China makes big investments in packaging grades.

China is poised for a decade of growth. For the period 2000-2015, paper and paperboard consumption and production will grow rapidly in China. Who is adding all the capacity, what grades are going to be produced, who owns the new mills, and who is supplying the machinery?

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Containerboard demand is forecast to more than double, growing at more than 7% annually and increasing from 11 to 26 million metric tons. Production will grow at a similar rate, with 19 new paper machines coming on stream during 2003-2005--yet net imports are still expected to grow in the long run. Most of the new machines will be based on recycled fiber--mainly OCC.

Market experts expect cartonboard demand to double, growing at 4.5%/yr and increasing by 4 million metric tons. Production is set to grow accordingly, with 13 new machines starting up in 2003-2005. As for containerboard, the majority of the new machines will use recycled fiber.

KEY PLAYERS, NEW CAPACITY

The biggest containerboard producers in China are Nine Dragons (1.5 million metric tons/yr), Lee & Man Paper Manufacturing (0.9 million tons/yr), Shanying Paper (0.4 million tons/yr), Zhongshan-Rengo Hung Hing Paper Manufacturing (0.4 million tons/yr) and Guangzhou Wanlida Paper (0.3 million tons/yr). These five players account for 40% of the industrial scale capacity.

The new machines are largely investments by established producers such as Nine Dragons and Lee & Man Paper. A majority of the new machines for which work has started or ground has been broken will produce recycled liner and medium; their sizes vary from 100,000 metric tons/yr to 450,000 metric tons/yr, and most are 150-250,000 metric tons/yr. The biggest new machines are supplied by Voith Paper/Liaoyang Voith. There is also a market for second hand machines, and five of those will start up from 2003-2005.

Projects under consideration could add another 2.5 million metric tons/yr. The planned capacities of these new machines are bigger, ranging from 300,000 metric tons/yr to 450,000 metric tons/yr. Today, the biggest machines in China are 400,000-450,000 metric tons/yr (Nine Dragons).

Top cartonboard producers are Shandong Sun Paper (0.5 million metric tons/yr), Asia Pulp & Paper (0.5 million metric tons/yr), Nine Dragons Paper Industries (0.5 million metric tons/yr), Shandong Bohui Paper (0.3 million metric tons/yr) and Dongguan Jian Hui Paper (0.3 million metric tons/yr). These five account for 40% of capacity, and typically use recycled fiber for the production of white lined chipboard (WLC), the key grade in China.

The majority of the decided projects are by established cartonboard producers. The sizes of the new machines range from 50,000 metric tons/yr to 700,000 metric tons/yr--quite a range. Metso/Valmet-Xian Paper will supply the biggest cartonboard machines. Projects under consideration could add up to nearly 2 million metric tons of capacity; today, there are ten announced plans, which typically include 300,000 metric tons/yr board machines.

Recovered paper is expected to provide much of the required new fiber for production growth in China. Use will increase by 19 million metric tons/yr, from 16 million to 35 million metric tons between 2000 and 2015. While China is expected to increase its recovery rate from 34% to 41%, enabling the recovery of 30 million metric tons/yr in 2015, the rapid growth will still require fiber imports.

Note: This article is part of a series by Jaakko Poyry Management Consulting, Tarrytown, New York, USA, a provider of marketing and consulting services. Contact Soile Kilpi by email at [e-mail], or by phone at [phone].