and the self-sufficiency rate of pulp is high. With the launch of kraft linerboard production capacity in 16 years, the company has formed a balanced layout of pulp, waste paper and cultural paper

the paper-making enterprises in the midstream have completed the integration of the industrial chain by extending upstream and downstream, among which Shanying paper is the most integrated enterprise at present. In 2017, the company's paper business revenue reached 12.576 billion (accounting for 72%), and the packaging business revenue was 3.644 billion (accounting for 21%). In 2018, the company acquired WPT, a Dutch waste paper acquisition enterprise, to improve the closed-loop industrial chain of waste paper base paper packaging waste paper. Sun paper and Chenming paper also gain cost advantages over the industry through the layout of the pulp and paper industry chain

2. Overseas layout solves the core problem of raw material supply

driven by the supply side reform and environmental protection pressure, the import of foreign waste raw materials has been tightened, and small and medium-sized enterprises in the industry can only use high price national waste due to the lack of foreign waste quotas, resulting in obvious pressure on their profitability. As the leading enterprises have obvious advantages in terms of financial strength, they can obtain sufficient supply of raw materials by distributing production capacity and raw material bases overseas. Among the leading enterprises, Nine Dragons Paper, Liwen paper, Shanying paper and sun paper

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