As July begins, China's paper industry has entered a new round of widespread price increases. Sun Paper announced that effective July 1, prices for all cultural paper products will increase by RMB 200/tonne. Folding boxboard, corrugated paper and other packaging grades have also announced price increases.
Despite the bullish market sentiment, paper producers continue to face weak profitability and the prospect of significant new capacity coming online in the second half of the year. Whether these cost-driven price increases can truly improve industry profitability remains uncertain.
Sun Paper attributed the increase to market prices having fallen below product value, while higher chemical, energy and logistics costs and production line conversions have significantly increased operating pressure and reduced effective supply. Nine Dragons Paper, Bohui Paper and Chenming Paper have likewise announced RMB 200/tonne increases on various cultural paper products beginning July 1.
Prices have also strengthened in packaging papers. Average prices for 250–400 g/m² folding boxboard reached RMB 4,038/tonne in June, up 1.13% from the beginning of the month despite the traditional off-season. Corrugated paper prices also rose, with average AA-grade 120 g corrugated medium reaching RMB 2,820/tonne during the first half of the year, up 5.15% year on year. Securities analysts attribute the gains to coordinated production shutdowns and maintenance programs that tightened supply and improved market balance.
Industry participants note that paper mills have shown unprecedented determination to defend prices. Traders have been forced to follow higher prices because of rising costs, while downstream packaging and printing companies have gradually shifted toward purchasing in anticipation of further increases, providing short-term demand support.
Nevertheless, the current round of price increases represents a defensive response to persistent cost pressure rather than a demand-led recovery. Although prices have improved modestly, folding boxboard remains near its lowest level in five years and many producers continue to operate at a loss. Gross margins remain below last year despite a slight easing in pulp costs. Corrugated paper profitability is also weak, with theoretical gross margins averaging only 8.33% in the first half of 2026.
The paper industry remains highly sensitive to the prices of pulp, recovered paper, coal, chemicals and freight. Although some raw material costs have softened, overall operating costs remain elevated while finished paper prices have stayed relatively low, leaving many producers in a situation where higher production does not translate into higher profits.
Paper mills have maintained exceptionally low inventories, giving them greater pricing power. Sample inventories of corrugated paper stood at only 237,200 tonnes as of June 18, down 46.1% year on year. Analysts believe low inventories both support price increases and reflect cautious expectations for demand, with producers relying on supply discipline rather than genuine market recovery.
Looking ahead, market performance is expected to diverge by grade. Cultural paper and folding boxboard may remain relatively stable, supported by seasonal demand and exports, although upside appears limited. Corrugated paper faces greater downside risk because of high costs, elevated inventories in the supply chain and substantial new capacity scheduled to enter the market.
Demand for cultural paper is expected to improve during the second half of the year as textbook and publication printing increases. Folding boxboard exports have also remained strong, with exports reaching 2.126 million tonnes during January–May 2026, up 7.26% year on year, while May exports increased 23.12%. However, weak domestic demand and potentially lower pulp prices are likely to limit further price gains.
In summary, the key challenge for China’s paper industry in the second half of 2026 has shifted from simple cost support to a broader contest among high production costs, supply-demand dynamics and expanding production capacity. During the traditional peak season in the fourth quarter, demand from Mid-Autumn Festival and National Day consumption, e-commerce promotions and Christmas export orders may create another window for price increases. Even so, periodic corrections remain likely and could limit the extent of any sustained market recovery.
