[ET Net News Agency, 16 December 2019] Credit Suisse expects waste paper import to
decline 30%/37% to 11.9mt/7.5mt in 2019/20 (17mt in 2018). It estimated China to run a
2.5mt recycled fibre shortage in 2020, which should drag down the utilisation rate and
lead to total supply dropping 2% to 44.9mt, against a 2.6% increase in demand.
With rising demand from e-commerce (+20% YoY for parcel delivery), reviving sales of
household appliances and auto & auto parts, the research house forecast total packaging
paper demand to grow at 2.6% to 45.4mt in 2020 (down by 7.1%/3% in 2018/19).
It expects top players to enjoy higher cost advantage, industry consolidation to
accelerate. The widening price gap between domestic and overseas to remain intact in 2020
(current +Rmb1,000/t). Smaller players, without waste paper import quota, are negatively
impacted by higher costs. This would trigger accelerating industry consolidation in
China.
Credit Suisse maintained its "outperform" calls on both Nine Dragons Paper (NDP)(02689)
and Lee & Man Paper Manufacturing (LMP)(02314). It raised its target prices for NDP and
LMP to HK$11.5 and HK$8 (from HK$9 and HK$6 respectively) to reflect its bullish view.
(KL)