The paper mill does not ship out much finished paper, but the inventory of waste paper is also not much (even very low), and the overall supply and sales are relatively balanced.

1. Current Situation: The small paper factory operates on a per-order basis; it stops production when there are no orders, and the large factory faces tricky raw material issues.
 
　　The paper mill's finished paper shipments are not high, but the waste paper inventory is also not much (even very low). Overall supply and sales are relatively balanced, so the waste paper purchase prices at the paper mills tend to follow the prices adjusted first by other paper mills and regions, adapting to the market (for example, this round of price fluctuations has been guided by Zhejiang Forest Paper Industry, influencing surrounding enterprises and cities). It is worth noting that the paper mills guiding market prices during this phase are not necessarily leading enterprises!
 
　　During the waste paper price increase phase, only the paper mills that raise prices first can truly absorb relatively low-priced waste paper, while those that follow can only take a small share (once price increase expectations form, packaging stations will choose to withhold sales in hopes of higher prices). Therefore, it cannot be ruled out that subsequent paper mills will engage in more frequent wave operations.
 
　　Small paper mills operate on a per-order basis; they stop production when there are no orders, can accept scattered orders, and are highly flexible: Currently, small paper mills have low finished product and raw material inventories. The shortage of raw materials is due to insufficient supply in the waste paper market, and the low finished products are due to reduced production flexibility to lower inventory pressure and quickly recover cash flow. Small mills are actually doing relatively well (the drop in waste paper prices is more significant compared to the drop in finished paper prices, and the profit margin per ton of paper is rising rather than falling), and the pessimistic sentiment circulating in the market is not as intense as it seems. The rumors about a certain paper mill shutting down and selling equipment to pay employee wages are mainly individual cases due to issues with the capital chain.
 
　　Large paper mills are concerned about the terminal market conditions, proactively laying out raw materials and finished products, and their inventory (waste paper and finished paper) poses significant risks. It is well known that large paper mills are reluctant to easily resort to shutdowns and production cuts (especially after just undergoing major repairs after the Spring Festival). Moreover, due to the lack of obvious price advantages for finished paper from large paper mills, coupled with the fact that terminal market conditions have indeed reached a freezing point, it will become inevitable for large paper mills to maintain median finished paper inventory and see a slow increase! Additionally, the tightness of raw materials caused by insufficient operations in the terminal market and secondary factories during the pandemic is also a fact, so the lack of raw materials for large paper mills will become a tricky issue.
 
　　2. Domestic Demand: The domestic packaging paper-related industry is accelerating its recovery.
 
　　Food, soft drinks, and daily chemicals account for 60% of the demand for packaging cartons. This part belongs to essential needs and is only affected by the supply side. As the resumption of production and work accelerates further, this part of packaging paper demand will steadily rise. In the electronic communications sector, according to a report by market research company ABI Research, global smartphone production is expected to decline by 30% in the first half of this year due to "stagnant supply" and "paralyzed demand." However, with the vigorous promotion of domestic "new infrastructure," terminal demand is expected to experience explosive growth in the future.
 
　　The express delivery industry has become the absolute main force in the flow of materials during the pandemic. As the domestic pandemic subsides, the rapid growth trend of the express delivery industry will ease; on March 18, the Ministry of Commerce stated that home appliance consumption has decreased by 30%. To expand consumption of key products, relevant departments will further propose policy measures to promote consumption of home appliances and other key products, encouraging enterprises to carry out trade-in for electronic products. Short-term demand will see a pullback, but due to the ongoing real estate regulation, terminal demand cannot show a retaliatory growth. In summary, the demand for the domestic packaging paper-related industry is accelerating its recovery, and overall demand will continue to improve in the near future.
 
　　3. Foreign Trade: Exports are expected to decline by at least 20%.
 
　　Data from March 2020 shows that the domestic demand indicators in the manufacturing industry have rebounded somewhat, but imports and existing orders are still in a month-on-month contraction range, and foreign demand indicators are also in a month-on-month contraction range. The new export orders index in March rose from 28.7% in February to 46.4%, still below the 50% "threshold." With the rapid spread and escalation of the pandemic overseas, the pressure on foreign demand is gradually becoming apparent.
 
　　This year's overall exports will inevitably decline significantly, and as the global pandemic worsens, they will continue to decline. If we simply calculate linearly, our exports will decline by at least 20%.
 
　　Fortunately, our export structure has undergone some optimization. Our larger foreign trade is within Asia, with imports and exports to Asia accounting for about 50% each. Our exports to the United States and the European Union account for about 34%, while imports account for about 20%.
 
　　If we consider this structural change, our export losses may be somewhat smaller.
 
　　In March, foreign trade indicators are still in a month-on-month contraction, and as the pandemic worsens in countries like Europe and the United States, the restrictions on export trade may further intensify. The demand for packaging paper is ahead of the market by a month, so the demand for finished paper due to the easing of foreign trade demand is likely to only manifest from late April to May.
 
　　4. Paper prices may still experience significant fluctuations, and there may be uncertainties in the terminal market.
 
　　Considering both domestic demand and foreign trade factors, we follow the inventory index:
 
　　From the overall demand perspective, the inventory index rose in March. The raw material inventory index rose from 33.9% last month to 49.0%, and the finished product inventory index rose from 46.1% last month to 49.1%.
 
　　The increase in finished product inventory and raw material inventory indicates that total demand is rising at this stage. If the current operating rate is maintained, the prices of packaging paper and waste paper will show a slow upward trend.
 
　　However, the market is never static. Once the demand and prices for finished paper and waste paper rebound, the operating rate and utilization rate of paper mills will significantly increase. Therefore, it can only be said that the short-term trend is positive, but there still exists the potential for significant price fluctuations in the future.
 
　　Currently, the importance of domestic consumption in driving the economy is increasing year by year. In 2019, consumption contributed 57.8% to China's GDP growth, while in terms of investment, after the end of the high growth phase, China lacks large-scale infrastructure investment projects of sufficient magnitude. Therefore, consumption currently plays a greater role in stabilizing China's economic growth and even in the post-pandemic economic rebound.
 
　　The pandemic itself has brought a significant direct impact on consumption, while it has also caused a substantial indirect impact on consumption through small and micro enterprises. Enterprises are facing difficulties, which leads to a decline in the income of the general public, and consequently, both the willingness and ability to consume will decrease.
 
　　Therefore, the actual changes in the consumption capacity of the terminal market still have many variables.
 
　　In the next phase, from the perspective of the terminal market (after all, only when the terminal market is fully opened can the finished paper and waste paper markets potentially generate substantial interlinked upward trends), the focus should be on the expectations of schools reopening and the recovery of the third industry market (note that it is expectations rather than actual data, as actual data lags significantly behind the packaging paper, finished paper, and waste paper industries).