“Starting August 1, corrugated paper prices and recycled kraft paper prices will be raised by 30 yuan/ton,” “All weights of recycled paper, corrugated paper, and paper tube board will be uniformly raised by 50 yuan/ton.”
Since early July, such price increase notices have been flooding the packaging paper market. Nine Dragons Paper has announced six price hikes for corrugated paper, recycled kraft paper, and other paper products within just one month. Leading companies like Shanying International, Lee & Man Paper, and Hubei Rongcheng have followed suit, announcing that new prices will take effect starting in August.
“Abnormal heavy rainfall in July has severely hindered waste paper collection,” said Chen Zhu, Executive Vice President of the Guangdong Paper Industry Association. “The recent rise in paper prices is mainly driven by cost factors. Waste paper raw materials account for 70%–80% of production costs. In Guangdong, prolonged rainfall and abnormal weather have disrupted both waste paper collection and logistics, further tightening supply and putting significant pressure on costs.”
According to data from Sublime China Information (SCI), in late July the average price of old corrugated cardboard (OCC) reached 1,482 yuan/ton, up 2.75% year-on-year. However, looking further ahead, the current wave of price hikes is rooted in the paper industry's struggle with “low-price internal competition.” “With the industry facing losses or only marginal profits, and with no room for further price cuts, the rebound in paper prices is a self-correcting market phenomenon after supply and demand hit bottom,” said Li Li, a corrugated paper analyst at SCI. In her view, this round of price increases serves two purposes: first, to restore paper mills' profit margins; second, to use the price signal to prompt downstream players to replenish stock at a critical moment, thereby easing the high inventory pressure faced by paper mills.
In addition to coordinated price hikes, the paper industry is also voicing a call to “end the vicious competition.” Recently, the Guangdong Paper Industry Association issued the first-ever “anti-involution” initiative in China's paper industry, explicitly urging the sector to “firmly resist disorderly low-price competition and safeguard fair market order.” Could this become an opportunity to break the industry's deadlock? And how will the paper industry's “anti-involution” self-rescue efforts unfold?
Is Price Hike Effective?
Fluctuations in raw material prices are seen as the direct driver of the current round of paper industry price increases.
“Cost issues are both the trigger and the main factor. After costs increased, the overall profitability of the paper industry has actually reached the second-lowest point in history,” according to Li Li, a corrugated paper analyst at Sublime China Information (SCI). Price increases have emerged because the industry's profit pressure has been mounting. Some companies with weaker cost control are already operating at a loss, so the willingness to raise prices is relatively high.”
She further explained that from a driving perspective, paper prices had been falling for some time. Packaging companies, in order to mitigate risks, had been keeping raw material inventories low, which has now left stocks at historically low levels. However, August is a key turning point from the paper industry's off-season to its peak season, so paper mills have chosen to proactively raise prices. The main purposes are twofold: first, to stimulate downstream companies' willingness to restock—by raising prices, mills encourage packaging plants with low inventories to anticipate further increases and thus restock actively; second, to transfer inventory pressure—downstream replenishment shifts stock from paper mills to packaging plants, helping mills reduce their own high inventory levels.
The deeper reason, however, lies in fierce price competition and an oversupplied market. According to Shanghai Securities News, in 2024 domestic paper industry capacity will increase by more than 10 million tons, while paper product consumption growth is only 1.5%. This supply-demand imbalance has driven the operating rate down to below 70% at times.
According to Chen Zhu, the core contradiction of oversupply comes from three aspects:
- Weak downstream demand, with both domestic and export orders for packaging paper shrinking.
- Continuous expansion of national production capacity, with new projects outpacing demand growth.
- Intensifying cross-regional competition.
Wang Xiaoya, General Manager of Dongguan Chengyi Paper Products Co., Ltd., added that tariffs—especially on packaging products—have significantly affected exports. “The U.S. remains the world's largest consumer market. Now, nearly 70% of packaging logistics suppliers' customers have shifted to Southeast Asia,” she said. Wang also noted that some markets require certificates of origin for products, further affecting paper industry exports.
According to the 2024 Annual Report on China's Paper Industry released by the China Paper Association, the industry's total revenue in 2024 was 1.46 trillion yuan, with profits of only 52 billion yuan and a profit margin of 3%–5%. Among the 2,572 companies surveyed, total profits fell 2.71% year-on-year, and the loss ratio reached 26.21%.
However, Wang is not optimistic about the prospects for price increases. She pointed out: “Price hikes are difficult in the absence of market demand to drive them—unless paper companies cut production to maintain prices.”
Industry Voices Call to “End Involution”
Facing difficulties, the industry is loudly calling for an end to destructive competition.
On July 28, the Guangdong Paper Industry Association issued the first-ever “anti-involution” initiative in China's paper industry, putting forward four key proposals:
- Resist disorderly low-price competition and ban below-cost dumping.
- Optimize capacity structure and avoid blindly expanding homogeneous capacity.
- Shift competition focus toward “quality, service, and innovation.”
- Build an industry self-discipline mechanism to maintain healthy upstream-downstream relationships.
Chen Zhu commented: “The initiative aims to curb vicious low-price competition and encourage companies to return to rational operations. Beyond opposing low-price competition, the association will promote technological upgrades to align with the national ‘Two New’ policy to eliminate inefficient equipment; drive product and service innovation to develop high-value, differentiated products; and optimize supply chain management to enhance resilience. The key is for companies to improve their own competitiveness—companies are the active players here.”
“Stop involution—returning to product quality is the right path,” Wang also urged in an interview. She believes this initiative echoes the July 30, 2023 meeting of the CPC Central Committee Politburo, which called for strengthening industry self-discipline to prevent “involution-style” vicious competition, and aligns with the supply-side structural reforms of 2015.
In 2015, the central government launched supply-side structural reforms. The paper industry seized the opportunity, and the reforms showed results. According to Ministry of Industry and Information Technology announcements, in 2015 alone, 60 outdated and surplus-capacity enterprises were eliminated, optimizing the competitive landscape and shifting market share toward leading companies, leading the industry toward healthier development. The 2019 Annual Report on China's Paper Industry showed that in 2019, national paper and paperboard output reached 107.65 million tons, up 3.16% year-on-year, while consumption was 107.04 million tons, up 2.54%—transitioning from overcapacity to basic balance.
“Reform in 2015 was mainly administrative, but promoting ‘anti-involution’ now faces three challenges,” Chen admitted. First, insufficient demand is the main contradiction; second, capacity expansion lacks national-level coordination, with uneven commissioning schedules across provinces and imbalances in cross-regional competition; third, homogenization of equipment, products, and services means a lack of competitiveness.
Li Li also analyzed: “Overcapacity has now spread throughout the entire industry chain. In the future, new constraints may be established through green indicators such as environmental protection, energy consumption, and carbon emissions.” She emphasized that in a competitive environment of widespread overcapacity, the core lies in forging differentiated market advantages.
In fact, leading companies have already taken action, aiming for deeper strategic transformation. Sun Paper has established three major bases in Shandong, Guangxi, and Laos, building an integrated forestry-pulp-paper model, with each base having different focuses. Xianhe Co., Ltd. has invested heavily in raw material supply, with large-scale projects in Hubei and Guangxi, and recently announced a 11 billion yuan investment in Sichuan to build facilities with an annual capacity of 800,000 tons of bamboo pulp and 1.2 million tons of high-performance paper-based new materials—strengthening its fully integrated forestry-pulp-paper-use industrial chain.
However, regarding specific paths for “anti-involution,” the paper industry still lacks a clear policy framework. “The last round of supply-side reforms already eliminated many outdated narrow-width production lines. This leaves limited room for simply defining outdated capacity by equipment age,” Li Li said frankly. “The specific policy tools and their implementation scope are still highly uncertain and await further clarification.”
Economists have suggested:
- Shift competition from price-based to service-, quality-, and innovation-based.
- Ensure the health of supply chain relationships, advocate fair trade, shorten payment periods reasonably, eliminate malicious arrears, and oppose price suppression to protect the interests of all links in the industry chain.
- Carefully evaluate market capacity to avoid blind, homogeneous, low-price competition, and maintain industry self-discipline to prevent below-cost market grabbing.
