The Development of China Paper Industry: Current Situation and Outlook Dr. Cao Zhenlei Sep 2014, Shanghai
Content -Status quo and market position of China s papermaking industry -China s papermaking market -Challenges in the development of the papermaking industry -Outlook into the near future -Conclusions
Status quo of papermaking industry 10,000 tons 12000 10000 8000 Average annual growth in output: 8.26% Average annual growth in consumption: 6.74% 7350 7290 7980 7935 8640 8569 9270 9173 9930 9752 10250 10110 10048 9782 6000 4950 5439 5600 5930 6500 6600 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Output Consumption
Status quo of papermaking industry 30.00 产量 Output % % Consumption 消费量 % % 25.00 20.00 15.00 10.00 5.00 0.00 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-5.00-10.00
Global papermaking market landscape 2002 Australasia 1% Latin Am erica 5% Africa 1% China 11% North America 31% Other Asia 20% From RISI Europe 31%
Global papermaking market landscape 2012 Latin America 4% Middle East 1% Africa Oceania 1% 1% North America 18% China 37% Europe 23% Other Asia 15% From RISI
Status quo of papermaking industry Proportions of different products stay stable in the Chinese market but are quite different from the global market. Chinese market Global market Tissue 8% Other 4% P/W 28% Tissue 8% Other 8% P/W 34% Package 60% Package 50%
Review Pulp and WP Import for 2002-2013 Pulp Import WP Import 35000 30000 25000 20000 15000 10000 5000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Review Pulp Import in 2013 BSKP BHKP Russia 9% Others 14% Canada 33% Chile 7% USD 5% Others 13% Brazil 37% Fenland 11% Uruguay 7% Chile 15% USA 18% Indonesia 31%
Review Wood chips and Pellets import reached 8.69mmt in 2013 Australia 14% Others 2% Indonesia 14% Vietnam 53% Thailand 17%
Status quo of papermaking industry According to 2013 report of CTAPI, only tissue and specialty paper witnessed increase in output and consumption. As per 2013 annual report of listed companies, their financial status improved considerably compared with that of 2012. The market of communication paper trends downward remarkably, while the coated paper market has picked up impressively.
China s papermaking market - Paper and board market Supply and demand The market has been sluggish since the beginning of 2012 with operating rate falling to 80% among the enterprises. Output and sales are balanced, while profit margin slumps. Excessive competition pushes profits to the downstream. Many projects under construction and planned projects have been delayed or canceled and the number of project starts is slashed.
China s papermaking market Communication grades (Newsprint, coated paper and uncoated communication paper) Worrying traditional application Newspapers, magazines, books, notebooks, office paper Stable business application Promotional materials such as sales catalogues, classified advertisements, inserts, leaflets and advertisement mails
Communication grades Changes in output and sales of newsprints (have been shrinking since 2009) 10,000 tons 600 500 400 300 200 100 0 Output Consumption 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Communication grades Changes in output and sales of coated paper (declined slightly in 2013) 10,000 tons 900 800 700 600 500 400 300 200 100 0 Output Consumption 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Communication grades Changes in output and sales of uncoated paper (demand fell) 10,000 tons Output Consumption 2000 1800 1600 1400 1200 1000 800 600 400 200 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China s papermaking market - Paper and board market main products - Communication grades Newsprints: high concentration ratio; production capacity not supposed to increase. Coated paper: high concentration ratio; capacity put into production gradually. Uncoated paper: low concentration ratio; mixed quality; backward capacities being eliminated; considerable potential of high-end products. Traditional application is hurt harder by e-media than business application. Products for business enjoy potential.
China s papermaking market - Paper and board market main products - Packaging paper and board classification Packaging paper Kraft paper, yoshire paper, etc. Boxboard Coated, white top liner boards, kraft liner boards, cartonboards, etc. Containerboard Kraft, regular, T-containerboard Corrugated medium
China s papermaking market Packaging paper (stable, import of high-end products) 10,000 tons Output Consumption 700 600 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China s papermaking market Boxboard (sliding amid stability) 10,000 tons 1600 1400 1200 1000 800 600 400 200 Output Consumption 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China s papermaking market Containerboard (slideing amid stability) 10,000 tons 2500 Output Consumption 2000 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China s papermaking market Corrugated medium (stable) 10,000tons Output Consumption 2500 2000 1500 1000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
China s papermaking market Packaging paper and cardboards Packaging paper: low concentration ratio; many varieties; import of some high-strength fiber products; and a promising prospect of food wrapping paper. Boxboard: rising concentration ratio; changing market; a gloomy prospect of CCNB because of the transferring of consumer goods production; a bright future of white cardboard and paperboard for food packaging. Containerboard: rising concentration ratio; small-sized machines being eliminated; products to be upgraded. Corrugated medium: backward capacity being eliminated; supporting products for cardboard paper to be upgraded; a promising prospect of containerboard and corrugated thanks to strong domestic demand. A large number of new projects; low cost domestic equipment.
China s papermaking market Tissue 2013 2012 Growth YoY (%) Output (ton) 6,808,000 6,273,000 8.5 Sales volume (ton) 6,638,000 6,120,000 8.5 Net export volume (ton) 601,600 492,200 22.2 Consumption (ton) 6,036,000 5,628,000 7.2 Annual consumption per capita (kg) 4.4 4.2 4.8 Turnover in mills (CNY bn) 65.72 62.40 5.3 Domestic market size (CNY bn) 77.69 74.63 4.1
China s papermaking market Tissue Output, consumption and export volume keep growing; Growth in revenue is slightly slower than that in sales volume, indicative of declining price; Operating rate is falling with new capacity put into production; new capacity construction is delayed due to the over growth in capacity; Elimination of backward capacity becomes common; Concentration ratio is rising further.
China s papermaking market Tissue Concentration ratio rises year by year. Four largest paper makers are Heng an, Gold Hongye, Vinda and C&S. 2010 2011 2012 2013 Total capacity of the four papermakers (ton) 1,631,000 1,906,000 2,615,000 2,955,000 Capacity (%) 26.4 27.8 33.3 34.7 Output (%) 22.6 24.1 27.8 30.7 Revenue (%) 27.9 30.0 32.3 35.4
China s papermaking market Tissue Combined turnover of top 15 papermakers has exceeded 50% of the total. 2010 2011 2012 2013 Output (%) 36.8 40.3 45.0 47.8 Revenue (%) 41.3 43.5 48.3 51.1
China s papermaking market Tissue Global brands have small market shares; Native brands enjoy stably growing market shares; Regional brands enjoy decent growth; Foreign brands with products sold through agents and private brands embrace opportunities; Low-end market shrinks.
China s papermaking market Paper and board specialty grade Definition: raw materials for other industrial goods produced by papermaking means. e.g. paper for electric appliances, paper for insulating materials, veneer paper for furniture and heat-resistant and thermal-insulating materials, which usually are not recyclable. Small market size; strong specificity; high technology. Rapid development in recent years. Potential markets Fiber paper Other materials produced by papermaking means
Challenges in the development of papermaking industry Paper products are biodegradable
Challenges in the development of papermaking industry Paper is recyclable, how about petroleum products?
Plantation absorbs more CO2
Challenges in the development of papermaking industry Paper is recyclable
A green and low-carbon environment is the motivation for the transformation of papermaking industry According to statistics from International Energy Agency in 2007, papermaking is responsible for only 2% of the total industrial carbon dioxide emission, much lower than that of the chemical industry, steel industry and cement industry. Pulp and paper 2% Other 23% Aluminium 2% Cement 26% Iron and steel 30% Chemicals 17%
Problems for the Industry The Challenge from the E-Media Global economy with slow growth Consuming goods export going down Domestic consumption could not make it up
Problems for the Industry After long term high speed, down to low Have to change from investment leading to consuming restrictions from both resources and environment Over capacity facing low consumption
Outlooks Printing and Writing News paper consumption will decrease steadily Coated grade need more time for digest new capacity Uncoated facing the most difficult time ever Commercial grades still have room for growth
Outlooks Packaging grades still growing but in transition Competing with other packaging materials High quality grades replacement New areas of market
Outlooks Packaging grades still growing but in transition Packaging for consuming goods changes from export to domestic market Restructuring both in grades and locations E-commerce leading the transition of packaging High transportation cost and low margin will move the manufacture close to the inland market
Outlooks The future looks good for tissue Per capita consumption still very low (only 4.2kg) New areas of products (applications) High new capacity comes up in these years Branding and market order very important
Outlooks Mixed future for specialty paper grads Very good market potential Market moves to China along with other manufactures Good profit margin High investment density but poor convertibility between grades Protection for intellectual property right very important R&D intensive
Conclusions The industry is into a transition, from for an available market to for a creative market! The overall operation rate and profit margin still suffering Some growth ahead for packaging and tissue, but also challenging Specialty paper A direction for transition of the industry remain to be seen!
Thank you! caozhenlei@sinolight.cn