Uncoated and Coated Paper Price Spread Expands
Intro: The market price gap between coated paper and uncoated woodfree paper has widened significantly over the past two years. In 2025, the gap once reached RMB 600/mt, mainly due to accelerating capacity expansion in the uncoated woodfree paper sector, while demand support remained limited, leading to a broader price decline compared to coated paper. Considering the bottom support from cost, the downside potential for the uncoated woodfree paper market is now limited, but coated paper prices are still anticipated to fall further, likely narrowing the gap between the two grades.
Coated Paper and Uncoated Woodfree Paper Prices Both Decline, but the Gap Widens
The market price gap between coated paper and uncoated woodfree paper has widened over the past two years. Taking the examples of Huaxia Sun 157g coated paper and 70g uncoated woodfree paper in the Beijing market, their price gap has remained at RMB 450/mt since July, widening by RMB 300/mt from the beginning of the year. The market trends for coated paper and uncoated woodfree paper are largely consistent. Since 2024, paper prices have experienced volatile declines, primarily due to weak demand, severe overcapacity, and bearish cost factors. Although in Q1 2025, market prices showed signs of recovery following the price hikes attempts by paper mills after the unexpected downtimes at a major integrated peer, the market supply-demand imbalance hardly improved. As a result, the paper prices both declined. In the meantime, due to constant capacity expansion in the uncoated sector, its price drop was more apparent compared to coated paper.
Uncoated Woodfree Paper Capacity Expansion Continues, Industry Supply Pressure Significant
Domestic uncoated woodfree paper capacity expansion has accelerated since 2020. In 2025, a total of 2,250kt/a of new capacity is expected, up 13.62% YoY. In H1 of the year, 750kt/a of new capacity has been launched in Central China and North China, and the anticipated capacity addition will mainly concentrate in South China. Due to advantages including raw material supply and lower costs, large-sized paper mills have been shifting their investment focus towards southern China. However, the average consumption volume of uncoated woodfree paper in the past 5 years was about 8,630kt, and the industry faced severe pressure from overcapacity.
In H1 of 2025, the uncoated woodfree paper consumption was 3,793.4kt, down 19.89% YoY, and the demand growth failed to keep up with capacity expansion. As of late June, the industry’s inventory was around 18.6days, up 22.05% YoY. With an intensified supply-demand imbalance, the uncoated woodfree paper price dropped constantly.
Coated Paper Industry Highly Concentrated, Capacity Relatively Stable
The coated paper capacity in China has remained at 6,920kt/a since 2020. In 2025, there is no planned coated paper capacity. Impacted by digital media and external socio-environmental changes, coated paper demand has shrunk relatively noticeably. In the past 5 years, the annual average consumption volume was around 3,420kt. Although the coated paper industry also faces overcapacity, paper mills have adopted a cautious investment approach in recent years, keeping capacity largely stable.
Currently, most coated paper mills are in Shandong and Jiangsu, and the industry’s CR4 is at 88%. Due to a high industry concentration ratio, paper mills have comparatively stronger pricing power. Thus, although coated paper price fluctuated following uncoated woodfree paper, its price drop was relatively limited.
Cost Support Limits Downside for Uncoated Woodfree Paper, and the Price Gap May Narrow
The current uncoated woodfree paper market price is at its lowest compared to 10-year historical levels. Although new capacity will still come online in H2 of the year, exerting significant supply pressure, current price support comes from the fulfillment of publishing orders, which helps paper mills to reduce inventory. Additionally, current market prices have fallen close to paper mills’ cost lines. SCI estimates the industry's average gross profit margin for uncoated woodfree paper has dropped to around 2%, weakening paper mills' willingness to further reduce prices.
The coated paper industry currently has no plans for new capacity additions, and production at major paper mills is relatively stable. However, demand-side performance is bearish. On one hand, textbooks and supplementary materials use relatively little coated paper. On the other hand, demand for commercial printing orders like advertisements and flyers is in its off-season. Industry inventory pressure sees limited relief, suggesting further decline potential for coated paper, although high industry concentration could limit the decline.
Overall, before the new round of publishing tenders in October, demand for cultural printing paper is generally weak. It is estimated that coated paper prices may fall by around RMB 200/mt, while uncoated woodfree paper may fall by around RMB 100/mt. Consequently, the price gap between coated paper and uncoated woodfree paper is expected to narrow. The gap is projected to narrow to RMB 300-400/mt during July-August, though this would still be higher than the average level of RMB 230/mt seen over the past year and a half.
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