Volume recovery is only the starting point. The quality of the recovery depends on whether improved profitability can withstand pressures from costs, capacity and inventories and ultimately translate into cash flow.
BIOTEN Observer · Global Paper Industry / GLOBAL PAPER REVIEW
The global paper industry is not recovering along a single curve. Drawing on evidence from China, Europe, North America and representative pulp-and-paper companies, this article examines why orders, prices, costs, capacity, inventories and cash flow have diverged—and provides a decision framework for China’s paper value chain.
Research Question / RESEARCH QUESTION
When output, shipments, price indexes, corporate profits and cash flow point in different directions, what common framework should China’s pulp, paper, packaging, materials, equipment and export businesses use to assess demand, profitability and risk?
Four Signals / FOUR SIGNALS
01 China Machine-made paper and paperboard output +6.0%, total profit of enterprises above designated size +27.5%, while the industry PPI remained −1.6%.
02 European Union / EU27 Q2 NACE C17 output, year over year +1.1%, while the domestic-market PPI in June remained −0.6%.
03 United States Q2 containerboard operating rate approached 95%, while H1 production was still −5%; nominal shipments of paperboard containers +4.4%.
04 Brazilian pulp-and-paper sample Suzano’s average net export price for pulp +8%, pulp sales −11%, H1 cash inflows from operating activities −17.0%.
Sources: National Bureau of Statistics product-output database; profits of industrial enterprises above designated size; producer prices; Eurostat output data; Eurostat PPI; AF&PA; U.S. Census Bureau M3; and Suzano. The four data sets cover different subjects and scopes and should not be compared directly in absolute terms.
These data do not contradict one another. Orders, prices, costs, capacity, inventories and cash flow are simply at different points in the transmission chain.
Scope of Analysis / SCOPE
China uses product-output data, financial data for enterprises above designated size and price indexes; the EU27 uses NACE C17 industry indexes; U.S. data include nominal shipment values and industry-association samples by paper grade; and some Japanese company data cover the first fiscal quarter from April to June 2026. This article does not construct a unified global total or average profit from non-comparable data.
01 · China / CHINA
Profit grew 27.5%. Why is it still too early to say pricing power has returned?
According to National Bureau of Statistics product-output data, cumulative output of machine-made paper and paperboard, excluding processing of purchased base paper, reached 83.132 million tonnes in January–June 2026, up 6.0% year over year. Over the same period, paper and paper-products enterprises above designated size recorded operating revenue of RMB 689.79 billion, operating costs of RMB 607.73 billion and total profit of RMB 19.61 billion, up 5.5%, 5.2% and 27.5%, respectively.
83.132 million tonnes Output / +6.0%
RMB 19.61 billion Total profit / +27.5%
Approximately 2.84% Total profit / operating revenue for the period
The positive signal is clear: among enterprises above designated size, profits are recovering faster than revenue is expanding. However, a simple calculation using the published totals puts total profit at approximately 2.84% of operating revenue. This is neither a company gross margin nor a net margin and cannot be used to reconstruct the prior-year figure on a comparable basis. It shows only that the 27.5% profit growth rate must be read alongside an absolute ratio of less than 3% for the period.
Prices have not strengthened in step. The PPI for the paper and paper-products industry fell 1.6% year over year in the first half; in June alone, it was down 0.1% year over year but up 0.3% month over month. Purchase prices for wood and pulp declined 2.2% year over year in the first half. The combined picture is closer to “higher volume, recovering profit and weak prices”: better profitability is not yet evidence that the industry as a whole has regained pricing power.
Implications for China’s value chain
Paper mills need to connect realized selling prices, cash cost per tonne, days of inventory and operating cash flow. Packaging converters and material suppliers need to verify whether lower input costs actually flow through order pricing and receivables turnover.
Sources: National Bureau of Statistics product-output database; profits of industrial enterprises above designated size; and producer prices. Product-output data, financial data for enterprises above designated size and the PPI are based on different statistical scopes and therefore cannot be combined to estimate profit per tonne.
02 · European Union / EU27
Output has turned first; prices and cash flow are still catching up
Terminology: EU27 means the 27 Member States of the European Union, not Europe as a whole; NACE C17 covers the manufacture of paper and paper products.
Eurostat data show that EU27 NACE C17 output fell 1.6% year over year in the first quarter of 2026, then increased 1.1% in the second quarter. The year-over-year decline in the domestic-market producer price index narrowed from 2.0% in January to 0.6% in June. This looks more like rebalancing from a low base: output turned positive first and price pressure eased, but the data do not establish that price increases have succeeded for any particular paper grade.
Q1 −1.6% → Q2 +1.1% C17 output, year over year
−2.0% → −0.6% PPI, year over year / January → June
Corporate reports show that regional output and corporate performance remain far apart. Revenue from UPM’s continuing operations was lower year over year; comparable EBIT increased 17%, but operating cash flow fell from EUR 468 million to EUR 225 million, and that cash-flow measure included both continuing and discontinued operations. Stora Enso’s adjusted EBIT improved, while IFRS operating profit and operating cash flow were lower year over year.
Mondi’s underlying EBITDA declined from EUR 564 million to EUR 379 million. The company attributed the pressure to higher input costs and lower average selling prices, only partly offset by higher sales volumes and price increases. The three companies do not represent the EU27 average, but together they offer a clear warning for China’s export value chain: improvement in Europe’s output index does not mean that downstream customers have broadly accepted price increases, nor that customers’ ability to pay cash has recovered in parallel.
2025 context: paper and paperboard production in Cepi member countries was 77.365 million tonnes, down 1.6% year over year, with an operating rate of 80.7%. This is based on the Cepi-member-country scope, not first-half 2026 data for the EU27.
Sources: Eurostat output index; Eurostat domestic-market PPI; UPM; Stora Enso; Mondi; and Cepi 2025.
03 · North America / NORTH AMERICA
Packaging is not a single market, and operating rates are not a proxy for demand
U.S. Census Bureau M3 data show that nominal shipment value increased 1.6% for paper product manufacturing and 4.4% for paperboard containers in January–June 2026, while the value for pulp, paper and paperboard mills edged down 0.3%. These are nominal U.S.-dollar values, not tonnage, and have not been adjusted for price effects.
+4.4% Nominal shipment value of paperboard containers
+6% Shipments of packaging papers and specialty packaging papers
−5% / nearly 95% H1 containerboard production / Q2 operating rate
Within AF&PA’s reporting scope, shipments of packaging papers and specialty packaging papers increased 6% in the first half, while containerboard production fell 5%. The Q2 containerboard operating rate approached 95%; domestic demand increased 1%, exports declined nearly 19%, and mill inventories at the end of June fell to a 15-month low. Production, operating rates, domestic demand, exports and inventories were not moving in the same direction.
A key reason these data can coexist is the capacity denominator. AF&PA’s annual survey shows that U.S. containerboard capacity fell 5.1% in 2025, while production declined 4.4% and the operating rate was 91.9%. The survey covers approximately 87% of U.S. paper and paperboard capacity, with the balance estimated. This is 2025 context, not a measure of new closures in the first half of 2026. It shows why operating rates alone can overstate demand if capacity, exports and inventories are ignored.
Printing-writing papers remained notably weak: first-half shipments of uncoated free sheet, coated free sheet and mechanical papers declined 9%, 3% and 28%, respectively. For China’s containerboard and corrugated-packaging value chain, the lesson from North America is not simply that “packaging is recovering”; paper grades, domestic and export demand, inventories and capacity must be separated first.
Canadian snapshot: the paper-manufacturing capacity-utilization rate was 82.8% in April 2026. This was a preliminary, unadjusted single-month figure and does not represent the North American average for the first half.
Sources: U.S. Census Bureau M3; AF&PA packaging papers; AF&PA containerboard; AF&PA printing-writing paper; AF&PA 2025 capacity survey; and Statistics Canada.
04 · Company Samples / COMPANY SAMPLES
Price is not profit per tonne; accounting profit is not cash
Misalignment 1: price and volume. Suzano reported calendar-year first-half net sales of BRL 22.5585 billion, down 9.2% year over year; net income fell 46.1%; and cash inflows from operating activities declined 17.0%. In the second quarter, the average net export price for pulp rose to USD 601 per tonne, up 8% year over year, while pulp sales fell 11% and adjusted EBITDA declined 23%. Even after prices recover, sales volumes, unit cash costs, exchange rates, capital expenditure and cash conversion still need to be validated.
Misalignment 2: total volume and product mix. In the first quarter of its fiscal year ending March 2027—April to June 2026, not the first half of the calendar year—Oji Holdings reported 3.5% sales growth in its Household and Industrial Materials segment, while operating profit rose from JPY 0.2 billion to JPY 5.8 billion; operating profit in Functional Materials increased 41.8%. Over the same period, sales in Printing and Communications Media fell 10.6%, and the segment continued to post an operating loss.
The same mechanism appears at CMPC: calendar-year first-half sales were broadly flat and adjusted EBITDA declined, while pulp, the tissue and personal-care business Softys, and Biopackaging recovered at different speeds. Three material value chains within the same group do not necessarily follow the same cycle.
Misalignment 3: accounting profit and cash conversion. Indonesian listed issuer INKP reported calendar-year first-half growth of 8.7% in net sales and 27.6% in industrial-paper sales, but net cash from operating activities declined 11.7%; net income included a USD 185.3 million net foreign-exchange gain. TKIM’s revenue increased, but operating profit did not keep pace; net cash from operating activities turned from positive to negative; and net income was materially influenced by income from associates. The two companies are samples of Indonesian listed issuers and should not be combined as APP Group performance.
A recovery in prices must be read alongside sales volumes and cost per tonne; growth in net profit must be read alongside operating cash flow, working capital and one-off items.
Sources: Suzano results release; Suzano interim financial statements; Oji results; Oji explanatory materials; CMPC results; CMPC financial statements; INKP interim report; and TKIM interim report. Company samples are used only to explain operating mechanisms and are not extrapolated as regional averages.
05 · China Decision Framework / CHINA DECISION MAP
Stop guessing the “direction”; manage the transmission mechanism
China’s export-oriented deliveries did not weaken in step with the domestic price index. In the first half of 2026, the export delivery value of paper and paper-products enterprises above designated size was RMB 40.50 billion, up 6.1% year over year. This is not customs data for HS Chapters 47 and 48, nor the export value or tonnage of paper products, and it should not be used to estimate global market share.
Market-access requirements for European orders are increasing. The EU Packaging and Packaging Waste Regulation (PPWR) became generally applicable on 12 August 2026 and covers packaging and packaging waste of all materials and from all sources; specific obligations have their own application dates. The EU Deforestation Regulation (EUDR) applies to large and medium-sized operators from 30 December 2026. Its annex covers relevant wood-pulp and paper products in Chapters 47 and 48 of the Combined Nomenclature (CN), while retaining exemptions for bamboo-based products, recovered paper and other specified categories.
PPWR and EUDR are not evidence that replacing plastic with paper will inevitably generate incremental demand. Their industrial significance is that material design, recyclability, supply-chain provenance, due diligence and documentation are becoming part of customer qualification. Specific requirements must be assessed individually according to company size, product code, market role and applicable exemptions.
01 Orders: first identify what is actually growing
Break orders down by paper grade, customer industry, region, domestic versus export demand, delivery cycle and market-access requirements. Paper mills should track actual shipments and order backlogs; packaging converters should examine customer mix and receivables quality; and exporters should incorporate data, traceability and compliance documentation into delivery schedules.
02 Price and cost: track the realized spread
Realized selling prices, industry PPI and spot quotations are three separate measures. Paper mills should evaluate realized selling prices against pulp, recovered paper, energy, chemicals, exchange rates and logistics over the same calculation period. Materials and chemical suppliers must also manage customer-qualification cycles, evidence that alternative materials meet performance requirements, quotation validity periods and payment terms.
03 Capacity and inventories: correct the denominator first
Every increase in an operating rate should prompt three questions: Has the capacity denominator contracted? Does the change reflect permanent exits, short-term maintenance or the ramp-up of new capacity? How are exports and inventories changing? When equipment suppliers assess opportunities for technical upgrades and capacity expansion, they should evaluate stable orders, capacity utilization, capital-expenditure budgets, commissioning schedules and payment terms together.
04 Cash flow: can profits be retained?
Assess whether improvement in the income statement is truly retained in the business by considering operating cash flow, receivables, inventories, payables, capital expenditure and the maturity profile of debt. For supply-chain cooperation, it is no longer enough that “the customer is profitable”; the customer must be able to convert profit into cash and support capacity expansion, credit approval, long-term agreements and the adoption of new materials.
90-Day Dashboard / 90-DAY DASHBOARD
Orders and actual shipments · Realized prices and cash costs
Capacity denominator and days of inventory · Operating cash flow and working capital
“Recovery” becomes an operating fact rather than a data point only when order growth does not depend on discounting or inventory releases, realized prices cover costs, and cash flow begins to keep pace with profit. This is an analytical framework, not a forecasting threshold.
Sources: National Bureau of Statistics export delivery values; European Commission PPWR topic page; PPWR application guidance; European Commission EUDR topic page; and the annex to EUDR.
Conclusion / CONCLUSION
In the second half, the key question is who can turn change into cash
The global paper industry in the first half of 2026 should not be reduced to either “a full recovery” or “continued weakness.” A more accurate conclusion is that the recovery sequence has diverged materially across regions, paper grades and companies; prices, output and profits no longer move automatically in the same direction.
This divergence is also redefining competitive advantage. In China’s value chain, the companies best positioned to navigate volatility are not necessarily those expanding capacity fastest, but those able to connect precise orders, product mix, cost discipline, capacity planning, regulatory market access and cash conversion in a closed loop.
The central question for the second half is not whether paper prices will rise broadly, but who can translate localized shifts—after accounting for costs, capacity and working capital—into sustainable cash flow.
BIOTEN Packaging · Industry Insights · Research Note
Verification date: 14 August 2026. This article applies a tiered approach to official statistics, public summaries from industry associations and formal corporate disclosures. Every data point is bounded by period, geography, paper grade, currency and statistical scope; company samples are used only to explain operating mechanisms and do not represent regional averages. “Profit-transmission efficiency,” the four transmission nodes and the 90-day dashboard are analytical frameworks developed for this article, not statistical findings, investment advice or price forecasts.
The general application dates of PPWR and EUDR do not mean that every specific obligation takes effect on the same day. Companies must assess requirements individually according to their role, size, product codes and subsequent guidance. This article does not present unified global production, first-half global trade totals or average global profit figures because primary sources of equivalent quality were not available.
Relationship disclosure: No commercial relationships have been disclosed. Corporate information in this article is used solely as a public-information research sample.
Data and Verification Sources
China: product-output database; profits of industrial enterprises above designated size; PPI; and export delivery value.
Europe: Eurostat C17 output; Eurostat C17 PPI; and Cepi 2025.
North America: U.S. Census Bureau M3; AF&PA packaging papers; AF&PA containerboard; AF&PA printing-writing paper; AF&PA capacity survey; and Statistics Canada.
Company samples: UPM; Stora Enso; Mondi; Suzano; CMPC; Oji; INKP; and TKIM.
EU market access: European Commission PPWR topic page; PPWR guidance; European Commission EUDR topic page; and the annex to EUDR.
