22.66 million metric tons answers how “large” Nine Dragons Paper is, but it does not answer three more difficult questions: Why can it continue to expand? How will the market absorb new capacity? What will drive improvements in profitability per metric ton of paper and returns on capital in the future?

FOUR NUMBERS · Four Key Figures

Note: Production volume, designed capacity, and sales volume cover different reporting periods and statistical scopes and cannot be directly added together or substituted for one another.

ONE SENTENCE · Nine Dragons Paper in One Sentence

Nine Dragons Paper is completing a shift in its competitive coordinates: from organizing global recycled fiber and scaling packaging paper to a model in which earnings resilience is jointly determined by multiple fiber raw materials, pulp-paper integration, product mix, and capital efficiency.

CORE JUDGMENT

Bottom Line First: Nine Dragons Paper Is Strong at Converting Scale into Operating Results

What is hardest to replicate at Nine Dragons Paper is not any single paper machine, production base, or paper grade, but six capabilities interlocking along the same value chain:

01 · SCALE AS A NETWORK

Layer One: 22.66 Million Metric Tons Is Only the Result; Network Synergy Is the Reason

According to disclosures on the company’s website and in its 2025/2026 interim report, Nine Dragons Paper operates 10 papermaking bases and 8 packaging bases in China, while also deploying papermaking, pulping, and packaging assets in Vietnam, Malaysia, and the United States; major bases are also supported by combined heat and power, warehousing, and logistics systems.

For this kind of scale to create real value, it must achieve three conversions: turn centralized procurement into a raw-material cost advantage, turn a multi-base footprint into shorter customer delivery distances, and turn large-scale equipment into consistent quality and sustained high-load operation.

From July to December 2025, the group’s sales volume increased by approximately 600,000 metric tons in the China market and approximately 400,000 metric tons in overseas markets, with total six-month sales reaching a new high for the third consecutive comparable period. For a company with annual designed papermaking capacity exceeding 25 million metric tons, whether orders can continuously absorb new capacity matters more than nameplate capacity itself.

02 · FIBER CONTROL

Layer Two: Raw-Material Restructuring Is the Main Theme of This Transformation

One of Nine Dragons Paper’s most distinctive early capabilities was connecting overseas recovered-fiber resources with China’s industrial packaging demand, creating advantages in global sourcing and recycled-fiber organization. As policies governing imported recycled fiber, international logistics, and raw-material pricing systems changed, this capability did not disappear, but the boundary of its raw-material advantage shifted from “obtaining low-cost recovered paper” to “maintaining optionality among multiple fibers.”

Nine Dragons Paper’s new answer is to configure domestically recovered paper, wood pulp, recycled pulp, and wood fiber simultaneously. As of the end of December 2025, its annual designed fiber raw-material capacity was approximately 8.2 million metric tons, including 5.4 million metric tons of wood pulp, 700,000 metric tons of recycled pulp, and 2.1 million metric tons of wood fiber; after all disclosed projects are fully operational, the company expects this designed capacity to reach approximately 10.7 million metric tons. The latter figure represents future designed capacity, not current output, and is not equivalent to the raw-material self-sufficiency rate.

The value of this system extends beyond procurement cost reduction. Wood pulp and higher-quality fibers raise the quality ceiling for high-end kraft linerboard, coated ivory board, and printing and writing paper; recycled fiber preserves the circularity and cost foundation of industrial packaging paper; and a multi-fiber portfolio allows the company to adjust furnish formulations according to paper-grade performance, raw-material price spreads, and market cycles, creating greater flexibility in both cost and product selection.

03 · PRODUCT MIX

Layer Three: Moving Upmarket Is Not About Adding a Few More Paper Grades, but Rewriting the Profit Structure

Under the company’s classification, packaging paperboard includes kraft linerboard, high-strength corrugating medium, coated white-top testliner, and coated ivory board, collectively contributing approximately 89% of revenue from July to December 2025. Therefore, “packaging paper remains dominant” does not mean that the internal mix is unchanged: during the same period, coated ivory board sales volume increased 133.3% year over year, significantly faster than kraft linerboard at 1.1% and high-strength corrugating medium at 2.4%.

These changes show that Nine Dragons Paper is not moving away from packaging paper, but adding new product and profit curves to its existing scale curve. As of the end of December 2025, the company had approximately 3 million metric tons each of annual designed capacity for coated ivory board and printing and writing paper and continued to extend into high-end kraft linerboard, high-value specialty paper, and other categories.

Compared with conventional industrial packaging paper, coated ivory board and base paper for food and consumer-goods packaging depend more heavily on fiber cleanliness, surface strength, printability, odor control, folding and forming performance, and customer certification. Manufacturing is more difficult and qualification cycles are longer; once consistent quality, converting compatibility, and application certifications are established, these products also have greater potential to improve the selling-price structure and customer stickiness.

04 · NEW INDUSTRIAL HUBS

Layer Four: Beihai and Hubei Are Not Two New Factories, but Two Integrated Hubs

According to current disclosures on the company’s website, the Beihai base has approximately 3.25 million metric tons of annual papermaking capacity and 1.9 million metric tons of annual wood-pulp capacity; the Hubei base has approximately 3 million metric tons of annual papermaking capacity, 1.95 million metric tons of annual wood-pulp capacity, and 210,000 metric tons of annual wood-fiber capacity, together with a captive wharf. The two bases jointly support the expansion of raw-material supply capabilities and high-end paper grades.

Beihai’s strategic value is particularly noteworthy. Its proximity to the port enables it to receive wood chips and other raw and auxiliary materials from ASEAN and connect through the New International Land-Sea Trade Corridor to western China, ASEAN, and Middle Eastern markets. In January 2026, Beihai Port’s dedicated wood-chip berth passed acceptance for opening to foreign trade, further completing the logistics chain linking wood-chip imports, port handling, and pulp-and-paper production.

From an industrial-system perspective, the value of the two bases is not simply the addition of several paper machines, but the organization of fiber raw materials, pulping, papermaking, utilities, logistics, and regional markets into new cost and growth centers. Whether a large-scale project succeeds ultimately depends on coordinated ramp-up of the entire system, not merely the start-up of an individual production line.

05 · OPERATING SYSTEM

Layer Five: The Invisible Barrier Is the Ability to Replicate Large-Scale Systems

When a company has only one production base, an excellent mill manager and process team can solve problems through experience; when a company operates more than ten large production nodes, competitiveness must come from standardization, data-driven management, and cross-base replication.

The company discloses that it continues to promote granular benchmarking across the full value chain, cross-base coordination, best-practice sharing, and technology enablement. For a company of Nine Dragons Paper’s scale, digital tools themselves are not the barrier; the real barrier is establishing unified data definitions and closed-loop exception management, turning pulp yield, paper-machine efficiency, specific steam consumption, chemical consumption, quality complaints, and inventory turnover into comparable, accountable, and replicable operating actions.

In July 2026, Nine Dragons Paper’s Beihai company and Guangxi University jointly established an “Academician Innovation Studio,” with plans to deploy research teams, experimental platforms, and mechanisms for commercialization of research results around the company’s practical needs. Public information has not yet disclosed specific technical research topics or outcomes, so the more accurate assessment is that this is a new organizational signal of Nine Dragons Paper strengthening industry-academia-research commercialization capabilities, rather than evidence that a specific product breakthrough has already been achieved.

06 · CAPITAL EFFICIENCY

Layer Six: Scale Has a Cost and Must Ultimately Be Validated by Returns on Capital

Pulp-paper integration and construction of large production bases require long-term, capital-intensive investment. Nine Dragons Paper’s capital expenditure in FY2024/2025 was approximately RMB 14.832 billion; as of the end of June 2025, total liabilities represented approximately 66.0% of total assets. As of the end of December 2025, group borrowings were approximately RMB 73.467 billion, while bank and cash balances, short-term bank deposits, and restricted cash totaled approximately RMB 6.613 billion; the disclosed undrawn and uncommitted borrowing facilities were approximately RMB 53.262 billion. The latter should not be equated with committed credit facilities already secured.

On the positive side, gross margin increased from approximately 9.5% in the same period a year earlier to 14.4% from July to December 2025, an improvement of approximately 4.8 percentage points; operating profit increased 113.4% year over year, and new pulp-and-paper projects began contributing to results. This is evidence that the strategy is beginning to deliver, but it is not yet confirmation across a full cycle. The next question is whether the ramp-up of new capacity can be converted consistently into operating cash flow and whether raw materials, inventory, and receivables and payables can remain efficient at a larger scale.

In July 2026, Nine Dragons Paper completed a cash tender offer for its US$400 million principal amount of preferred perpetual capital securities carrying a 14.00% distribution rate, ultimately accepting approximately US$399.5 million, or approximately 99.9% of the outstanding principal amount. The company stated that the purpose was to enhance profitability and optimize its capital structure. This can be understood as an active adjustment of high-cost capital, but the repurchase of a single instrument does not by itself demonstrate that total leverage has declined significantly.

2026 CHANGE SIGNALS

Six Latest Signals Point to the Same Strategic Theme

BIOTEN PACKAGING VIEW

BIOTEN Packaging View: The Next Stage of Moving Upmarket Is Paper Functionality Engineering

As Nine Dragons Paper moves further into coated ivory board, premium paper, and high-end base paper for consumer-goods packaging, its products will face more directly the integrated requirements of food, foodservice, beauty, pharmaceutical, consumer electronics, and other applications: not only strength, basis weight, and cost, but also surface properties, barrier performance, odor control and migration risk, printing and forming efficiency, food-contact safety, and circularity compliance.

Notably, the product section of Nine Dragons Paper’s 2025/2026 interim report already lists single-side PE-coated paper and sandwich PE-coated paper in the range of 50–450 g/m², with applications covering food packaging, industrial protection, medical supplies, and printing substrates. This indicates that the group’s product boundary has extended from base paper into functional fiber-based materials; however, public information remains insufficient to determine the specific barrier-material route, business scale, certification scope, or recyclability performance.

This means that incremental value will not arise only at the paper-machine stage, but will continue to propagate through coatings, surface treatment, printing, lamination, heat sealing, and finished-product converting. Base-paper producers, packaging companies, equipment suppliers, and functional-material companies need to move from point-solution supply toward joint development centered on end-use performance, processing windows, and compliance data.

The above is an industrial-chain inference based on publicly disclosed changes in Nine Dragons Paper’s product mix. It does not mean that Nine Dragons Paper has selected any specific material route, nor does it indicate any product adoption, testing, or cooperation relationship between Nine Dragons Paper and BIOTEN Packaging.

CONCLUSION

22.66 Million Metric Tons Is the Result,
Efficiency in Converting Scale Is the Answer

Nine Dragons Paper’s true strength lies not only in its 22.66 million metric tons of production, nor only in its 25.4 million metric tons of designed capacity, but in the system foundation it has established for organizing massive assets into raw-material optionality, unit-cost advantages, product coverage, regional delivery, and supply stability.

It is completing a second restructuring of its capabilities: the first established leadership through global recycled-fiber organization and packaging-paper scale; the second is based on wood pulp, recycled pulp, and a multi-fiber system, extending into high-end kraft linerboard, coated ivory board, printing and writing paper, and more high-value fiber-based materials, while using cash flow to test the quality of expansion.

But capital-intensive expansion must ultimately pass three tests:

If these three continue to be delivered, Nine Dragons Paper’s leadership will evolve from tonnage leadership into system leadership; if delivery falls short, massive scale will also amplify fixed costs, inventory, and capital pressure. The dividing line between these two outcomes is not how many more metric tons are added, but whether every additional metric ton of capability can generate higher-quality returns.

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