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Analysis on Chinese Papermaking Industry 2011-2012

cri-report.com - China's papermaking industry maintains the rapid growing trend in recent years. In 1999, total production of paper and paperboard in China was 29 million tons, while it increased to 93.83 million tons in 2009 with annual growth rate of 13.90% and 2.20 times increase over the 10 years. China's total paper and paperboard production in 2010 is estimated to be over 100 million tons.

Driven by macro economy which continues getting better in China, the expansion of China's papermaking industry, especially large enterprises, continues accelerating with vigorous growing trend of productivity. Due to lack of paper fiber resources, China's supply capacity can no longer meet the demand for productivity expansion, while fiber material becomes a bottleneck constraining the development of China's papermaking industry.

In 2009, the usage amount of wood pulp accounted for 23% of total raw materials; that of non-wood pulp accounted for 15%; and that of waste paper pulp was 62% in China's papermaking industry. In recent years, the proportion of wood pulp and waste paper pulp is on the rise, while that of non-wood pulp is declining.

Waste paper acts increasingly great role in supporting the development of China's papermaking industry. China's waste paper import volume grew from 2.52 million tons in 1999 to 27.50 million tons in 2009 with annual growth rate of 30.40% and 9.93 times increase over the 10 years. Since price is decided by supply-demand relationship, with the rapid growth of demand, price of imported waste paper shows a substantial increase. In 1999, price of imported waste paper was USD 97 per ton, while that was USD 138 per ton in 2009; that in 2008 reached average USD 230 per ton, and the maximum price was once up to USD 300 per ton. China's imported waste paper mainly comes from the U.S.A., Japan, Britain and other countries. In 2009, China imported 10.76 million tons of waste paper from the U.S.A., accounting for 39.10% of total import volume and ranking the first; 4.12 million tons, which ranked the second, were imported from Japan, accounting for 15%; Britain exported 2.81 million tons to China, accounting for 10.20% and ranking the third. Though importing a large amount of waste paper and wood pulp can relieve raw material deficiency, it also leads to excessive dependence on raw materials in foreign countries. In 2009, waste paper pulp calculated on imported wood pulp and imported waste paper accounted for 42% of total raw materials.

Currently, there are a large number of papermaking enterprises in China with low industry concentration. In 2010, about 10,000 papermaking enterprises and paper product enterprises obtained the annual individual sales revenue of over CNY 5 million, among which nearly 4,000 papermaking enterprises gained annual individual production of less than 30,000 tons, greatly lagging behind the average level of counterparties of advanced countries in the world. Among those papermaking enterprises in China with huge production in 2009, only 6 enterprises possessed individual production exceeding 2 million tons, 8 enterprises' individual production exceeded 1 million tons, and 16 enterprises' individual production was over 500,000 tons.

At present, China's paper export volume only accounts for 1/30 of total production. Due to environmental protection, domestic demand guarantee and other reasons, it is not advocated to export a large amount of paper in China, while meeting domestic demand should be given priority to. Hence, different from other industries, tax rebate for paper export is not supported in China, waste paper processing trade is constrained, and the Chinese government gives no subsidy to the papermaking industry.

Most large paper industry companies in the world realize forest-pulp-paper integration, while Chinese paper industry companies hardly form their forest-paper industry, whose quality paper fiber depends on import. Their raw material costs are heavily influenced by external factors, directly leading to unstable business performance and profit decline. As China's papermaking industry develops rapidly, fiber material supply deficiency has become a serious bottleneck influencing the development of China's papermaking industry. In the near future, papermaking material deficiency in China is likely to become the most serious problem. 

Besides, four bottlenecks constraining China's papermaking industry and new problems are gradually becoming obvious. Firstly, excessive regional concentration leads to resource deficiency. Secondly, due to irrational product structure, market demand can be hardly met. Thirdly, backward papermaking machinery restricts product improvement. Fourthly, the industry creates serious pollution and faces enormous pressure of environmental protection.

With the development of Chinese economy and the improvement of people's living standard, in the next 5-10 years, demand for paper products in Chinese market will maintain a rapid growth. Many investment opportunities exist in China's papermaking industry, which is predicted to attract numerous investors to enter. ]

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