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Peak Season Starts, The Price Of Waste Paper Reignited, The Price Is Expected To Return To High!
Aug 06, 2018

The paper industry was the star sector last year, but this year's national scrap price correction has depressed investor sentiment, and the sector continues to adjust.However, there are signs of gradual bottoming out of paper recently, and the plate is also gradually stabilized, among which nine dragons paper industry, the leading Hong Kong stock, has risen more than 20% from the bottom. Sun hengchi of zhongtai securities thinks that with the advent of the peak season, waste paper in the aftermarket is still bullish, and the paper industry has had excess returns in the last five years except the third quarter of 2015.

First, the paper industry in the third quarter of the peak season gradually opened

Zhongtai securities believes that the paper industry will continue to be optimistic in the third quarter for three reasons:

1) the overall pattern of industry supply and demand has not changed much. There is no new production capacity for cultural paper. The main new production capacity of wrapping paper is that 800 thousand tons of carton paper of sun paper is scheduled to be put into production in August.

2) cost side: as for the waste paper system, the scarcity of waste paper resources is expected to become more prominent with the advent of the peak season.At the same time, the new production capacity of the solar paper industry may also exacerbate the market's expectations of the source of raw materials tension.Superimposed foreign waste import policy is unlikely to relax, the third quarter overall waste paper bullish.In the aspect of wood-series pulp, the price of wood-pulp in the European market is still in a continuous upward stage, and the global supply and demand pattern is still tight, so the third-quarter high vibration of wood-pulp price is more likely.

3) inventory: as can be seen from the data of historical inventory changes of various paper types, the inventory of enterprises in the third quarter was in a declining range with the market turning from weak to prosperous in the third quarter.The decline in inventory levels will reduce companies' willingness to accelerate the return of capital by cutting prices, and also support the rebound in paper prices.

2. The direct profit attribute of waste paper will be more prominent

Based on the judgment of the increase of waste paper price in the third and fourth quarters, the core focus of the profitability of waste paper industry in 2018 lies in the advantages of raw materials source and cost, and the continuous increase of waste paper price will lead to the widening of the waste paper price gap between China and foreign countries, and the direct profit attribute of waste paper quota will be more prominent.

Leading enterprises with foreign waste quotas are expected to enjoy policy dividends.The gap widened to nearly 1,400 yuan a tonne this year.According to the calculation, due to the widening gap in the price of waste products from foreign countries this year, the performance of nine dragons, liwen and mountain eagle increased by 29.8, 13 and 1.31 billion yuan compared with the same period last year.