Dye Sublimation Transfer Paper Industry Highlights

1. The compound annual growth rate of consumption is 7%

The household paper industry is an anti-cyclical investment choice. In the economic downturn, this industry is more defensive. The reason is not difficult to understand. When the economic climate deteriorates, companies and even individuals will reduce investment and consumption, but household paper is a necessities of life, and the demand is relatively stable, so it is less impacted by the deterioration of the economic environment in Dawei.

More importantly, the ecology of the household paper industry in the Mainland is different from that in developed regions. There is still a lot of room for development in the Mainland, and demand can remain stable and grow rapidly. In 2011, the domestic consumption of household paper reached 5.25 million tons, an increase of 12.7%; sales of 66.2 billion yuan, an increase of 21.9%, is the world's third largest household paper consumption area, second only to the United States and Western Europe. However, on a per capita basis, the current per capita household paper consumption in the Mainland is only 3.5 kg, while the per capita paper consumption in Europe and the United States can reach 15 to 25 kg. Guojin Securities estimates that by 2020, household paper consumption will reach 9 million tons, a compound annual growth rate of 7%. It can be seen from Figure 1 that in the past few decades, the proportion of household paper used in emerging markets (including China) has continued to expand.

2. There are few product types and there is still plenty of room for development

To analyze the household paper market, we must first understand the characteristics of the industry. The so-called household paper actually includes various products such as toilet paper, soft draw paper, handkerchief paper, box tissue paper, kitchen paper, and toilet paper. However, toilet paper accounted for 66.5% of the Chinese market, and non-roll paper only accounted for the remaining 33.5%.

Toilet paper is the most basic type of household paper, especially in the backward cities and towns. Toilet paper has just entered the market and is experiencing a rapid growth stage. Only first- and second-tier cities have more levels of products. Product upgrade stage. This reflects that the paper products in the mainland market are still not fully mature and the products are still very unitary. Manufacturers have room to improve the quality of their products in order to exclude other competitors.

3. Wood pulp price reduction, paper industry cost reduction

The main cost of household paper manufacturers comes from wood pulp. Take Zhongshun Jierou, one of the four major mainland brands, as an example, wood pulp accounts for nearly 60% of the total cost. Therefore, the ups and downs of wood pulp prices have a key effect on the cost and even the gross profit of the company.

Since the end of 2011, the price of wood pulp has continued to fall. Generally speaking, manufacturers will hoard raw materials when wood pulp raw materials are low in price, and then the gross profit margin will be improved in the next one to two quarters. In fact, since May, the prices of various types of wood pulp have been declining. At present, the prices of black needles, cloth needles and silver stars have fallen below the lows at the beginning of the year. Merchants will continue to benefit from low-priced raw materials.

Wood pulp prices will continue to be low due to the global economic downturn and the market’s reduced demand for raw materials; in addition, the global wood pulp production capacity will enter the release period in the second half of this year. The increase in production capacity reached 13.2 million tons, which may cause oversupply. These are long-term positive factors for paper manufacturers.