Contradictions between supply and demand in the paper industry will gradually ease

In a global climate marked by slow economic growth and domestic economic slowdown, China's paper industry maintained a growth trend last year. While the balance between production and sales remained relatively stable, the overall efficiency of the industry declined significantly, raising concerns about the financial health of many companies. The "12th Five-Year Plan" for the paper industry emphasized controlling capacity expansion and limiting the growth rate of new production lines. This year, newly added capacity is expected to decrease, which will help reduce supply pressure. Additionally, lower profitability in the sector is likely to deter investment, further slowing supply growth. As the economy gradually recovers, demand is expected to rise, leading to a gradual improvement in the supply-demand imbalance over the next two years. This year, the supply and demand dynamics are expected to improve primarily for coated paper and linerboard. However, white cardboard may face increased supply due to new production capacity, potentially intensifying the supply-demand gap. Meanwhile, cultural paper production may shift from coated paper lines, and while digital products like e-books have impacted traditional paper demand, the effect remains limited. Domestically, coated paper production is projected to reach around 7 million tons this year, up by approximately 9.4%. Exports are expected to increase by 8.7% year-on-year to 1.5 million tons, while imports remain at around 300,000 tons. Annual consumption is estimated at 5.8 million tons, reflecting a 9% increase. Although coated paper has faced oversupply and weak pricing due to new capacity and export challenges, no new production lines are expected to come online soon. As the economy recovers, downstream demand should improve, leading to better pricing and profitability in the future. For cultural paper, production is expected to reach about 17.6 million tons this year, up 1.7% compared to the previous year. Imports are forecasted at 380,000 tons, with exports reaching 950,000 tons. Annual consumption is expected to be around 17 million tons, an increase of 0.8%. Although there won't be much new capacity, some coated paper machines could be repurposed for offset paper. Demand remains stable, though it faces long-term pressure from digital alternatives. Whiteboard paper production is expected to reach around 14 million tons this year, up 4.5% year-on-year. Imports are anticipated at 750,000 tons, while exports are set at 850,000 tons. Annual consumption is expected to grow by 5.1%, reaching 13.9 million tons. Despite stable production and sales last year, new capacity additions this year are likely to increase competition, making it difficult to achieve strong performance later in the year. Looking at containerboard production, with new capacity coming online and small and medium-sized enterprises reducing output, total domestic production is expected to reach 20.7 million tons, up 4% year-on-year. Imports are expected to be around 870,000 tons, with exports at 70,000 tons. Annual consumption is estimated at 21.5 million tons. Corrugated paper production is also expected to rise slightly, with annual consumption growing by 2%. Despite a smaller amount of new capacity this year, containerboard is expected to see the strongest demand recovery among industrial papers. This should lead to a rebound in prices and profitability for containerboard in the coming months.

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