Golden forecast for the paper industry in 2026: supply closure, raw materials are king.

CICC released a research report stating that overall paper demand is expected to continue to recover moderately in 2026. Although the supply is nearing completion, with new capacity coming online in 2025, it is predicted that the supply and demand will remain relatively loose. In terms of incremental pressure, the institution believes that cultural paper > specialty paper > white board paper will be the order. On the raw materials side, intensified competition in the pulp and paper industry in recent years has shortened the pulp price cycle, becoming a key driving force for inventory replenishment and destocking in the paper industry, and also playing a role as a "signal gun" for investment decisions. According to CICC statistics, the next major pulp project is expected to come online in 2027, with no high certainty projects in the meantime. It is expected that pulp prices will recover year-on-year in 2026. However, in recent years, the concentration of new pulp production capacity has hindered the upper limit of pulp price recovery. It is predicted that the price of broadleaf pulp will fluctuate in the range of $550-650 per ton. Key points from CICC: Looking ahead to 2026, consumer demand is still in a phase of moderate recovery, with various paper supply changes: the supply and demand of pulp paper varieties remain loose, with pulp prices becoming a key driving force for inventory replenishment and destocking in the industry. Integrated leading companies in the pulp and paper industry are expected to continue to enjoy excess profits; the capacity of linerboard and corrugated paper has basically reached its limit, and is expected to be the first to emerge from this cycle of supply and demand imbalance, ushering in a recovery in capacity utilization rates, leading to a rise in paper prices year-on-year as performance recovers. The price center of linerboard and corrugated paper is expected to recover year-on-year. Linerboard and corrugated paper are the most sensitive to consumption in the paper industry, with consumption growth rates of 8% and 4% in 2023-24. It is estimated that there will be an incremental consumption of ~10 million tons from 2022-25. The current round of supply expansion is coming to an end, with CICC estimating that a total of 15 million tons of new capacity has been put into operation from 2023-25 (with four leading companies accounting for ~40%), and the future expansion of existing leading companies is relatively restrained: Nine Dragons has paused expansion of linerboard and corrugated paper production since 2024, Shanying's new capacity in Anhui is unlikely to come online in the short term, Lee & Man has no expansion plans, with only 700,000 tons of capacity from Sun as planned to be released by the end of 2026. CICC believes that the current round of industry expansion is coming to an end and is optimistic about the industry's prospects for capacity utilization and price recovery in 2026. The scarcity of high-quality forest land and pulp assets is further increasing. Considering global economic growth and limited high-quality forest resources, upstream forest and pulp resources are becoming tighter, making companies with high-quality forest and pulp assets promising. Risks include: demand falling short of expectations, supply increasing more than expected, and core raw material prices fluctuating more than expected.