China's Paper Industry Into An Accelerated Integration Period

- Dec 18, 2017 -

With the total amount of papermaking in China entering a balanced development period, the papermaking industry will enter an accelerated integration period. Paper production to maintain a low growth, the internal structure of the industry will continue to optimize. In the process of accelerating the integration of the paper industry, the profitability of enterprises has been polarized. The profitability of superior enterprises has been continuously enhanced. The disadvantaged enterprises have been gradually eliminated.

In the future, the output growth of China's paper industry will continue to be higher than the growth rate of consumption. However, China's supply-side reform and environmental supervision are constantly intensifying, resulting in accelerated consolidation of the industry under environmental protection and market pressure. Through the elimination of backward production capacity and mergers and acquisitions, large paper mills will gradually increase their market share by virtue of their scale and cost advantages, and the industry concentration will continue to increase. Through the transformation and upgrading and "going global", paper mills will increase their cross-border development and meanwhile, High-end papermaking industry development, high-quality products will occupy the market of low-quality products, high-end paper species squeeze low-end paper market, differentiation, customization, personalized products will increase.

1.Policy ry optimization and upgradingforcing indust

From 2010 to 2015, 37.31 million tons of paper mills in China have been ordered to shut down by government departments for failing to comply with the requirements of ecological environment protection. Relevant environmental protection policies have forced industrial upgrading.

China plans to shut down another 8 million tons-10 million tons of outdated paper-making capacity during the "13th Five-Year Plan" period, mainly to eliminate currently discontinued enterprises or enterprises that do not meet the requirements of environmental protection. Expected to have more than 100 enterprises under strict law enforcement inspection shut down. In the long run, the demand for wood pulp will continue to increase as more and more modern machines replace this backward production capacity.

Since 2016, eco-friendly has become the new focus. In the governance, MEP attaches great importance to actual discharge from the attention of key industries to the issuance of permits for thermal power paper-making enterprises. From the frequency of supervision to the implementation of supervision, the government is determined to govern the environment and the future Law enforcement is the trend of the times.

In the context of supply-side reform and the Belt and Road initiative, the paper industry ushers in an optimization and upgrading. Supply-side reform encourages quality improvement and efficiency improvement. The paper industry is expected to partially replace some 2 million tons of imported paper by domestic products. To capacity will clear the zombie business, for the advantages of manufacturers to make room for the market; layout of our "Belt and Road" to encourage the advantages of capacity to go out, which will drive the global pulp consumer market. In 2014, China exported 3.987 million tons of paper and paper products to countries and regions along the "Belt and Road". In 2015, China's export of pulp and paper-making equipment involved an amount of 1.222 billion U.S. dollars, up 15.51% on a year-on-year basis.

2.Paper production and sales will continue to grow

Judging from the global market, the demand of paper and paperboard in the developed countries in the future will continue to shrink. China is the main driving force for the growth of global demand for paper and paperboard. It is estimated that the CAGR of the demand in the United States, Western Europe and Japan will both be around -1% by 2020; while the demand for paper and paperboard in developing countries will continue to grow. The compound annual growth of China, Eastern Europe and Latin America by 2020 Rates are about 3%. Expected from 2015 to 2020, the global demand for paper and cardboard increased by 27.24 million tons, 65% of the growth comes from China, China is still the world's major impetus to the growth of paper and cardboard demand. It is estimated that from 2015 to 2020, the global demand for bleached commercial pulp will increase by 6.7 million tons, with 70% of the increase coming from China. In the meantime, China's demand for waste pulp will maintain a 3% growth rate from 2015 to 2020.

Driven by the demand for economic development, China's paper production and sales will continue to grow, but less than the GDP growth. Benefit from online shopping and emerging logistics, wrapping paper is the main force of the growth of paper production and sales in our country. It is estimated that by 2020, the output of China's papermaking industry will continue to increase by 13 million tons, of which 70% of the growth will come from packaging paper.

3.Pulping industry is grim

In the future, the world's pulp will continue to expand. If new capacity is put into operation on schedule, there will be a period-by-stage surplus of global hardwood pulp supply in 2018. Wood pulp enterprises shut down and turn will increase, the domestic non-wood pulp manufacturers or there will be a large-scale shutdown.

Since the fourth quarter of 2016, the supply of waste paper and wood pulp market in China has been in vacancy period. Soaring paper and pulp prices, hardwood pulp spot price rose 30%. Judging from the current imbalance between supply and demand, the situation of commodity pulp in the short term will be maintained well and the price of pulp before the fourth quarter of 2017 may continue to rise. Although the price of wood pulp soared, due to environmental protection and capacity constraints and other factors, China's pulp and non-wood pulp production did not show significant growth.

Since the fourth quarter of 2016, the finished paper market in our country has been very hot, paper shortage has occurred in cardboard boxes and corrugated base paper. China's finished paper is expected to continue to be subject to such factors as the soaring prices of raw materials, the devaluation of exchange rates, the elimination of outdated production capacity, rising freight rates and inflation as well as prices in the short term.

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