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Short Supply Of Fiber Outstands Other Challenges
2021-10-25 13:30chinapaperonline.com
Since the start of the 3rd Quarter, China's paper industry has suffered from power shortages or outages, which has disrupted the normal operation of many mills. More market observers believe that the challenge, similar to others that the industry has gone through, including those caused by COVID-19 and tight transportation, is of relatively short term and will subside or pass soon. However, the contradiction between fiber supply and demand, especially the tightness in supply of prime quality recovered paper, will remain and hinder industry progress in a long period of time.

Annual reports from China Paper Association (CPA) show China's paper and paperboard production grew by an annual average of 2.02% from 99.30 million metric tons in 2011 to 112.60 million metric tons in 2020. At the same time, consumption rose 2.65% in annual average from 97.52 million metric tons to 118.27 million metric tons. The volume of consumption over production was balanced by imports from the outside world. In terms of fiber, the country's paper-grade pulp consumption rose steadily to a ten-year average increase by 3.64%, regardless of the setbacks in years 2013 and 2018. By 2020, China's paper-grade pulp consumption reached 102 million metric tons, up 5.27% from that of 2019. By pulp variety, 40% were wood pulp, 55% were recycled pulp (including 47% production from domestic recovered paper, 2% imported recycled pulp and 6% from imported recovered paper). If we look at the country's pulp production, however, we see that production in 2020 totaled only 73.78 million metric tons, giving a ten-year average growth by 0.16%. For recycled pulp made of recovered paper, which contributed to more than half of industry’s pulp production, the growth in production was only 0.26% by ten-year average and having a negative -3.88% growth from 2017 to 2020! According to industry analysts, China's paper-grade pulp production will only be able to achieve moderate increases from 2020 to 73.82 million metric tons in 2021, while consumption exceeding 103 million metric tons at the same time. The gap between production and consumption is getting bigger and bigger. The consistent growth of China's market pulp imports, which rose 8.7% from same period of 2020 to 15.81 million metric tons in the first half of 2021, is achieved at surging cost by 29.2%! It is therefore not unrealistic to count on increases in market pulp imports to make up for the huge gap between China's domestic pulp production and consumption.

Until 2017, Chinese paper companies were able to source large amount of recovered paper from overseas markets, targeting especially at those made of more virgin fiber in North America and elsewhere. As supplement, Chinese paper companies also bought recovered paper in the domestic market and increased their wood pulp orders from abroad. Such efforts basically met with fiber demand of the industry. Today, however, the industry can only rely on fiber supply from domestically generated recovered paper, more imports of wood pulp, scant amount of imported recycled pulp, limited recovered paper supply from Hong Kong and on-going capacity expansion of wood pulp mills in China. It is a fact that 56.13% of the country's paper and board production are packaging paperboard and much of it, such as linerboard, corrugating medium and duplex board, is primarily consuming recycled pulp. Under existing technology and equipment, demand for recycled pulp in the production of these paperboards is very firm. Moreover, the "plastic ban" will further stimulate demand and production packaging paperboard and setting higher requirements on quantity and quality in recovered paper supply.

In a word, the rise in demand for paper and paperboard, with packaging paperboard in particular, will result in consistent growth of China's paper and board production. As predicted by the CPA, the industry will produce 140 million metric tons of paper and board in 2025, allowing China's per capita paper consumption to 100 kilos/year. And by 2035, total output will top 170 million metric tons, growing the per capita consumption to 120 kilos/year. To reach the goals, fiber is indispensable. The current situation, however, makes people believe that the contradiction between fiber demand and supply will remain in a long period of time. This is the problem that the industry cannot avoid and can only manage to deal with it properly!

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