Guotai Haitong: Demand recovery after the March holiday, paper industry profits continue to improve.

Guotai Haitong released a research report stating that in March, the quoted prices of cultural paper mills slightly increased, profits rebounded, but downstream demand recovery was limited; white board paper prices decreased due to loose supply and unstable demand; profits of boxboard paper increased as large-scale paper mills raised prices, but contradictions between supply and demand emerged in the latter part of the month. Waste paper prices rose compared to the previous period, and pulp market overall remained weak, with the average price of imported broadleaf pulp narrowing its decline. Guotai Haitong's main points are as follows: Cultural paper: The quoted prices of paper mills slightly increased, and profits continued to rebound. As of March 27, the monthly average price of 70g wood pulp high-white double-coated paper in the market was 4728 yuan/ton, an increase of +0.06% compared to the previous period, and an increase of 13.23% year-on-year. The main factors affecting price trends are: 1) Some paper mills raised their prices at the beginning of the month, with distributors in the northern market following suit slightly, and the focus of transactions shifting partially upwards; 2) Limited recovery of downstream demand after the Spring Festival, insufficient follow-up of social orders, a reduction in the export shipment of some downstream products, low purchasing enthusiasm of printing plants leading to a decline in transactions; 3) Some bookstores and publishing houses started bidding, with a few prices slightly lower, exacerbating market wait-and-see sentiment, and distributors' shipments being more negotiable; 4) The upstream wood pulp market saw more declines than increases, and the cost support for double-coated paper was insufficient. White board paper: Overall supply-demand gap widened, and white board paper prices decreased. As of March 27, the average monthly price of 250-400g flat white board paper traded inclusive of taxes was 4237 yuan/ton, down by -0.75% compared to the previous period, and down by -1.56% year-on-year. The reasons for the price decline in March are: 1) Paper mills accumulated inventory during the Spring Festival period, and production of white board paper increased in the Southwest and South China this month, leading to an overall loose market supply; 2) Terminal demand experienced a temporary increase, but with weak continuity in orders, and with raw paper exports being hindered, market shipments slowed down gradually in the latter part of the month; 3) Increased bearish sentiment among traders, with discounts being offered continuously. Boxboard paper: Profit rebounded as large-scale paper mills raised prices after the Spring Festival. As of March 27, the monthly average price of Chinese boxboard paper was 3592 yuan/ton, an increase of +1.67% compared to the previous period, and a decrease of -1.03% year-on-year. The main reasons for the price changes in March are: 1) Large-scale paper mills continued to raise their prices throughout the month, with successful price increases in the middle and early part of the month, and small and medium-sized paper mills actively following suit, creating a relatively strong atmosphere of price increase in the market, with the focus of transactions moving up and trading improving. However, in the latter part of the month, small and medium-sized paper mills slowed down in accepting orders, with less enthusiasm for price hikes; 2) Paper mills gradually resumed normal production, leading to increased inventory and supply pressure. In the middle and early parts of the month, downstream packaging factories stocked up on low supplies, but in the latter part of the month, orders were generally affected, with the demand for raw paper being maintained just at the essential level, and contradictions between supply and demand gradually becoming apparent; 3) The average price of the main upstream raw material waste paper trended slightly upward, providing limited support for the cost side of boxboard paper prices. Waste paper: Domestic waste consumption volume increased month-on-month, and prices rose compared to the previous period. As of March 27, the monthly average price of waste yellow board paper in the market was 1522 yuan/ton, an increase of +0.59% compared to the previous period, and an increase of +0.59% year-on-year. The main reasons for the price trends are: 1) The supply of waste paper decreased due to the Spring Festival, with most paper mills receiving reduced amounts, leading to a trend of initially high and then low supply of waste yellow board paper; 2) Heavy rainfall in the south affected the trading of waste paper, causing market prices to rise; 3) Leading paper companies steadily increased their procurement prices for waste paper, gradually boosting market sentiment. Pulp: Downstream demand increase is relatively limited, and broadleaf pulp prices remained basically stable. In March, import pulp trading tended to be just in need. The main factors affecting price trends in March include the following aspects: 1) The main contract prices of pulp futures on the Shanghai Futures Exchange fluctuated downwards to a low level, under the dual influence of the basis quo mode of quotation and weak demand, leading to downward pressure on the average price of imported softwood pulp. 2) The external market continuously reported price increases for imported broadleaf pulp to hedge against the speed of pulp price declines, narrowing the decline in the average price of imported broadleaf pulp. 3) Changes in supply and demand for imported bleached and mechanical pulp were limited, with prices following the overall downward trend. 4) Downstream paper mills reduced costs and increased efficiency, which was not conducive to the high operation of the pulp market and effective destocking. Risk warning: Disruption in overseas pulp supply chains, lower-than-expected downstream consumption demand, etc.