Despite the decline in raw material prices, the domestic paper industry has accepted a poor performance report. Contrary to expectations for improved revenue due to the drop in pulp prices, demand contraction caused by economic slowdown has had a greater impact on results. The burden on the third-generation owners who have recently entered the management frontlines of the paper industry is also increasing.
According to the Financial Supervisory Service on the 16th, Hansol Paper, the leading company in the paper industry, recorded sales of 575.5 billion won in the first quarter, an increase of 7.8% compared to the same period last year. However, operating profit fell 40% to 20.3 billion won during the same period.
Moorim Paper, the second-largest company, reported a consolidated sales of 319 billion won in the first quarter, a decrease of 3.5% compared to the same period last year, while operating profit plummeted 80% to 5.1 billion won. KLEANNARA, ranked third, saw sales of 130.7 billion won, a 1.5% decline, and posted an operating loss of 3.8 billion won.
The industry hoped for improved revenue this year as pulp prices and shipping costs stabilized. According to the Ministry of Trade, Industry and Energy, as of May 15, the price of Southern bleached hardwood kraft (SBHK) pulp in the United States was $750 per ton, a decrease of about 8.5% from the sharp increase in April 2024. The Shanghai Container Freight Index (SCFI), a shipping cost indicator, also fell from an average of 2010 points in the first quarter of last year to an average of 1762 points in the first quarter of this year.
The high exchange rate trend also heightened expectations for improved revenue. When the exchange rate rises, export prices decrease, making price competitiveness stronger. Given that the exchange rate of the won to the dollar remained high at around 1450 won in the first quarter, it has been analyzed that this will benefit the paper industry, which has a high export ratio. In particular, Moorim Paper has an export ratio of about 50%, and Hansol Paper also generates more than half of its total revenue from overseas, making it a sector that benefits from the high exchange rate.
However, demand weakness due to the economic slowdown hampered performance. Hansol Paper pointed to a decrease in the share of sales in advanced markets due to economic slowdown and the impact of rising electricity costs as the background for its profit decline. KLEANNARA also noted, "We recorded an operating loss due to the effects of global economic contraction."
In addition, a temporary increase in expenses has also contributed to the decline in performance. Moorim Paper temporarily suspended production equipment for a month in the first quarter due to major renovations at its subsidiary Moorim P&P's factory. Consequently, revenue has weakened in the short term.
The burden on the third-generation owners who succeeded the management rights is also increasing due to this dismal performance. The paper industry has entered a third-generation management system as YIDO, the representative of Moorim Paper (the eldest son of Lee Dong-wook, chairman of Moorim Group), Choi Hyun-soo, the representative of KLEANNARA, and Han Kyung-rok, the representative of Hansol Paper (the eldest son-in-law of Jo Dong-gil, chairman of Hansol Group), successively took over as leaders. All have advocated "innovative management" and are seeking breakthroughs, but they have yet to overcome the wall of poor performance amid a global economic slowdown.
The industry is hopeful for a recovery in the second-quarter results, but the risk of tariffs from the United States is a burden. Amid concerns that the U.S. President Donald Trump may impose reciprocal tariffs on South Korea and some other countries, worries are growing that export competitiveness may weaken. Since paper is not a high value-added item and competition is fierce, the imposition of tariffs would deteriorate price competitiveness.
However, considering the U.S. market's reliance on imports, the industry believes that even if tariff risks materialize, the impact may be limited.
A representative from the paper industry said, "The U.S. has a structure that inevitably relies on imports due to its insufficient domestic production capacity compared to paper consumption, so while there are concerns about tariffs, performance is expected to improve from the second quarter."