Three Major Problems Beset Papermaking Sector     

According to the speech made by Zhao Wei, Secretary-General of China Papermaking Industry Association, at the meeting recently held to analyze the situation of the papermaking sector, the uncertainty in the growth and the digestion between capacity and consumption, the uncertainty in the export market resulted from aggravated foreign trade frictions and the uncertainty in the impact of saving energy and reducing pollution on industrial restructuring are the three major problems faced by the papermaking sector.

Inventory buildup caused by capacity expansion

"The inventory of products is 13% higher than the previous year," said Zhao Wei. "Attention should be paid to this new phenomenon."
   The capacity of the papermaking sector has expanded drastically since 2005. Some large paper mills have added new paper machines one after another. There were seven new paper mills with a capacity of over 1.0 million t/a in 2006. The demand has, however, failed to make a synchronous growth. Data show that the new capacity growth already reached the peak in 2006. The growth of new capacity is 15% in 2007, already lower than 2006.
   The undigested capacity started to accumulate in 2006 and an inventory buildup has appeared for the first time in 2007.
   According to Zhao Wei, the capacity will reach more than 75.0 million t/a in 2007, an increase of 10% over 2006, but the apparent consumption will only be 71.0 million tons, an increase of around 5%. There will therefore a considerable capacity surplus.

Aggravated frictions in export

Paper mills have already taken initiative to expand overseas markets so as to cope with oversupply in the domestic market. Due to increasing trade frictions, however, the use of the low cost strategy by Chinese enterprises is full of thorns today. Printing paper, heat-sensitive paper and kraft paper have already met with rejection in quite a few countries such as the United States and Korea. Methods they use include oppositions to dumping, subsidy and market injury.
   Data show that in the first three quarters of 2007 the import amount of high-grade paper varieties reduced whereas the export amount of paper varieties increased. The total import amount from January to September was 3.1352 million tons, a drop of 7.1% from the same period of 2006 and the total export amount was 3.31 million tons, close to the total export amount in 2006 and an increase of 41% over the same period of 2006.
   "By the end of 2007 the export amount will exceed the import amount for the first time in history," Zhao Wei points out, "it means that the status of supply shortage that has lasted in the papermaking sector for years will be changed."

Pains in industrial restructuring

The Economic Functioning Bureau of the National Development and Reform Commission of China pointed out at the meeting that the papermaking sector is one of the sectors with the greatest consumption of resources in China. The papermaking sector will therefore be faced with industrial restructuring taking energy conservation and reducing pollution as the lead. It means that the upsurge of reformation and acquisition will soon come.
    The emission of pollutants in the papermaking sector is concentrated in the first step (chemical change). A series of environmental protection policies for pulp preparation have therefore been issued in 2007. They include the elimination of outdated grass-based pulp preparation technologies and production lines and the elimination of small pulp preparation enterprises.
   Data show that the output of pulp in the first nine months of 2007 was 15.79 million tons, a drop of 15% from the same period of 2006. 1 562 small pulp preparation enterprises were rectified or shut down.