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 experienced another wave of 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 Paper (China) Investment Co., Ltd. announced a 200 yuan/ton increase starting in March; and major cultural paper leaders like Sun Paper Co., Ltd. of Shandong also released plans to raise prices in March.

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

Paper Companies’ Profit Restoration Needs Drive Price Increases

The supply and demand dynamics and industry trends in the cultural paper sector provide a relatively clear example for observation.

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

Although paper companies claim that “raw material costs are rising” in their price increase notices, Zhuo Chuang 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 previous month. In fact, the main raw material costs for double-adhesive paper have slightly decreased by 0.08% compared to the same period last month.

Sun Yue pointed out that, looking at a longer timeline, the 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 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. “It’s unlikely that overall demand will sustain a continuous upward cycle through 2026. This round of price adjustments mainly reflects paper companies’ need to restore profits.”

Inventory data further highlights this dynamic. Zhuo Chuang Information shows that during the Spring Festival, market transactions were sluggish, and paper mills increased their stockpiling. By the end of February this year, the inventory days for double-adhesive and double-copper paper had increased by 10.27% and 6.32% respectively compared to the previous period. Although downstream printing factories resumed work after the Lantern Festival (March 3), new publishing tenders have not yet started, and social order inflow 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 Forest-Pulp-Paper Production Become Evident

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

“In recent years, most new capacity in the cultural paper sector has come from large-scale paper mills expanding their capacity, significantly increasing industry concentration,” said Sun Yue. Data from Zhuo Chuang Information indicates that by 2025, the CR4 (the combined market share of the top four companies) for cultural paper will reach approximately 46.70%, up 3.70 percentage points from 2024.

Sun Yue explained that large-scale paper mills are also optimizing raw material structures through forest-pulp-paper integration strategies, effectively reducing cost fluctuation risks. The integration of the industry chain has improved production efficiency and resource utilization, which is beneficial for further expanding market share.

For example, Sun Paper’s total pulp and paper capacity in 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 forest-pulp-paper integration strategy.

Yuan Shuai noted that the layout of forest-pulp-paper integration is reducing the impact of industry cycle fluctuations.