Leading paper companies consecutively release price increase notices to expand cost advantages through integrated wood pulp and paper production

Securities Daily Reporter Wang Xi

Recently, the domestic paper industry has once again experienced frequent price adjustments. From cultural paper to packaging paper and household paper, paper companies have announced price increase notices starting from late February and early March. Nine Dragons Paper (Holdings) Limited (hereinafter referred to as “Nine Dragons Paper”) announced a 50 yuan/ton increase for packaging paper at its eight major bases; leading white card paper company Golden Light Paper (China) Investment Co., Ltd. announced a 200 yuan/ton price hike starting in March; and industry leaders in cultural paper such as Shandong Sun Paper announced plans to raise prices in March.

Through multiple interviews, the reporter learned that this round of price increases is mainly a proactive effort by paper companies to restore their profits.

Paper Companies’ Profit Restoration Needs Are Being Released

The supply and demand dynamics and industry trends in the cultural paper sector provide a clearer observation sample.

“Recently, major domestic cultural paper producers have successively issued price increase notices for March, with a rise of 200 yuan/ton. However, based on current market feedback, demand has recovered relatively mildly after the Spring Festival, with limited growth in downstream procurement orders. Distributors are cautious in their purchases, and there is still resistance to rising paper prices. Some factories are continuing to accept orders at February prices,” said Sun Yue, an industry analyst at Zhuochuang Information Co., Ltd. (hereinafter “Zhuochuang Information”), in an interview with Securities Daily.

Although paper companies claim in their price increase notices that “raw material costs are rising,” Zhuochuang Information’s monitoring data shows that as of March 3, the average market prices for imported coniferous and broadleaf pulp were 5,241 yuan/ton and 4,565 yuan/ton respectively, with little change from the same period last month. In fact, the main raw material costs for double-coated paper have slightly decreased by 0.08% compared to the same period last month.

Sun Yue noted that, looking at the longer timeline, the theoretical gross profit margins of paper mills have remained mostly in negative territory over the past six months. Therefore, improving profitability is the real internal driver supporting price increases. Additionally, some industry insiders suggest that this round of price adjustments by paper companies also leaves room for future pulp price hikes.

“The current paper industry is at a turning point from passive destocking to active inventory replenishment, but downstream demand recovery remains mild,” said Yuan Shuai, Deputy Secretary-General of the Zhongguancun Internet of Things Industry Alliance, in an interview with Securities Daily. “It will be difficult for overall demand to sustain a continuous upward cycle through 2026. This round of price adjustments mainly reflects paper companies’ need to restore profits.”

Inventory data highlights this speculative characteristic. Zhuochuang Information shows that during the Spring Festival, market transactions were light, and paper mills increased their inventory accumulation. By the end of February this year, the inventory days for double-coated and double-copper papers increased by 10.27% and 6.32% respectively compared to the previous month. Although downstream printing factories resumed work after the Lantern Festival (March 3), new publishing tenders have not yet started, and social order growth remains limited. Sun Yue predicts that cultural paper prices may rise slightly from March to April, but as publishing tenders proceed and market bargaining pressure increases from May to June, prices could shift from rising to falling.

Advantages of Integrated Pulp, Paper, and Forestry

Despite short-term demand pressures, a significant change is occurring within the paper industry: leading companies with integrated forestry, pulp, and paper operations are leveraging their cost advantages to achieve rapid growth.

“Over the past two years, new capacity in the cultural paper industry has mainly come from expansion by large-scale paper mills, significantly increasing industry concentration,” Sun Yue said. Zhuochuang Information data shows that by 2025, the industry’s CR4 (the combined market share of the top four companies) for cultural paper will reach about 46.70%, up 3.70 percentage points from 2024.

Sun Yue explained that large paper mills are also optimizing raw material structures through integrated forestry and pulp strategies, effectively reducing cost fluctuation risks. The integration of the industry chain improves production efficiency and resource utilization, which helps them further expand market share.

For example, Sun Paper’s total pulp capacity at its three major bases in Shandong, Guangxi, and Laos exceeds 12 million tons, with a self-supply rate of 60%, maintaining industry-leading profit margins. Nine Dragons Paper’s performance for the six months ending December 31, 2025, showed a net profit attributable to shareholders soaring by 318.8% year-on-year, driven by the cost advantages brought by its integrated forestry and pulp strategy.

Yuan Shuai stated that the layout of integrated forestry, pulp, and paper operations is reducing industry cycle volatility.