Huafu Securities: Pulp and paper resonance expects sector recovery, preferred pulp and paper integration leader

The Zhitong Finance App learned that Huafu Securities released a research report saying that the supply side of overseas coniferous pulp mills has continued to be disrupted recently. Broadleaf pulp has fluctuated upward since September, and the price spread has narrowed, supporting the price of imported coniferous pulp on the side. If pulp prices are in an upward channel in '26, the production costs of paper companies will also gradually rise in the process of catalytic paper price restoration. The bank suggests choosing an integrated faucet with woodland/self-supply pulp. Homemade pulp lines have a certain cost side advantage, which can effectively iron costs when pulp prices fluctuate.

The main views of Huafu Securities are as follows:

Incident: External pulp prices rose in December, and the supply side of overseas pulp mills continued to be disturbed

According to Zhuochuang information, Chile's Arauco announced the external price of wood pulp in December. Among them, Acerola Pulp Silver Star rose 20 US dollars/ton to 700 US dollars/ton; broadleaf pulp Star rose 20 US dollars/ton to 570 US dollars/ton. Recently, the supply side of overseas coniferous pulp mills continued to be disrupted. On December 2, Domtar announced that it will permanently shut down its Crofton coniferous pulp plant in BC, Canada (with an annual production capacity of 380,000 tons) in mid-December. Finland's MetsFibre also announced plans to shut down the RAUMA pulp mill (annual production capacity of 650,000 tons, scheduled downtime from December 15 to January 7, 2026) and announced a drastic reduction in Joutseno coniferous pulp plant production in 2026 (annual production capacity of 690,000 tons). Broadleaf pulp has fluctuated upward since September, and the price spread has narrowed, supporting the price of imported coniferous pulp on the side.

The characteristics of the bottom of the wood pulp cycle are clear, and pulp-paper resonance is expected to pick up

Currently, the price of wood pulp paper is at the bottom of the 10-year cycle. According to Zhuochuang information, from the beginning of the year to December 6, the average price of white cardboard/double adhesive paper/coated paper fell by 76/650/790 yuan/ton, respectively, by 1.8%, 12.1%, and -14.3%, respectively. The current paper price quantiles for the past ten years (2015 to date) are 8%/1%/4%, respectively. The average profitability of the industry has bottomed out, and some small and medium-sized enterprises are facing losses. In terms of operating load rate, the current weekly operating load rate of white cardboard/coated paper is less than 70%, and the operating load rate of double adhesive paper is 50%-60%. Since 25Q4, demand for white card paper and double offset paper has improved marginally under traditional peak consumption season+ publishing tenders, and leading paper companies have also issued price increase letters. Among them, the price increase of white card paper and cultural paper once again increased by 200 yuan/ton in December. The bank believes that the increase in pulp prices will strengthen cost side support. It is expected that price increases will gradually be implemented during the peak season to comprehensively improve the profitability and valuation of the sector.

New production capacity for overseas commercial pulp is limited, and pulp prices are expected to rise in '26

In total, Liansheng and SUZANO put into production more than 4 million tons of broadleaf wood pulp in 2025-2026. According to Fastmarkets's forecast from the forest pulp and paper industry, the increase in bleached broadleaf wood pulp production capacity is slowing from 2025 to 2027. At the same time, some major bleached softwood pulp production capacity is at risk of being shut down. Furthermore, in recent years, paper companies have set up integrated pulp and paper projects. The bank believes that the intensive use of homemade pulp lines will also increase demand for raw wood chips, and the rise in the price of wood chips will also drive up the cost line of homemade pulp. Based on overseas supply and the commissioning of domestic homemade pulp lines, the bank expects pulp prices to rise in '26.

Risk Alerts

Risks such as large fluctuations in pulp prices, project construction and downstream demand falling short of expectations