Thu, September - 9 - 2010 |
(on a truly global perspective)
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Just about everyone knows the influence that China is having on world markets. People have developed a level of concern about the increasing trade deficit the United States has with China. Many of the appliances, electronics, shoes and clothing seen in Wal-Mart and other major retailers carry a Made in China or Assembled in China label. According to “China and the Global Market for Forest Products” by A. White et al., China makes 30 percent of the world’s televisions, 50 percent of the world’s cameras, and 70 percent of the world’s photocopiers. There have been concerns that the rapid growth of manufacturing in general and paper manufacture in particular in China will be a threat to US manufacturing. An article on the Chinese tissue market in the October/November issue of Tissue World as well as some personal experience with manufacturing in China initiated a closer look at what is happening in the Chinese paper industry.
A lot of exposure has been given to the boom in the Chinese paper industry. Quite a few world class paper machines have started up in China in recent few years. An article in Solutions! Magazine (March 2004, H. Oinonen, N. Xiaorong, pages 24-27) listed the eleven largest paper machines in China. All of them have started up during or after 1999. In addition the article listed twelve machines in various stages of construction. All of them were expected to startup in 2004 or 2005. The smallest capacity machine of the latter group was 300,000 metric tons/year! More attention grabbing was the statement that “the Chinese paper industry grew by 50 new paper and board machines” in 2003.
Does this imply that Chinese made paper will become a significant threat to Wisconsin paper? The answer requires a bit more information about the current economic situation in China. The Solutions! article referenced above indicated the per capita income for China had reached US$1000. While this does not seem to be very substantial, this provides a level of disposable income, however meager, that was nonexistent under the earlier political system. The controlled move to a market economy is starting to create markets that are experiencing rapid growth. There is an attendant growth in the consumption of paper and paperboard products.
According to a number of sources, the production of paper and paperboard has been rising rapidly. In 2003 the overall production of paper and paperboard was just under 40 million metric tons. In 2004 this rose to about 46 million metric tons, an increase of about 15%! In 2005, production exceeded 51 million metric tons. What balances this is that consumption of paper and paperboard for those years was 45, 49 and more than 55 million metric tons respectively. Since 1994, annual consumption of paper and paperboard has exceeded production. Although the gap is narrowing, China’s demand for these products still exceeds the capacity.
A major contributor to the increasing demand for paper is the change in the basic economy of China. As more people move from rural, agrarian based localities to seek higher paying, manufacturing jobs, demand for paper products increases. The desire for newspapers, books, printed materials as well as bath tissue and foodservice items increases as the population moves from rural to urban areas. Even with the rapid increase in paper consumption, the per capita consumption of paper in China lags behind most of the world. Chinese per capita consumption per year was 29 kg in 2001 versus a global per capita consumption of 52 kg per year. For comparison, most industrialized nations fall in the 200-300 kg consumption per year with the US having consumption of 330 kg of paper and paperboard per year! While China has many large modern cities, the majority of the population still lives in the rural areas of the country. As the population shifts to accommodate the increase in manufacturing the demand for paper and paperboard will continue to increase as well.
A significant issue for China is the availability of fiber to supply the growing needs of the paper industry. China does not have large forest resources. Most of the fiber currently used to make paper is recycled/reclaimed paper fiber or non-woody fibers such as bamboo, straw or reed. In 2004, 52 percent of the pulp used in Chinese paper and board products came from waste paper (much of it bought from the US). Thirty percent of the fiber came from non-wood fiber that was mainly pulped in China. The remaining twenty percent of pulp was wood pulp that was either imported as market pulp, or imported as chips or logs. Most of the domestically harvested timber in China goes into the manufacture of furniture or structural wood products such as plywood.
Heavy reliance on recycled fiber and non-wood fiber results in most of the Chinese paper and board products falling into the low and medium quality arena. While some of the new world class machines do produce world class, quality products, the majority of the Chinese products generally fall below the standard quality of comparable US and EU products. The Chinese government is investing in reforestation and establishment of fast-growing plantations. $3.7 billion dollars were allocated to forest restoration and protection in 2004.
While the spotlight has been on the major new paper installations in China, it is important to note the challenges the Chinese industry faces. Even with all of the new machine startups, the average Chinese paper mill production is only 6,500 tons/year. There are a large number of small mills in China. In a paper by H. Li, J. Luo and P. McCarthy, “Economic Transition and Demand Pattern: Evidence from China’s Paper and Paperboard Industry” available online at the Center for Paper Business and Industry Studies website (http://www.cpbis.gatech.edu/ ) it was noted that only 44 of the 4748 paper mills in China produce more than 10,000 tons per year (2004). Small mills with old machines using primarily recycled or non-wood fiber furnishes trying to accommodate a growth rate of 13-15% is a significant challenge. It is no wonder why so much interest is focused on China, but are they an immediate threat to the Wisconsin paper industry? In most instances, that is likely to be some years away.
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