China is getting stuck with paper?

Autumn is known by the fall of a leaf. Under the adjustment of household paper prices, China's paper safety problems caused by the rising price of pulp raw materials have gradually surfaced.

01 up! Go up! Go up!

"The last time I bought it was 29.9 yuan, and then I can't afford it anymore, so I can only save it in the future!" Jin V blogger Miao Ge posted such a micro blog, along with a photo of 10 rolls of Vinda toilet paper in a supermarket for 42.99 yuan.

Such ridicule is not rare, in the social media search keyword "paper price", some netizens said that now go to the print shop A4 paper prices; Some netizens joked that the envelope of express delivery has also become thinner and worse; Some netizens joked that the man who receives the paper may earn more than himself.

Since April 1, China's four major household paper enterprises - Jinhongye, Hengan, Vinda, Zhongshun (Jierou), have raised their product prices, and some household paper products have increased by 10%-20%.

In addition to household paper, other wrapping paper, cultural paper, special paper prices have already been adjusted. In March, the ex-factory price of white cardboard broke through the 10,000 yuan mark for the first time, up 18% from February.

The recovery of economic fundamentals has provided the basis for the price increase of paper products, but the biggest impetus is still from the upstream supply costs. Since the third quarter of 2020, the price of wood pulp, the most common raw material for paper products, has continued to rise, nearly doubling.

From the price increase of raw materials last year, the transmission to the downstream consumer price is already an inevitable event.

Papermaking as a generally stable demand industry, the cost of raw materials to a large extent determines the profit margins of downstream enterprises in the industrial chain, and most of China's paper enterprises are located in the middle of the raw material processing position, raw wood pulp imports accounted for more than two-thirds, the situation is quite passive.

In this round of price increases, a realistic and embarrassing problem has been exposed: not only the high-tech industry, but also the paper industry will be stuck. According to estimates, China's import dependence on pulp products soared from 12.93% in 2008 to 23.39% in 2018, in addition to 2009, China's foreign dependence on pulp to maintain a growth trend.

Autumn is known by the fall of a leaf. Under the adjustment of household paper prices, China's paper safety problems caused by the rising price of pulp raw materials have gradually surfaced.

02 Doomed to be controlled by others?

Pulp as the main raw material of the paper industry, the main source can be attributed to waste pulp, wood pulp, non-wood pulp three categories, and waste pulp and wood pulp as the main raw materials. Wood pulp is mainly used for household paper and cultural paper; Waste pulp is mostly used for packaging paper; Non-wood pulp is mostly used for household paper.

Wood pulp can be divided into coniferous pulp and broadleaf pulp according to the different species of raw materials. Coniferous pulp sources are mainly temperate and cold temperate countries and regions with higher latitudes, and the world's major exporters of coniferous pulp are Canada, Finland and the United States.

The main sources of broadleaf pulp are tropical and subtropical countries and regions with lower latitudes. Brazil, Chile and Indonesia are the major exporters of broadleaf pulp in the world.

Generally, coniferous pulp has stronger toughness and stretchability than broadleaf pulp, so a certain proportion of coniferous pulp is usually incorporated in the use of wood pulp to enhance the toughness of paper.

In 2020, China's wood pulp imports will be 30.64 million tons, an increase of 12.7%. Domestic wood pulp production was 11.41 million tons, and imported wood pulp accounted for 72.8% of the total consumption of wood pulp.

Behind the huge import volume is the basic reality of the lack of forest resources in China. The latest data shows that China's forest coverage rate is only 22.96 percent, lower than the world average of 31 percent. The forest area is also far behind the above-mentioned major exporters of wood pulp, so that the main raw material for the paper industry, wood pulp, needs to rely on foreign imports for a long time.

Now look at the waste pulp.

Waste pulp as a papermaking raw material, mainly used in wrapping paper. The source of waste pulp can be divided into domestic waste paper and imported waste paper, imported waste paper, the quality of paper products and pulp rate in developed countries is higher, so the foreign waste to Europe, the United States, Japan developed countries as the main source.

2020 is the end of the implementation Plan for the reform of the Solid Waste Import Management System, and the newly revised Law on the Prevention and Control of Environmental Pollution by Solid Waste will come into effect from September 1, 2020, and basically achieve zero solid waste imports by the end of 2020.

In recent years, under the guidance of relevant policies, the import volume of waste paper has decreased year by year. China Solid Waste Chemicals Management network information shows that in 2020, China's imported waste paper volume is 8.232,000 tons, although this amount accounts for less than 20% of China's waste paper production, but China's waste paper recovery rate is relatively slow, it is difficult to fill this part of the supply gap in the short term.

The shortage of waste paper raw materials has indirectly affected enterprises in the entire paper industry chain, reducing their bargaining power to upstream enterprises, and it is a huge challenge for enterprises specializing in the production capacity of waste paper raw materials. They either compete with the same type of paper enterprises at high prices for domestic waste paper raw materials, or adjust the production line to adapt to the changing demand of raw material supply, or directly withdraw from the market.

And non-wood pulp.

In addition to wood pulp and waste pulp, non-wood pulp is made from other non-wood plant fibers, and there are mainly three types of non-wood pulp: grass fiber raw pulp (such as straw, bamboo, bagasse, etc.), bast fiber raw pulp (such as hemp, kenaf, flax, etc.) and seed wool fiber raw pulp (such as cotton fiber, etc.).

China is the world's largest non-wood pulp production country, has a lot of non-wood pulp raw material resources, but due to the poor quality of non-wood pulp fiber, need to be mixed with wood pulp to obtain better quality paper products, and non-wood pulp from the raw material to extract fiber process, requires a higher level of technology and chemical agent costs, so the cost performance is low. In recent years, under the impact of foreign wood pulp and waste pulp, the proportion of non-wood pulp raw materials has not been high.

The contradiction between the supply and demand of raw materials in China's paper industry comes not only from the basic reality of resource shortage, but also from the impact of industrial supply changes caused by the improvement of environmental protection requirements.

In addition, with the easing of the epidemic, the economic recovery is expected to rise, and the cost of world shipping has gradually risen. The blockage of the Suez Canal by the "Long Gift" cargo ship on March 23 this year also had a certain disturbance to the price of pulp, a raw material that has long relied on imports.

03 Crisis is everywhere

The price of paper products, seemingly ordinary industrial changes, there are many geopolitical factors behind the impact.

China imports wood pulp from more than 30 countries and regions in the world, more than 90% of the wood pulp from these 8 countries: Canada, Brazil, Indonesia, the United States, Chile, Finland, Uruguay, Russia.

China's rapid development in these years has attracted the envy of some countries, led by the United States, Western countries continue to use economic policies to suppress China, as we all know, such as making restrictions on China's imports of chips, lithography machines and other high-tech products, but many people do not know is that in the non-high-tech but also dependent on imports in the field, will still be the "neck" threat.

Coniferous pulp is a wood pulp raw material with high fiber quality, and its main supply countries are Canada, the United States and Finland, and it is also a country with more trade friction with China, and the supply is a security threat.

StoraEnso, Finland's largest pulp and paper manufacturer, decided to stop supplying raw materials to Xinjiang after the South China Morning Post mentioned that most of the chemical wood pulp used in Xinjiang comes from Finland, according to Finland's Yle radio.

Although Stora Enso did not directly respond to whether the decision was related to the previous BCI boycott of Xinjiang cotton, in the South China Morning Post report, the Xinjiang factory with Stora Enso is close to the foreign media rumors of "forced labor camps." 

In 2020, Canadian coniferous pulp exports to China decreased by 32% year-on-year in a single month. According to the data from January to February this year, the proportion of coniferous pulp in Canada continues to decline.

But there is another country that can provide a lot of coniferous pulp and maintains good and stable diplomatic relations with our country: Russia.

In 2020, Russia exported more than 1.14 million tons of conifed pulp to China, an increase of more than 250,000 tons year-on-year, and the annual import of Russian pulp from Manzhouli by China-Europe freight train has reached 448,000 tons. In addition, the Russian Ilim Group and Xiamen C&D Paper signed a four-year supply of base paper and pulp agreement, which can obtain 300,000 tons of base paper and 180,000 tons of pulp raw material supply every year.

For countries that supply broadleaf pulp, China generally has good diplomatic relations, but these countries generally have a low level of economic development, and the prevention and control level in this epidemic is not high, which affects some pulp production capacity. For example, Chilean pulp giant Arauco announced in March that it had temporarily suspended production due to employees infected with the novel coronavirus, and projects under construction had also been halted.

Under the epidemic, the construction investment of new capacity in many countries has been forced to put on hold, which may lead to a decline in capacity supply in the next year.

China Harbour Indonesia is the contractor of the supporting pier of the OKI pulp Mill, and is also one of the Chinese enterprises that helped the bottom people fight against the "epidemic" after the outbreak of the new coronavirus pneumonia in Indonesia. In the early stages of the epidemic, China Harbor distributed personal epidemic prevention materials to the surrounding people, which mitigated the impact of the epidemic to a certain extent, and enabled the project to be completed smoothly during the epidemic.

While providing epidemic prevention assistance to overseas partners, Chinese companies have also contributed to a stable supply of raw materials for China, the factory of the world.

Under the limitation of many objective factors, how to promote paper safety in our country? The market is always the smartest, looking at some companies in the industry, or comparing the development of foreign countries, we may be able to find some answers.

With the complete landing of the ban on waste in China, the foreign waste pulp quota of paper enterprises is zero, which makes the gap of paper raw materials increase, the price of domestic waste paper is also rising, and the contradiction between supply and demand is deepening, but the domestic waste paper production actually has a lot of room for growth.

According to Statista statistics, Japan's paper recovery rate in 2020 is as high as 85%, and the average recovery rate has been above 80% in the past decade. According to the 2019 Monitoring report published by the European Waste Paper Recycling Council (EPRC), the overall paper recycling rate in Europe has reached 72%. In contrast, China's waste paper recycling rate in 2019 was only 49%.

Some people say that waste paper is a forest resource in the city, because the recycling of 1 ton of waste paper can produce 0.8 tons of recycled paper fiber, and the waste paper from high-quality paper making materials will produce better pulp quality. In addition, paper recycling can also save space in landfills, while saving more than half of the energy used to make paper.

The relevant departments can also help paper companies achieve carbon neutrality by adjusting domestic waste paper quotas and achieve the effect of rapid industrial concentration.

The maturity level of an industry depends not only on the number of enterprises in the industry, but also on the degree of industrial concentration to a large extent.

Tianyan data show that there are more than 216,000 papermaking related enterprises in China. Among them, 46% are individual industrial and commercial enterprises, 45% are limited liability companies, and most of them belong to small and micro enterprises.

Looking at the entire domestic paper industry, in 2019, the top 10 enterprises accounted for 45.67% of the market share, while the US paper industry experienced environmental legislation to reduce capacity and industry mergers and acquisitions, the top 10 enterprises accounted for about 90% of the market share. In the same year, the top four enterprises accounted for 28.88% of the market share, which was comparable to the paper industry data of the United States in 1984.

If the industry is not concentrated, it will bring about problems such as weak bargaining power of upstream and downstream, difficult to avoid inefficient competition, and insufficient motivation for research and development.

The leading international paper company in the U.S. paper industry, originally formed from the merger of 17 pulp and paper mills in the United States, has operations in more than 20 countries, and also has extensive plants in Europe and Brazil.

At present, there are also individual leading enterprises in China trying to promote upstream and downstream business expansion, and to overseas countries rich in forest resources to lay out production capacity.

Nine Dragons acquired two paper and pulp mills in the US and built 1.6m tonnes of paper production capacity in Vietnam. Mountain Eagle Paper has acquired or controlled a number of pulp/paper mills in Sweden, Norway, Finland, the Netherlands and the United States. In Laos, which is rich in forest resources, Sun Paper has built a new paper and pulp plant and laid out 100,000 hectares of pulp forest projects to ensure the supply of raw materials.

Objectively speaking, the rising tide of papermaking raw materials is also a tide of using market mechanisms to eliminate backward and inefficient production capacity. If leading enterprises can seize the opportunity to expand market share, form scale effects to improve profitability, they can also drive the benign development of the entire industry.

While increasing the source of foreign raw materials, we must not forget to improve our own raw material supply.

In addition to the tree planting and forestry that the state has been advocating, the paper industry has also been advocating the "forest and paper integration" operation that takes into account environmental protection and benefits.

Brazil Suzano Pulp and Paper Group combines afforestation, forest operation, logging, pulping, paper making and sales to build a fast-growing and high-yield raw material forest base in various forms, forming a virtuous cycle of industrial chain.

At present, only a few enterprises such as Chenming Paper, Nine Dragons Paper, Sun Paper and Liansheng Paper have really begun to promote the "forest and paper integration" operation, and the first "forest and paper integration" project of Nine Dragons Paper, the domestic leader, is also determined to settle in Guangxi Beihai at the end of 2020.

The reason is fundamentally back to the problem of industrial concentration and scale effect, "forest and paper integration" project at every turn tens of billions of investment on the capital requirements of enterprises is very high threshold, so this theoretically feasible model, but very slow in reality.

But perhaps non-wood pulp raw materials, which have been shrinking in recent years, offer a different possibility.

At least these companies are not giving up on the possibility of more exploration: Shanying Paper's pulp and industrial paper project in Fuyu, Jilin province, includes a production line for making 100,000 tons of corn stalk pulp annually; Silver Spring Paper Company used straw as the main raw material and successfully produced paper mulch products. Taisheng Pulp and Nine Dragons Paper have launched bamboo pulp and paper projects in Nanping and Xianning respectively.