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| Rise of the Paper Dragon |
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http://www.lylths.com
2011-06-16 |
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With few natural resources and rapidly burgeoning domestic demand, the Chinese papermaking industry has become by far the world's largest consumer of recovered paper. With the West's limited ability to increase supply, Ben Messenger looks at some of the factors expected to drive the market in the coming years.
Paper takes its name from Cyperous Papyrus; marsh grass first worked into thin sheets. The Ancient Egyptians used these to write on around 3000BC. Paper as we know it today, however, can be traced back to China. In 105AD T'sai Lun, an official of the Imperial Court during the Han Dynasty began experimenting with pulping a variety of materials including fishing net, rags and later plant fibres. Any which proved sufficiently elastic he used as the raw materials for paper.
These raw materials were boiled, beaten into a mash and then stirred into a pulp, before being spread on a straining frame or basket. When it had formed a thin tissue it was pressed with heavy weights and dried. Lun was celebrated as a hero. The resultant paper was called T'sai Ko-Shi – Distinguished T'sai's Paper.
Since then papermaking has become ever more mechanised, and has spread across the globe, becoming woven into the fabric of almost every society on Earth. Even as we progress into an age of digital, instant communication and free access to vast quantities of information, a world without paper, for most would seem unthinkable.
The second coming of Chinese papermaking
Today paper is used across the world in huge quantities, and for a variety of purposes including newsprint, toilet tissue and packaging. According to a report by the Waste & Resources Action Programme (WRAP), in China, where the story of modern paper began, consumption levels reached 64kg per head in 2009, up from 60kg just one year previous. This figure however, remains well below those seen in the developed world, such as the 266kg per head consumed in the U.S. In 1999, total production of paper and paperboard in China was 29 million tonnes, but with an annual growth rate of 13.9% rose rapidly to 93.8 million tonnes by 2009. With the Chinese economy looking set to continue its astonishing upward trajectory, growing at a better than forecast 9.7% in the first quarter of the year, it seems reasonable to assume that its domestic appetite for paper products will continue to rise. According to analysts, China's paper making industries, particularly the larger enterprises are continuing to vigorously ramp up capacity to meet this increased demand.
In its recent publication, Research Report on China's Papermaking Industry 2011-2012, market analysts, China Research and Intelligence, claim that due to a lack of fibre resources China's supply capacity can no longer meet the demand for expansion, while fibre material has become a bottleneck constraining the development of the country's papermaking industry. According to the report, in 2009 wood pulp accounted for 23% of the raw materials consumed by the industry, non-wood pulp accounted for 15%, and waste paper pulp made up the bulk with 62%. Over recent years, the proportion of waste paper pulp has been on the rise, while that of non-wood pulp has been in decline.
Recovering markets
Waste paper recycling, then, is playing an increasingly pivotal role in supporting the development of China's papermaking industry. China's waste paper imports grew from 2.52 million tonnes in 1999 to 27.5 million tonnes in 2009, with annual growth rate of over 30%. With such a rapid growth in demand, prices for imported waste paper have increased substantially. In 1999 imported waste paper cost the Chinese $97 per tonne, by 2008 that figure had skyrocketed to an average price of $230 per tonne, peaking briefly at $300 per tonne. This was before the world fell into the grip of economic turmoil: by 2009 the figure stood at $138. According to Export to China, at the time of writing the price had recovered almost to its pre-credit crunch highs and stood at $247 per tonne.
In its report, The Chinese markets for recovered paper and plastics - an update, WRAP assesses that the Chinese markets were particularly affected by the market disruption in late 2008, as the effects coincided with the end of the momentum provided by the Olympic Games. In the space of one month, UK exports of recovered paper and plastics to China fell by 40% - 45%, and prices fell even more dramatically, by up to 66% in some cases. However, underlying Chinese demand for the materials remained resilient, and the market quickly stabilised, with Chinese buyers making the most of the low prices.
Figures published by China Research and Intelligence show that China's imported waste paper mainly comes from the U.S., Japan, the UK and other countries. In 2009, China imported 10.8 million tonnes of waste paper from the U.S., accounting for over 39% of the total, while 4.1 million tonnes were imported from Japan, accounting for 15%,. A further 2.8 million tonnes were imported from the UK, making up roughly 10% of the total.
According to forestry products industry information specialist, Resource Information Systems Inc (RISI), in 2009 China accounted for 54% of global trade in recovered fibre, a substantial increase from its 34% share in 2004. The U.S. exported over two thirds of its recovered paper to China in 2009, just over 13 million of the 19 million tonnes it recovered. Chinese paper and board mills imported a further 17 million tonnes from the rest of the world.
Feeding the dragon
RISI forecasts that China will account for more than 60% of the worldwide growth in demand between 2011 and 2025, with its total demand expected to approach 184 million tonnes by 2025
Based on already announced capacity expansion plans, further strong growth for the containerboard market will add over 13 million tonnes of new capacity by 2012, with North America and Western Europe continuing to provide recycled fibre to support this expansion. Pöyry, a management consultancy and analyst in the pulp and paper supply chain, has forecast that by 2015 Chinese paper producers could be using around 81 million tonnes of recovered paper, and close to 98 million tonnes by 2020 – more than a 50% increase on current levels.
Economists at RISI are predicting that China will continue to be the largest net importer of recovered paper, and expect to see China's imports reach about 45 million tonnes by 2025, up from 28 million tonnes in 2009. RISI is also predicting that despite its forecast for a recovered paper utilisation rate of 65% by 2025, up from the current 56% rate, growth in recovered paper consumption will be constrained by limited supply and higher recovered paper prices on a global basis. Recovered paper consumption is forecast to be about 400 million tonnes by 2025, compared with 206 million tonnes in 2009. Although RISI expects the quantity of trade in recovered paper to expand over the next 15 years, it is predicting that the share of trade in total recovered paper demand will decline. It attributes this to limited supplies and high prices in the developed world, which it says will force developing regions to recover more paper domestically.
East to West to East
There is a widely held expectation that the Chinese economy will continue to grow, coupled with demand for paper products. What is less certain, however, is the knock on effects that this rise in consumption will have on the recovered paper markets.
Many factors are intertwined. China has a serious lack of forestry resources that its papermaking industry can call on. Inevitably it will have to rely more heavily on recovered paper fibres if it is to meet the expected growth in domestic consumption. While its own waste paper collection and recovery schemes are in their relative infancies, the West by contrast has advanced systems in place. In many ways it could be seen as a symbiotic relationship. China ships huge quantities of packaged goods to the West, the West sends those same cargo ships back to China laden with recovered paper. It saves the ships from sailing empty. It pays for sophisticated recycling schemes. And it solves China's raw materials shortage. An international trade win-win?
The art of papermaking may well be China's greatest ever export, but 2000 years later, as the country prepares to overhaul the United States as the largest economy on Earth, the dragon's gigantic appetite for imported paper looks set to continue. |
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