Strong demand for food packaging paper, enterprises expanding production capacity and seizing the market

April 21, 2023

With the implementation of policies such as the "plastic restriction order", there is a strong demand for food Packaging Paper, and leading enterprises are expanding production capacity to compete in the market.
Recently, the Special Paper leader Xianhe Co., Ltd. (603733. SH) launched the PM10 project with an annual production capacity of 300000 tons of high-end paper based materials and successfully rolled the paper. In addition, in recent years, multiple listed paper companies have utilized the capital market to complete their capacity expansion strategies.
Qiu Chenyang, a researcher at Zhongyan Puhua, stated in an interview with China Business Daily that the industry's continuous increase in production capacity indicates that companies have very optimistic expectations for the future of the market. Whether it is the rapid development of the national economy, product exports to the outside world, future e-commerce development, or the implementation of the "plastic restrictions" policy, it will provide huge market demand. Based on this, industry leading enterprises increase their investment scale to increase market share, maintain market competitiveness, and achieve economies of scale.
Strong market demand
In recent years, many countries have issued "plastic restriction orders" or "plastic prohibition orders". As of March 1, 2020, the State of New York in the United States began implementing the "plastic prohibition order"; EU member states will prohibit the use of disposable plastic products from 2021; China issued the "Opinions on Further Strengthening Plastic Pollution Control" in January 2020, proposing to take the lead in prohibiting and restricting the production, sales, and use of certain plastic products in certain regions and fields by 2020.
This means that the use of plastic products in daily life is gradually limited, and green and environmentally friendly packaging will become an important development trend in the packaging industry. Affected by this, the demand for food grade cardboard, environmentally friendly paper and plastic lunch boxes will increase.
In addition, under the guidance of policies such as the "Plastic Restriction Order" and the "Notice on Issuing the Action Plan for Plastic Pollution Control during the 14th Five Year Plan", the demand for paper-based products has significantly increased. The sales of disposable food paper based packaging materials and high-end paper based medical packaging materials have also steadily increased.
Benefiting from this, Xianhe Group achieved a revenue of 7.738 billion yuan in 2022, a year-on-year increase of 28.61%. Among them, the company achieved sales of 1.511 billion yuan in food and medical consumer products, an increase of 52.09% compared to the same period last year.
Qiu Chenyang stated that in recent years, with the gradual transfer of the global packaging industry to developing countries and regions represented by China, China's paper product packaging industry has become increasingly prominent in the global paper packaging industry and has become an important global supplier of paper product packaging, with the export scale continuously expanding.
According to statistics from the China Packaging Federation, in 2021, the total import and export volume of China's paper packaging industry was 8.84 billion US dollars, of which the export volume was 8.669 billion US dollars, a year-on-year increase of 31.09%.
Industry concentration ratio improvement
Under the background of strong market demand, food paper packaging enterprises continued to increase their production capacity, and the industry's concentration ratio continued to increase.
On April 10th, Xianhe Co., Ltd. announced that the PM10 of Zhejiang Hefeng New Materials Co., Ltd.'s "300000 tons per year high-end paper based material project" had started production and successfully rolled up. The project mainly focuses on new high weight and high-end food grade packaging materials.
In addition, in July 2022, Huawang Technology announced that it plans to invest 2.5 billion yuan in the construction of a high-performance paper based new material project with an annual output of 300000 tons. The project mainly produces various new paper based materials such as high-quality food grade paper, medical grade paper, and industrial paper. On January 15, last year, during an investor relations event, Wuzhou Special Paper stated that the company had added 500000 tons of food packaging paper production capacity, expected to release 350000 tons of production capacity by 2022, and expected to achieve full production by 2023.
Xianhe Co., Ltd. stated that the company has been committed to the research and development of food packaging paper (oil proof paper series, Coated Paper series, liquid packaging series, etc.) and medical packaging paper (medical dialysis paper and medical wrinkle paper) for many years, and its products have a high reputation in China. In order to quickly adapt to market changes, the company has increased research and development investment, actively layout and expand new markets, develop new products, and develop strategic value customers. It has also developed multiple end oriented products.
The reporter noticed that at present, Xianhe Group's annual production of 2.5 million tons of "high-performance paper-based new materials" in Sanjiangkou New Area, Guangxi, with an investment of 11.8 billion yuan in Laibin, Guangxi, as well as the annual production of 2.5 million tons of "high-performance paper-based new materials circular economy" project with an investment of 10 billion yuan in Shishou, Hubei, have entered the construction phase.
A person from a paper company stated in an interview with reporters that in recent years, the implementation of policies such as "plastic restriction orders" has led to a continuous increase in demand for the entire packaging paper industry. At the same time, industry leading enterprises have strong comprehensive strength, and expanding and improving profits is in line with long-term development strategic goals.
The person believes that against the backdrop of the improving prosperity of the food packaging paper industry, the expansion of production capacity by large enterprises will be conducive to further consolidating their market position and obtaining better market pricing power.
Anxin Securities believes that as a leading enterprise in the special paper industry, Xianhe Group has a diverse product matrix and continues to increase its focus on high growth tracks such as downstream food and medical packaging materials. With the continuous deployment of new production capacity, performance growth is expected.
At the same time, in the context of the policy of increasing national energy conservation efforts, China's paper industry has implemented more stringent technical and environmental standards, and market clearing efforts have continued to increase.
According to statistics from the China Paper Industry Association, as of the end of 2020, the number of paper enterprises above designated size reached 2409, a year-on-year decrease of 115. In 2020, the top ten papermaking enterprises in China produced a total of 52.4982 million tons of machine made paper, accounting for 46.62% of the total industry output, an increase of 7.81 percentage points compared to 2016; In addition, out of the 2409 papermaking production enterprises counted in 2020, there were 527 loss making enterprises, accounting for 21.88%, and there is still significant room for industry integration.
The people from the above paper enterprises said that in order to cope with the increasingly fierce market competition, the advantageous enterprises in the industry continued to expand their production scale or carry out restructuring and integration, take the road of large-scale and intensive development, and the industry's concentration ratio continued to improve.

Author:

Mr. Ma Yanfeng

E-mail:

sandy@zhongzhi.cn

Phone/WhatsApp:

8615200088110