Zhongjin: The supply and demand situation in the paper industry is still relatively loose, and the production capacity utilization rate of cardboard and corrugated paper may see a recovery.

CICC Research Report: Looking ahead to 2026, consumer demand is still in the mild recovery stage. Various types of paper supply changes differently: pulp-based paper supply and demand remains loose, with pulp prices becoming the key driver for industry inventory replenishment and destocking, and integrated leading pulp and paper companies are expected to continue to achieve excess profits; The capacity of containerboard and corrugated paper has basically been completed. It is expected to be the first to break out of this round of supply-demand imbalance cycle, ushering in capacity utilization rate recovery, and a performance recovery trend with ton paper prices rising year-on-year. CICC's main views are as follows: The supply and demand pattern of pulp-based paper remains relatively loose The bank believes that the overall demand for papermaking is still in a mild recovery in 2026. Although the supply is entering the final stage, the climbing release of new capacity in 2025 is expected to keep supply and demand relatively loose. From the perspective of incremental pressure, the bank judges that cultural paper > specialty paper > white cardboard. On the raw material side, under the intense competition in the pulp and paper industry chain in recent years, the pulp price cycle has become shorter, becoming a key driver for the papermaking industry to replenish and destock, and also playing a role as a "signal gun" for investment decision-making. According to the bank's statistics, there is no high certainty project until the next large-scale pulp project is put into production in 2027. The bank expects the pulp price to recover year-on-year in 2026. However, in recent years, the concentration of self-made pulp production capacity is hindering the upper limit of pulp price recovery. The bank judges that hardwood pulp prices will fluctuate in the range of 550-650 US dollars per ton. The price center of containerboard and corrugated paper is expected to recover year-on-year The bank believes that containerboard and corrugated paper is the most sensitive to consumption in papermaking, with consumption growth rates of 8% and 4% in 2023-24. The bank expects consumption growth from 2022 to 25 to be ~10 million tons; This round of supply expansion has entered the final stage. The bank's statistics show that a total of 15 million tons of capacity has been put into production from 2023 to 25 (four leading companies account for ~40%), and the expansion of the existing leading companies is relatively restrained in the future: Nine dragons will temporarily suspend the expansion of production of containerboard and corrugated paper from 2024, Shanying Anhui will have difficulty in short-term investment in new capacity, and Lee & Man has no expansion plans, while only 700,000 tons of capacity of Sun is scheduled to be released by the end of the year in 2026. The bank believes that this round of industry expansion is approaching its end, and the bank is optimistic about the industry's capacity utilization rate and price center recovery in 2026. The scarcity of high-quality forest land and pulp assets is further enhanced Considering the global economic growth and limited high-quality forest resources, upstream forest and pulp resources are tightening, and the bank is optimistic about companies that own high-quality forest and pulp assets. Specifically, in the short term, Nine Dragons and Xianhe actively layout the self-made pulp sector, bringing incremental profits from new bases; in the long term, domestically, Sun leads the industry to establish an integrated forest-pulp-paper industry chain, and the bank is optimistic about its sustained accumulation of excess profits; the revaluation of the scarce value of forest land in Laos is expected, and overseas Suzano also benefits from the layout of high-quality forest and pulp assets. Risk Demand lower than expected; Excessive new supply; Core raw material prices fluctuate more than expected.