Consumer Paper Prices May Rise After Cost of Raw Materials Jumps Four Times in August
Liao Shumin
/SOURCE : Yicai
Consumer Paper Prices May Rise After Cost of Raw Materials Jumps Four Times in August

(Yicai Global) Sept. 11 -- Steel and coal prices have risen sharply in China this year and the boom has now spread to the paper market, with prices of certain products more than doubling over the past 12 months.

Most paper mills marked up their products around three or four times in August alone, and prices of everyday paper products, including corrugated paper, white paper, consumer paper, newsprint and coated paper, have increased by CNY300 (USD46.1) to CNY900 (USD138.5) per ton, state-owned news agency Xinhua reported.

"I have worked in the industry for 15 years, and I've never seen paper prices reach such a high level," said Cui Dechen, manager at Jilin Donghao Packaging. "The price of corrugated paper has more than doubled from CNY2,200 to around CNY5,000 per ton."

Soaring prices have helped paper mills to achieve unprecedented earnings results. Most paper production companies listed on A-share markets recorded an increase of more than two-fold net profit in the first six months of the year, WIND Info data show.

Net profits of Shan Dong Sun Paper Industry Co. [SHE:002078] and Shanying International Holdings Co. [SHA:600567], for example, posted 150 percent and 450.95 percent growth, respectively, in net profit.

Downstream businesses, on the other hand, are having a tough time. Carton packing business Shanghai Jielong Industry Group Corp. [SHA:600836] suffered a 495.61 percent annual slump in first-half net profit after a 92.92 percent decline last year.

Sales volume and the value of pulp have both increased so far this year in China, due to short supply and tightened government regulation over imports of waste paper, a key raw material for the country's papermaking industry, said Zhao Wei, chair of China Paper Association.

Rising paper prices are also attributable to tougher environmental protection policies. "As the government has tightened environmental requirements in recent years, many small- and medium-sized paper mills have shut down or switched to other businesses, and paper prices have been on the rise as a result of a decline in operations and dwindling inventories and supplies," said the manager of a paper mill with a yearly production capacity of 200,000 tons.

There is still no sign of an end to the price boom, and paper prices may increase further. The likelihood of a fall in pulp prices this month is slim, and prices of consumer paper products, such as toilet paper and wet paper towels, are heading up, suggested Zhang Xuesong, a consumer paper industry analyst at SCI99.

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Keywords: Paper , Price Increase