To meet with growing demand for virgin fiber as a result of product upgrades and to ease dependence on imported market pulp, Shandong Huatai Paper decided in 2018 to build a 700,000mtpy chemical pulp mill at the cost of RMB5.7 billion. So far, the project has gone through the filing with the Shandong Provincial Development and Reform Commission and the municipal environmental protection department and entered the EIA public review period. On September 9th, the company announced to publicly issue RMB1.5 billion convertible bonds as part of the funding to the project.

Though no date of running is given, the company’s fund raising and project feasibility report slates a 24-months construction time, which allows the market to expect its start-up in 2022. What clearly indicated, however, is that the project, covering an area of 467,148 m2, will be equipped with state-of-the-art installations, including advanced environmental protection equipment and facilities. The mill will consume eucalyptus chips sourced from overseas to produce 400,000mtpy of wet pulp for internal use and 300,000mpty dry marketable baled pulp.

The company’s report also projects average after-tax sales revenue at RMB3.24 billion/year and net earnings at RMB504.41 million/year when the project goes into full operation, with 7.69 years of investment payback period and 12.64% IRR.

In the first six months of 2020, sales revenue of Huatai Paper fell below RMB5.39 billion, -17.74% from the same period of 2019, while net earnings edging up +3.60% to RMB260 million. This enabled EPS to grow +2.38% to RMB0.24. Against a total asset of RMB6 billion, the company’s debt ratio was 42.24% at end-June, which was relatively low in the industry.

Employing about 3,000 people, Huatai Paper has nearly 1.44 million/mtpy of paper production capacity and 922,200/mtpy of pulping capacity (including 622,200/mtpy of de-inking pulp and 300,000/mtpy of chemi-mechanical pulp). Its flag-ship 400,000/mtpy newsprint machine makes it the leading producer in upper China. In addition, the company owns a few other machines, including a 100,000/mtpy coated paper machine, a 180,000/mtpy offset paper machine and a 100,000/mtpy LWC machine (under joint-venture with Stora-Enso).

Huatai Paper’s determination to build its jumbo pulp mill seemed to have no immediate impacts on China’s pulp market as price continued its rise. By the 2nd week of September, spot listing of BSK and BHK went up as much as RMB150 per metric ton, while offers of BSK and BHK from overseas for September rising no less than US$10 per metric ton. And reports from China Customs showed more than 17.18 million metric tons of paper-grade market pulp were shipped into the country in the first seven months of 2020, +13.30% from that of 2019. This included 5.09 million metric tons of BSK (+4.30%) and 7.42 million metric tons of BHK (+10.33%).