China's paper product packaging industry continues to move forward steadily

With the increasingly strict national environmental protection policies, the implementation of "plastic restriction order" or "plastic ban order" in various places and the continuous improvement of social environmental protection concepts, the paper product packaging industry has strong demand, and paper product packaging manufacturers are expanding production capacity
through capital market fundraising.

Recently, Zhejiang Dashengda Packaging Co.
, Ltd.
(hereinafter referred to as "Dashengda"), a leading enterprise in China's paper product packaging, received feedback from the China Securities Regulatory Commission
.
Dashengda intends to raise no more than 650 million yuan this time to invest in pulp molding, environmentally friendly tableware intelligent R&D and production base and other projects
.
Not only that, in 2022, a number of companies in the paper packaging industry rushed to IPO to complete the capacity expansion strategy
with the help of the capital market.
On July 12, 2022, Fujian Nanwang Environmental Protection Technology Co.
, Ltd.
(hereinafter referred to as "Nanwang Technology") submitted the draft
application for the IPO prospectus on the Growth Enterprise Market.
According to the prospectus of Nanwang Technology, the GEM listing intends to raise 627 million yuan
.
Industry experts said that the industry's continuous expansion of production capacity shows that enterprises are very optimistic about the future expectations of the market, but they still face pressure such as costs and need to reduce costs and increase efficiency
.

The policy promotes "paper instead of plastic" at a fast pace

Paper packaging refers to commodity packaging made of paper and pulp as the main raw materials, which has the characteristics
of high strength, low moisture content and low air permeability.
Paper used for food packaging must also have hygienic, sterile, and pollution-free impurities
.

With the improvement of people's awareness of environmental protection, many countries have introduced "plastic restriction orders" or "plastic bans"
.
For example, New York State in the United States began to implement the "plastic bag ban" on March 1, 2020; EU member states banned single-use plastic products in 2021; In January 2020, China issued the Opinions on Further Strengthening the Control of Plastic Pollution
.
Under the guidance of policies such as the "plastic restriction order", "opinions on accelerating the green transformation of express packaging" and "notice on printing and distributing the "14th Five-Year Plan" plastic pollution control action plan", the demand for paper-based products is expected to rise
significantly.

The use of plastic products in daily life is gradually limited, and green packaging will become an important development trend
in the packaging industry.
Specifically, the market demand for food-grade cardboard, environmentally friendly paper-plastic lunch boxes, etc.
has increased; Environmental protection cloth bags, paper bags, etc.
are promoted and used
in shopping malls, supermarkets and other places.

Dashengda said that in recent years, the implementation of policies such as the "plastic restriction order" has made the demand for the entire paper packaging industry increasing
.
At the same time, as a leading enterprise in the industry, the company has strong strength, and its expansion and development are in line with the company's long-term development goals
.
Nanwang Technology said that the fundraising is mainly used for the construction project
of a smart factory with an annual output of 2.
247 billion green paper products.
The implementation of the project will further meet the market demand
.

Qiu Chenyang, a researcher at the Puhua Industrial Research Institute of the Chinese Research Institute, said that the industry's continuous expansion of production capacity shows that enterprises are very optimistic
about the future expectations of the market.
Whether it is the rapid development of the national economy, the export of products, the future development of e-commerce, or the implementation of the "plastic restriction order" policy, it will provide huge market opportunities
.
Based on this, leading enterprises in the industry increase the scale of investment to increase market share, maintain market competitiveness, and achieve economies
of scale.

In fact, the demand for packaging paper is inseparable
from the change in demand in the downstream consumer industry.
In recent years, food, beverage, household appliances and other industries have performed eye-catchingly, effectively driving the growth
of the paper packaging industry.
Qiu Chenyang said that in recent years, with the gradual transfer of the global packaging industry to developing countries and regions, China's paper packaging industry has become increasingly prominent in the global paper packaging industry, and has become an important paper packaging supplier country in the world, and the export scale continues to expand
.

In the eyes of the industry, paper products have a highly substituting effect on plastics, and it is expected that the demand for paper packaging products will increase
significantly between 2020 and 2025.

Advantageous enterprises continue to expand production scale

Statistics from the China Packaging Federation show that in 2020, the total import and export volume of China's paper packaging industry was 6.
760 billion US dollars, of which the export volume was 6.
613 billion US dollars, a year-on-year increase of 4.
08%.

In 2021, the total import and export volume of China's paper product packaging industry was 8.
840 billion US dollars, of which the export value was 8.
669 billion US dollars, a year-on-year increase of 31.
09%.

Under the background of strong demand, paper packaging companies continue to expand production capacity, and the industry concentration continues to increase
.
Dashengda said that after the pulp molded environmental protection tableware intelligent R&D and production base project reaches production, it will have an annual output
of 30,000 tons of pulp molded environmental protection tableware.
After the completion of the construction project of Guizhou Renhuai Baisheng intelligent paper wine box production base, it can achieve an annual output of 33 million fine wine boxes and 24 million card box products
.
Hop Hing Packaging is also focusing on developing paper-plastic packaging production capacity, and initially plans pulp molding production lines
in Thailand and Minhang factory in Shanghai.

In addition, Nanwang Technology is sprinting for an IPO
.
Nanwang Technology expects that after the implementation of the smart factory construction project, the capacity bottleneck will be effectively solved, and the production capacity will be greatly increased to meet the growing market demand; With the help of new products with high technology content and high added value, the company can effectively develop new profit growth points, expand market share, and maintain a dominant market position
.

At present, a number of pulp molding enterprises are accelerating the layout of pulp molding business
.
For example, Yutong Technology, whose pulp molding production capacity has begun to increase, plans to invest 400 million yuan in Haikou National High-tech Industrial Development Zone to build an environmental protection industry demonstration base, research and development, production and sales of plant fiber molded products and high-end paper packaging, according to statistics, its revenue from pulp molding products in 2021 has reached 691 million yuan
.
Jialian Technology, a listed company that originally focused on plastic tableware, plans to invest about 1 billion yuan to build a "100,000-ton bagasse degradable environmental protection material products project with an annual output of 100,000 tons
" in Guangxi.

Industry insiders said that the industry has a certain scale and strength of high-end corrugated carton enterprises are to further expand the scale of production and marketing, improve market share as one of the main goals, due to China's paper packaging industry manufacturers low entry threshold, and the downstream industry is wider, a large number of small carton factories rely on local demand to survive, the industry in the low-end of the small and medium-sized carton factories are numerous, forming an extremely decentralized industry pattern
。 At present, the domestic paper packaging industry above the scale of more than 2,000 manufacturers, most of the manufacturers in the industry for small and medium-sized enterprises, although after years of development, the industry has appeared a number of large-scale, advanced technology level of production enterprises, but from the overall point of view, paper packaging industry concentration is still low, industry competition fierce, formed a fully competitive market pattern
.

Industry insiders said that in order to cope with the increasingly fierce market competition, advantageous enterprises have continuously expanded their production scale or carried out restructuring and integration, and the industry concentration has been increasing
.

Actively explore new packaging formats

Although the demand for paper packaging industry has increased in recent years, the industry's profits have declined
.
According to the "2021 National Paper and Paperboard Container Industry Operation Overview" released by the China Packaging Federation, in 2021, there were 2,517 enterprises above designated size in China's paper and paperboard container industry, with a cumulative operating income of 319.
203 billion yuan, a year-on-year increase of 13.
56%, and a cumulative total profit of 13.
229 billion yuan, a year-on-year decrease of 5.
33%.

According to the financial report, from 2019 to 2021, the net profit attributable to the parent after the deduction of Dashengda was 82 million yuan, 38 million yuan and 61 million yuan
, respectively.
It is not difficult to see from the data that net profit has declined
.
According to the prospectus of Nanwang Technology, from 2019 to 2021, the gross profit margin of the company's main business has shown a downward trend year by year, while the average gross profit margin of 10 comparable companies in the same industry has also shown a downward trend
.

According to data from the Ministry of Industry and Information Technology, from January to October 2022, the national output of machine-made paper and paperboard was 112.
942 million tons, down 1%
year-on-year.
The operating income of papermaking and paper products enterprises above designated size was 1,239.
7 billion yuan, a year-on-year increase of 1.
1%.

Qiu Chenyang said that in 2017, the General Office of the State Council issued the "Implementation Plan for Banning the Entry of Foreign Garbage and Promoting the Reform of the Solid Waste Import Management System", which made the import quota of waste paper continue to tighten, the raw material waste paper of raw paper was restricted, and its price began to climb
all the way.
The price of base paper continues to rise, which has formed great cost pressure
on downstream enterprises such as packaging plants and printing plants.
From January to February 2021, the price of industrial base paper rose rapidly, and special paper generally rose by 1,000 yuan / ton, and individual paper grades even jumped by 3,000 yuan / ton
at one time.

Qiu Chenyang believes that the paper product packaging industry chain generally presents the characteristics of
"upstream concentration and downstream dispersion" in the industry.
The upstream papermaking industry concentration is relatively high, nine dragons paper, Chenming paper and other large enterprises occupy a large number of market share, its bargaining power is strong, easy to waste paper, coal and other raw materials price risk to downstream packaging enterprises, and downstream industry coverage is wide, almost all consumer goods manufacturing industry need packaging enterprises as a supply chain supporting link, in the traditional business model paper packaging industry almost does not exist dependence on a specific downstream industry, so, Packaging enterprises in the middle have poor
bargaining power in the entire industrial chain.

Industry experts said that in the future, China's paper product packaging industry will grow steadily, and enterprises in the industry face the current decline in total profits, on the one hand, need to better control the cost of raw material procurement, pay attention to the changes in raw material prices and the reasons for their changes, strengthen the prediction of the future market, and lay out in advance to better reduce costs and increase efficiency; On the other hand, enterprises also need to enhance their competitiveness, comply with the trend of market consumption upgrading, continue to improve product quality and service capabilities, develop high-value products, or develop professional packaging services, or extend the industrial chain to explore new packaging formats
.

(Yuan Guofeng, comprehensive arrangement)

China Food News(Version 07, January 11, 2023)

(Responsible editor: Yuan Guofeng)