Most popular paper industry appreciation short-ter

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Paper industry: appreciation is good in the short term and short in the long term.

on September 16, the exchange rate of the RMB against the US dollar closed at 7.94 yuan. Since the central bank officially announced the increase of the exchange rate on July 21, 2005, it has appreciated by 3.76% in total. In addition, the market expectation that the RMB will continue to appreciate is also extremely strong

we believe that the background of RMB appreciation has a certain positive impact on the paper industry in the short term, but the long-term impact is limited, and may even be negative. The main reasons are as follows:

appreciation is conducive to reducing costs

the main positive impact of RMB appreciation on the industry is to reduce the production costs of papermaking enterprises in the industry. When customers buy precision instruments in China, they subconsciously think that the instruments of a major brand are of good quality and should be bought. At present, most of the raw materials required by the paper industry depend on imports. Since 2000, with the further acceleration of China's pulp structure adjustment, the proportion of waste pulp and wood pulp has been increasing, of which the imported waste pulp and imported wood pulp have the fastest growth, and the compound growth rate of import volume is 36.89% and 22.47% respectively

in 2005, the import volume of commercial pulp and waste paper in China reached 7.59 million tons and 17 million tons respectively, ranking first in the world for many consecutive years. Based on the average price of pulp of $500/ton and the average price of waste paper of $135/ton, the total price of imported waste paper and pulp is about $3.795 billion and $2.2 billion respectively The focus should be on functional electrolyte. If the RMB appreciates by 5%, domestic paper enterprises will save us $190million and US $115million respectively, with a total of about 2.422 billion yuan, while the profit of the whole paper industry in 2005 was 12.32 billion yuan. If only the cost saving factor of RMB appreciation is considered, the 5% appreciation will increase the profit of the paper industry by about 20%

among the leading domestic papermaking enterprises, the enterprises that rely on imports of raw materials such as G Chenming and G Huatai, which mainly make the wind in the operation room unable to circulate fully, will be the main beneficiaries. In 2005, the cost of imported pulp of G Chenming, G Huatai and G Bohui was 2.1 billion yuan, 900million yuan and 500million yuan respectively. When the RMB appreciated by about 5%, the three companies saved 100million yuan, 45million yuan and 25million yuan respectively

appreciation also has negative effects

in fact, the impact of RMB appreciation on the whole industry is not just cost saving. First of all, the cost savings brought about by the appreciation may not be fully translated into the profits of enterprises due to overcapacity. The production of a large number of new projects has reduced the paper price from 5300 yuan in mid-2005 to 4700 yuan at present. The decline of costs caused by excessive competition may lead to further decline in prices

in addition, the reduction of the cost of imported pulp will also threaten the profit prospects of many forest paper integration projects launched in China at present, resulting in the reduction of enterprises' demand for domestic pulp and affecting the localization process of China's pulp industry. In particular, the share prices of companies such as G Chenming, G Yuezhi, G Meili, etc., whose growth prospects are the integration of forestry and paper, may be affected to some extent

finally, with the rapid development of China's paper industry, the situation of overcapacity can be further deteriorated according to the statistics of new materials, resulting in the industry's deepening dependence on the international market, and the negative impact of appreciation on exports may be gradually reflected. Over the past four years, China's paper and paperboard exports have increased significantly, from 740000 tons in 2002 to 1.67 million tons in 2005, with an average annual growth rate of 31.2%. In 2006, China exported 737000 tons of paper and paperboard, worth 570million US dollars, an increase of 62.5% and 55.4% respectively over the same period last year. In contrast, the growth of imports has gradually declined. In 2005, China's imported pulp increased by only 3.69% year-on-year, the lowest growth rate over the years. With the continuous production of China's forestry paper integration project, the self-sufficiency rate of pulp will gradually increase. The import of paper and paperboard products was 5.24 million tons in 2005, a year-on-year decrease of 14.66%

on the whole, we believe that in the short term, the impact of RMB appreciation on the industry is undoubtedly positive, and the decline in the cost of imported raw materials will help to improve the overall profitability of the industry. However, we expect that in the next five years, China may become a net importer of the paper industry, and the impact of RMB appreciation on the industry will tend to be neutral to negative

source: Securities Times

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