China's Paper Industry: Ups and Downs within

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China's Paper Industry: Ups and Downs within

New Delhi | 12 September 2018 | The Pulp and Paper Times

The waste paper crisis in China is turning out in to a war zone among small, medium and big paper mills for procuring raw material from local market. The investigation found that the price of waste paper in Ji'an City has risen in recent years, with a result that they are short of funds to acquire waste paper and finally they have to shut down. Most of the local waste paper was shipped to leading Paper Mills in Guangdong.

The supply and demand situation has shifted, the seller's market has the final say. Most of the backward production capacity of the market was eliminated, and most of the production capacity began to concentrate on a few large enterprises. According to the data, the production capacity of the top 8 paper mills in China has exceeded 70% in the offset paper industry, and the competition situation has gradually changed from “buyer market” to “seller market”. After the concentration of production capacity, some major paper companies began to raise their prices.

The upstream pulp supply shortage drives the downstream price increase. The data show that the proportion of waste paper pulp in China's paper pulp consumption is as high as 60%-70%. Since the beginning of this year, upstream raw materials are in shortage. At the end of April, several shipment of imported waste paper was returned, and the import waste paper policy continued to tighten, which intensified the shortage of waste paper in China's domestic market

The leading paper companies in the industry have given higher prices for waste paper purchases than ordinary paper manufacturers.

The shortage of waste paper in China has also prompted manufacturers to increase the price of sales.

As the paper price has been raised again. Take an example of the black cardboard produced by a paper company in Jiangxi. In 2016, the ex-factory price was 3,651 yuan/ton, and in 2017 it was 4,300 yuan/ton, rose to 6,100 yuan/ton In 2018. According to the financial data of the company, the sales revenue in the first quarter of 2017 increased by 95.1%, but the profit only increased by 8.9%; the sales revenue in the first quarter of 2018 increased by 4.0%, and the profit increased by 2.8%.

Future waste paper imports to China will continue to decline

According to the adjusted tax increase list announced by the Ministry of Commerce, the US import tariffs from 0 to 25% were officially implemented on August 23, 2018. After the addition of 25% tariffs, the US waste price will rise by 400-550 yuan / ton, or will push up all foreign waste prices, resulting in a reduction in the gap between foreign waste and national waste prices, superimposed a series of waste paper import policies since 2017 The adjustment of the amount of imported waste paper in the second half of 2018 will continue.

The target of zero waste import in 2020 has been clarified, and the issue of raw materials has become a key factor affecting the development of the industry. On June 24, 2018, the State Council clearly stated that “we will strive to achieve zero import of solid waste before the end of 2020”; the draft revision of the “Solid Waste Law” draft on July 11th reaffirmed the goal of zero solid waste import, zero waste import or Will be written into the law. The impact of the waste paper New Deal on the quantity of imports is expected to exceed market expectations. The reduction of China's waste paper imports in 2018-2020 has become a necessity. How to effectively solve the problem of raw materials has become a key factor affecting the development of the industry.

Enterprises importing waste paper must apply to the Ministry of Environmental Protection for import quotas before they can be imported. Therefore, the amount of waste paper import license can be considered as the ceiling of the actual imported quantity of waste paper. Up to now, a total of 67 companies have been approved for 2018 waste paper import licenses, a total of 14.33 million tons, compared with nearly 48% in 2017, and the number of imported waste papers in 2018 is a foregone conclusion.

In the case that the national waste supply cannot be fully guaranteed, the substitution effect of wood pulp on waste paper will be triggered, and the prices of raw materials such as waste paper and wood pulp are expected to continue to rise. The problem of raw materials has become the key point in the paper industry in recent years, and domestic environmental protection has heightened the barriers for paper companies to solve this problem in China. Ref: chinapulppaper.com

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