Paper Industry Rebounds Amid Middle East Naphtha Shock

Global Sae-A Withdraws Sale Plan for Paper Subsidiaries
Cumulative Operating Profit Doubles in May, Profitability Improves
Paper Industry Surges Amid Naphtha Supply Instability from the Middle East
Hansol Paper, Korea Paper Accelerate Discovery of New Businesses

The paper industry, which had been struggling with a prolonged downturn due to factors such as declining demand for printing paper driven by digital transformation, is now facing a new turning point triggered by the Middle East war. As instability in the naphtha supply chain has led to the renewed appreciation of paper packaging as an alternative to plastic, paper manufacturers are shifting their focus towards eco-friendly businesses and are proactively expanding their operations.

Interior view of a pulp factory. Photo by The Asia Business Daily DB

According to the industry on July 3, Global Sae-A Group has recently decided to completely halt the sale process of its group paper subsidiaries, including Tailim Paper, Tailim Packaging, and Jeonju Paper. Global Sae-A had been pursuing a package sale of its paper subsidiaries by contacting multiple investment banks (IBs) since the beginning of this year. However, it is reported that the plan was withdrawn as synergy among the subsidiaries recently improved the overall group profitability. As of May this year, the cumulative operating profit of Global Sae-A’s paper subsidiaries reached 73 billion won, up 100% year-on-year, while sales for the same period came to 904 billion won, a 7% increase.

The paper industry has long suffered from a structural downturn due to declining demand for printing paper as a result of digital transformation, a shrinking school-age population, and oversupply from China. However, some analysts say that the U.S.-Iran war that broke out in February this year has, paradoxically, cast new light on the eco-friendly value of the paper industry and its competitiveness as a substitute material.

As geopolitical instability in the Middle East has increased uncertainty in the supply of naphtha and other petrochemical raw materials, concerns about the global plastic supply chain have mounted, driving the rapid rise of eco-friendly paper packaging as a viable alternative. Coupled with increasingly stringent environmental regulations in many countries, the paper industry, once considered a “sunset industry,” is now viewed as having discovered new growth momentum.

The eco-friendly secondary packaging material 'Protego' developed by Hansol Paper applied to a coffee bean bag. Hansol Paper

The industry is also accelerating the discovery of new businesses based on paper. Companies are turning their attention to high value-added sectors with strong growth potential, such as cosmetics, packaging, and bio-materials, in search of new growth engines. In April, Hansol Paper launched the eco-friendly, paper-based secondary packaging material “Protego HS” series, and more recently introduced “Duracle,” a new eco-friendly material for cosmetics that can replace chemical thickeners. Korea Paper is also expanding its share of the food and beverage market with its eco-friendly paper packaging “Green Shield.”

An industry insider stated, “Inquiries for eco-friendly paper packaging, particularly from the food and distribution sectors, have increased by more than 50% year-on-year in terms of perception. Internally, there is also growing support for expanding investment and R&D in eco-friendly materials and paper-based new businesses. Given the global trend toward stricter environmental regulations and the spread of ESG management, we believe there is limitless potential for the expansion of eco-friendly, paper-based businesses in the future.”

This content was produced with the assistance of AI translation services.