Trends and Developments in the Chinese Pulp and Paper Industry · Pulp and Paper Industry...
Transcript of Trends and Developments in the Chinese Pulp and Paper Industry · Pulp and Paper Industry...
Trends and Developments in the Chinese Pulp and Paper Industry
International Forum on Investment and Finance in China’s Forestry SectorSeptember 22-23, 2004, Beijing, ChinaIlkka KuusistoAssociate PrincipalJaakko Pöyry Consulting, Shanghai
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Agenda
Paper and paperboard consumption
Production and capacity additions
Future fibre supply
Will the growth continue?
Where will the production be located and who will operate it?
Is there enough fibre? Where will it come from?
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Global Consulting and Engineering Group
Client- and technology-oriented globally operating consulting and engineering firmCore operations based on three know-how clusters:1. forest industry2. energy, and 3. infrastructure & environmentGlobal market leader in forest industryStrong international position
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Paper and paperboard consumption
Production and capacity additions
Future fibre supply
Will the growth continue?
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Global Paper and Board ConsumptionOver the past 23 years, global paper and paperboard consumption has grown 3.0% a year or a total of 165 million tons.
0
50
100
150
200
250
300
350
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
North America
Europe
Japan
Non-Japan Asia+ 3.4 %/a
+ 3.1 %/a Rest of World
Million tons
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Co-existence of Media
103TTS01
Historically, electronic media has not threatened the growth of paper based communication – in many cases the paper industry has benefited from it.
0
10
20
30
40
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
0
10
20
30
40- Paper consumption, million t/a -
Newsprint
Printing and writing papers
Expansion ofInternet/WWW
PCs
MiniComputers
RadioCinemaTV
Laser PrintersCD-ROMs
MainframeComputers
ColourTV
Cable TVVCR
SatelliteTV
Newsprint and pr/wr paperconsumption in Western Europe
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Innovations and Paper-based Packaging
103TTS01
Paper remains a very competitive packaging material. New innovations and applications help maintain its position against other materials and systems.
0
50
100
150
200
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
- Consumption, million t/a -
World consumption of packaging paper and board
Barrier technology
Lightweighting
Smart packaging
Aseptic liquid packaging
Microflutes
Digital printingNon-impact printing
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GDP Growth by Region
Source: Consensus Forecasts and OECD
Asia (excl. Japan and China) China
4.4
0.4
5.9
5.3
3.8
4.4
5.9
5.8
5.6
5.5
5.5
5.7
5.4
0 2 4 6 8
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
L-t trend
8.8
7.8
7.1
8.0
7.3
8.0
9.1
8.3
7.7
7.6
7.0
7.3
7.7
0 2 4 6 8 10
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
L-t trend
Japan
00
1.6
0.8
2.8
0.4
0.2
2.5
4.2
1.8
1.9
1.8
2.1
1.3
00
0 2 4 6 8
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
L-t trend
% change in GDP
…and the rapid economic growth in Asia will underpin the growth in paper consumption.
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World Demand for Paper and PaperboardWorld demand for paper and paperboard continues to grow. With an average growth rate of 2.2 percents a year, it will reach 450 million tons by the year 2015.
0
100
200
300
400
500
1980 1985 1990 1995 2000 2005 2010 2015
Million tons
Rest of Asia
North America
Western Europe
JapanEastern Europe
China
Latin America
ForecastRest of the World
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Growth of Paper and Paperboard Demand
Eastern Europe
Latin America
Africa
Asia excl.Japan & China
China
JapanNorth America
Western EuropeOceania
Average 2.2 %/a
Demand growth %/a Emerging Growth Markets
Traditional Strongholds
0
1
2
3
4
5
0 20 40 60 80 100
Share of consumption in 2000 (325 million tons), %
Most of the growth will take place in more volatile emerging markets.
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Growth of Paper and Paperboard DemandWoodfree papers and tissue show highest growth rates, packaging boards account for substantial volume growth.
Othergrades
Tissue
Newsprint
Uncoatedmechanical
Coatedmechanical
Uncoatedwoodfree
Corrugating materials
Cartonboards
Sackpaper
Coatedwoodfree
Average 2.2%/a
0
1
2
3
4
0 20 40 60 80 100
Share of consumption in 2000, %
Demand growth %/a
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Paper and paperboard consumption
Production and capacity additions
Future fibre supply
Where will the production be located and who will operate it?
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Consolidation and Globalization
Market growth
Resource availability Globalization of customers
Trade policy &legislation
Competitive pressureRegional costadvantages
Search forimprovedefficiency
Search fornew markets
& growth
Search forstrategic assets& capabilities
Search for markets, assets and competitive advantage drive consolidation and globalization
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Leading Global Paper and Paperboard ProducersTruly global companies are yet to emerge but many companies have by now established Asian presence.
- Capacity, 1000 t/a -
Regional Capacity Distribution, 2004/IIQ
0 2000 4000 6000 8000 10000 12000 14000 16000 18000
Stora EnsoInternational Paper
UPMOji
Georgia-PacificWeyerhaeuser
Nippon Unipac HoldingSmurfit-Stone Container
Abitibi-ConsolidatedSCA
M-realAsia Pulp & Paper
Norske SkogMeadWestvaco
Mondi
North AmericaWestern EuropeEastern EuropeLatin AmericaAsiaOther
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Paper Industry Concentration 1997 vs. 2002
0
20
40
60
NorthAmerica
WesternEurope
Asia LatinAmerica
World
1997
2002
Combined capacity share of top five firms (%)
The pulp and paper industry is still relatively fragmented with top five firms controlling only 20-40% of regional capacity.
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Industry-level Benefits of ConsolidationConsolidation helps to bring price stability.
Price volatility vs. industry concentration
0
2
4
6
8
10
12
14
16
20 40 60 80 100- Concentration of Top 5, % -
Global price, regional concentration for pulp- Standard deviation, % -
Testliner
Newsprint
Uncoated woodfree
LWCSC
Kraftliner
BSKP
BHKP
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Changes in Investment Conduct
20.7%
12.3%
1.5%
6.9%
0 %
5 %
10 %
15 %
20 %
25 %
Totalinv.
Acq. Newlines
Othercapex
Totalinv.
Acq. Newlines
Othercapex.
1991 - 1995 1996 - 2000
- Investment spend, % of sales -
11.2%
2.4%
1.8%
7.0%
The past 10 years has been a decade of acquisitions.
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Acquisition and Investment ActivityConsolidation has mainly taken place in developed, slow growing, mature markets. Asian companies are still growing through new investments.
North America, Europe and Japan China and Rest of Asia
Acquisitions
Fixed Investments
55 % 45 %90 %
10 %Acquisitions
Fixed Investments
Source: JP Research
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Global Capacity Growth
Source: JP Research
Non-Japan Asia’s share of global capacity investments has grown significantly
0
20
40
60
80
100
1970s 1980s 1990s 2001-2006
North America
Europe
Japan
Asia
China
Rest of World
%
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Capacity Expansion Projects in ChinaOver the next five years, China will lead the world in capacity growth.
Company Capacity 1000 t/a Grade Location TimeAPP Ningxing Zhonghua 700 Duplex board Zhejiang 2004APP Hainan Jinhai Pulp 1000 Bl hardwood pulp Hainan 2005APP Gold East Paper 700 Coated woodfree Jiangsu 2005/2006APRIL 400 Uncoated woodfree Guangdong 2006/2007APRIL 1000 Bl hardwood pulp Shandong n.a.Daewoo Paper 300 Coated woodfree Heilongjiang 2006Dongguang Jia Hui (Sun) 300 Duplex board Guangdong June 2004Dongguang Jia Hui (Sun) 300 Duplex board Guangdong August 2005Foshan Huafeng 300 Duplex board Guangdong 2005Hebei Pan Asia Long-Teng 330 Newsprint Hebei 2005Jiangxi Chenming Paper 400 LWC Jiangxi 2004Lee & Man Paper Mfg. 250 Unbl testliner Jiangsu 2004Lee & Man Paper Mfg. 350 Recycled medium Jiangsu September 2004Lee & Man Paper Mfg. 400 Testliner/medium Guangdong 2005Nine Dragons 250 Recycled medium Guangdong August 2004Nine Dragons 250 Recycled medium Guangdong August 2004Nine Dragons 300 Unbl testliner Guangdong 2005Ningxia Meili Paper Industry 300 Folding boxboard/duplex Ningxia 2005Oji Paper 400 Coated woodfree Jiangsu 2006Shandong Cheming 400 Folding boxboard Shandong 2005Shandong Cheming Qihe 300 Recycled medium Shandong n.a.Shandong Huatai 450 Newsprint/LWC Shandong 2005Shandong Jin Feng Yuan 450 Duplex board Shanghai/Fengxian n.a.Shanghai Zhonglong Paper 300 Testliner/medium Shanghai/Pudong 2004StoraEnso Suzhou Paper 450 Coated woodfree Jiangsu n.a.UPM-Kymmene 450 Uncoated woodfree Jiangsu 2005Wuhan Chenming 300 Cartonboard Hubei n.a.Wuxi Long Chen Paper 400 Testliner/medium Jiangsu 2007Yuen Foong Yu Paper 500 Testliner/medium Jiangsu 2006Yuen Foong Yu Paper 500 Testliner/medium n.a. n.a.Yueyang Paper 300 Folding boxboard Hunan n.a.Zhanjiang Wood Pulp Mill 700 Bl hardwood pulp Guangdong n.a.TOTAL ABOVE 13730
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Paper and paperboard consumption
Production and capacity additions
Future fibre supplyIs there enough fibre? Where will it come from?
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Global Consumption of Papermaking Fibre
0
100
200
300
400
500
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Million tons
Non-wood pulps
Mechanical/semichemical
BSKP
UKP
BHKP
Sulphite pulps
Recovered paper
Forecast
World consumption of papermaking fibre is forecast to grow from 350 million tons in 2003 to 460 million tons by the year 2015, or 2.3%/a on average.
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Average Papermaking Fibre Furnish in the WorldWood pulp is still the most important papermaking raw material, but recovered paper continuously increases its share of the total – today about 48% of the total
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Percent
Non-wood pulps
Mechanical/semichemical
BSKP
UKP
BHKP
Sulphite pulps
Recovered paper
Forecast
Recovered Paper Collection and Consumption – 2003North America is the great provider of recovered paper for Asia.
0
5
10
15
20
25
30
35
40
45
50
Western Europe North America Non-Japan Asia Japan
Million tons
ConsumptionCollection
58% 50%
40%
65%
Recovery rate
6.9 4.1
1.5
9.32.7
0.7
0.4
2.0
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New Capacity in China11 million tons of new papermaking capacity came on stream in China during the past three years. To keep these machines running requires nearly 8 million tons of recycled fibre as well as virgin wood pulp.
0
2
4
6
8
10
12
2002 2003 2004 RCF required
Newsprint
Cartonboard
Printing and writing
Containerboard
ONP
OCC
Mixed
Pulp
&
fillers
Million tons
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Recovered Paper Imports into Mainland ChinaLarge part of the increase in consumption has come from imports.
0
2
4
6
8
10
12
14
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04
OCC
ONP
Mix
White
Million tons
Note: 2004 estimated based on Jan-Jul statistics
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Recovered Paper Imports into Mainland ChinaUSA, Europe and Japan are the largest import sources, but they have just about reached their limits. Other countries cannot export more, either.
Million tons
0
2
4
6
8
10
12
14
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04
USA
Europe
Japan
Others Korea Canada Australia Hong Kong
Note: 2004 estimated based on Jan-Jul statistics
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Paper Recycling Water Wheel
Other Uses of Old Paper
Collectionof Paper
Paper TradeProcess Losses(deinking)
Recovered Paper Trade
Continuous additions of fibre are needed to offset losses.
Used for PaperProduction
Consumption ofPaper
Production ofPaper
Virgin Wood Pulp
Minerals and Additives
Not Collected(tissue, library books, burned, etc.)
Trade in Paper Products
29CALCMOD2/ILE
Days
- Volume of raw material -
0 20 40 60 80 100 120 140 160 180 200 220 2400
20
40
60
80
100
120
Collection 45%/Round 20 Days
Collection 50%/Round 20 Days
Collection 60%/Round 20 Days
Collection 60%/Round 30 Days
Without virgin fibre injection,paper & paperboard industrywould run out of raw material
within 6 months.
Paper and Paperboard Collection CycleFibre quality decreases over time until it disappears in the recycling process.
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Growing Stock of ForestsThere is plenty of wood in the World. It is just not all in the right places.China must secure a reliable and sustainable source of wood for its industry.
22.6
6.8
12.7 9.5
13.07.5
63.7
16.9
1.8 1.1
4.9 4.9
3.8
37.1
2.0
107.4
0.5
55.1
0.97.9
-billion m3-
Total 380 billion m3
Softwood 126 billion m3
Hardwood 254 billion m3
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ConclusionsThe global demand for paper and paperboard continues to growThe industry growth is shifting outside traditional supply areas, especially to Asia and increasingly to ChinaThe industry remains fragmented, especially in AsiaAcquisitions have become an important driver of corporate growth, but capacity growth continues in ChinaRecycled fibre will soon constitute over 50% of global paper industry’s fibre raw materialsTraditional supply sources cannot continuously increase their exports of recovered paperDomestic collection must be developed and improved to meet a growing part of the fibre mixNon wood pulp must be developed into a viable alternativeWorld has enough wood to meet the growing demand but it is not all located in the right places.China will have to develop sustainable source of wood to help meet its growing demand for fibre.