Paper Companies Face Profit Declines Amid Weak Demand
On October 29, Sun Paper (002078.SZ) released its 2025 third-quarter report, showing year-on-year declines in revenue and net profit excluding non-recurring items, while net profit reported a slight overall increase. Among the paper companies that have released their third-quarter reports, many have seen falling earnings.
Notably, Annil Paper (002235.SZ), Minfeng Special Paper (600235.SH), and Forest Packaging (605500.SH) each recorded profit drops of more than 50%.
Several companies attributed the decline in performance to falling selling prices. Although domestic paper producers have issued multiple price-increase notices this year, the intended effects have not materialized in their financial results. A Sun Paper representative told that the main reason is weak demand — price adjustments often fail to take effect in the market. “For example, the price of offset paper has been declining throughout the first three quarters, and the current price level remains quite low,” the employee said.
Regarding the outlook for paper prices, an analyst from Sublime Information told on October 28 that as the industry enters its traditional peak season, the prices of whiteboard paper and corrugated paper are expected to rebound in the fourth quarter. However, the average price of offset paper is projected to continue falling quarter-on-quarter, while coated paper may first decline before recovering later in the season.
Paper Prices Continue to Fall
The paper-making industry is a fundamental sector of China’s raw materials industry, closely tied to national economic and social development. Generally, the industry can be categorized by use into four main segments: cultural paper (such as offset and coated paper), packaging paper (such as whiteboard, kraft linerboard, and corrugated paper), specialty paper (such as cigarette paper), and household paper.
During the first three quarters of this year, prices for major paper types—including whiteboard paper, offset paper, coated paper, and corrugated paper—continued to decline due to multiple factors such as supply-demand imbalance and high production costs. Although paper companies have issued several price-increase notices throughout the year, the results have been modest.
Falling paper prices have also eroded profits for listed companies. Data show that most paper manufacturers that have released their third-quarter reports have seen declines in net profit.
In the first three quarters, Yueyang Forest & Paper Co., Ltd. recorded operating revenue of 6.568 billion yuan, down 5.07% year-on-year, and net profit of 162 million yuan, a drop of 31.49%. In the third quarter alone, net profit plummeted by 78.48% year-on-year to 177 million yuan.
As an industry leader, Sun Paper achieved operating revenue of 28.936 billion yuan during the reporting period, down 6.58% year-on-year. Its net profit reached 2.5 billion yuan, up 1.66%, while net profit excluding non-recurring items dropped 4.64% to 2.471 billion yuan.
When asked about the reason for the revenue decline, a Sun Paper representative told reporters that the main factor was weak demand. Public information shows that Sun Paper is primarily engaged in the production and sale of machine-made paper, paper products, wood pulp, and paperboard.
Even specialty paper—considered a high-tech product within the paper industry—saw declining performance among listed companies. In the first three quarters, Wuzhou Special Paper Co., Ltd. achieved operating revenue of 6.457 billion yuan, up 18.13% year-on-year, but net profit fell 44.66% to 181 million yuan. Minfeng Special Paper recorded operating revenue of 889 million yuan, down 23.61%, and net profit of 18.64 million yuan, a steep decline of 69.43%.
Wuzhou Special Paper explained that its performance downturn was mainly due to intensive capacity releases across the industry, while demand growth remained slow. As a result, intensified price competition led to a significant year-on-year drop in profits.
Different Companies, Different Challenges
Apart from the overall decline in paper prices, the reasons behind each company’s performance slump vary.
Yueyang Forest & Paper Co., Ltd. stated that its profit decline in the third quarter was mainly due to three factors.
First, intensified market competition led to lower selling prices for paper products compared with the same period last year.
Second, during the same period last year, the company’s technological renovation projects were converted into fixed assets. As loans related to these projects no longer qualified for capitalization, interest expenses increased significantly.
Third, its landscaping subsidiary was affected by a downturn in the sector, resulting in declines in both revenue and costs.
Minfeng Special Paper Co., Ltd. attributed its performance decline in the first three quarters primarily to production line adjustments.
According to its financial report, the company’s PM20 and PM22 paper machines were shut down at the end of May and August 2024, respectively. Because the two machines remained idle from the beginning of the year until the end of the reporting period, overall production and sales volumes dropped year-on-year, leading to lower operating revenue and profit.
In addition, similar to Yueyang Forest & Paper, Minfeng Special Paper’s Phase I and Phase II projects were converted into fixed assets. The corresponding loan interest could no longer be capitalized and was instead expensed, resulting in higher financial costs and operating expenses, and consequently, lower operating profits.
Sun Paper and Wuzhou Special Paper faced financial pressures stemming from capacity expansion.
In April this year, Wuzhou Special Paper’s Hubei base fully launched its industrial packaging paper production line, adding 550,000 tons of annual containerboard and corrugated paper capacity. In September, two specialty paper lines at the same base also began production, adding 300,000 tons of glassine paper capacity and 70,000 tons of decorative base paper capacity. While this capacity expansion boosted revenue, it also drove interest expenses up 84.46% year-on-year to 152 million yuan.
Sun Paper’s countercyclical expansion reduced its monetary funds by 30.13% to 2.107 billion yuan, while its short-term borrowings reached 7.711 billion yuan and non-current liabilities due within one year stood at 2.504 billion yuan, creating short-term debt pressure. The company also had 9.787 billion yuan in long-term liabilities. This high debt level resulted in substantial interest expenses, totaling 361 million yuan during the reporting period.
Signs of Recovery Ahead
Reporters have noted that several paper companies are still expanding production capacity in the fourth quarter.
For instance, Sun Paper is advancing multiple projects at its Guangxi base. In the Nanning Industrial Park’s Phase I project, the high-grade packaging paper production line (PM12) entered the commissioning stage in October 2025. In the household paper segment, four new production lines (PM16–PM19) are under construction at the same site, with PM16 and PM17 scheduled to begin commissioning in October 2025, and PM18 and PM19 expected to follow in November 2025.
When asked whether continuous capacity expansion across the industry might lead to further price declines, a Sun Paper representative told reporters that the key lies in maintaining the company’s own operational strength and profitability. The company focuses on product differentiation, tailoring products to meet diverse customer needs to ensure its core competitiveness.
It is worth noting that although capacity continues to expand, the fourth quarter marks the traditional peak season for the paper industry. In the short term, as demand rises, certain paper grades are expected to experience a rebound in prices.
According to Sublime Information, the fourth quarter coincides with the traditional consumption peak season. As e-commerce and holiday orders for New Year’s Day and Spring Festival gradually increase, downstream players are actively replenishing inventories. Overall, paper mills maintain a strong intention to raise prices, with many already issuing price hike notices at the end of October. Sublime Information forecasts that the whiteboard paper market may trend upward in Q4, although weakening costs in December could introduce a risk of mild correction.
Similarly, prices for corrugated paper, another major category of packaging paper, are also expected to rise. Li Li, Senior Analyst for Corrugated and Containerboard Paper, told reporters that the fourth quarter will bring strong seasonal demand, with both supply and demand expected to grow. Supported by upstream costs, the market outlook for corrugated paper remains bullish overall, though a potential downturn in December may occur as production costs ease.
In the cultural paper segment, offset paper—primarily used for educational materials—is also under observation. According to Sublime Information analyst, paper manufacturers are currently facing significant profitability pressure, which may prompt them to announce price hikes. Overall, offset paper prices are expected to recover slightly, though the average quarterly price may still decline marginally due to a relatively low base price.
Regarding coated paper, analyst noted that both supply and demand are expected to increase in the fourth quarter. The anticipated demand recovery could help stabilize and support prices, potentially leading to a rebound after earlier declines. However, ample supply and a downward trend in production costs may limit the extent of price growth, resulting in a “fall first, rise later” pattern for the coated paper market in Q4.
