Paper producers gearing up for new expansion in China again!

SHANGHAI, Mai. 21, 2010 (RISI) - Expansion, expansion and expansion, in almost all paper grades, was the word that was heard most in talks among industry CEOs and executives during the recently held Metso Summit at the Finland pavilion at the Shanghai World EXPO. The Chinese market seems to be fully recovered from earlier economic down turns and players are gearing up for new growth.

"China's paper production reached 22.846 million tonnes during January to March in 2010, up 22.85% compared to the same period last year. In March alone, China produced 8.644 million tonnes of paper, up 17.4% year on year" says Guo Yongxin, assistant director and senior engineer of China National Information Center of Light Industry.

As one of the main suppliers to China's pulp and paper industry, Metso's confidence in sustainable growth in the industry by leveraging advanced technology is obvious.

"Ever increasing energy costs and emissions regulations, as well as the need to decrease fresh water usage are major considerations for the process industry around the world today. The pulp and paper industry is no exception. Investment in the development and implementation of the best available technology is the only way to boost energy and materials efficiency, and to reduce emissions and water consumption", says Ari Harmaala, president of Metso operations in China at the summit. Metso is one of the sponsors of the Finland pavilion at the World EXPO.

Still challenges ahead

Nevertheless, there is no doubt that the industry faces challenges in sustainable development and it was this that became the hot topic during the summit- for instance short supply of raw material, rising raw material prices, environmental issues and world trade conflicts.

"We should have a trust system in the industry and communicate well about expansion plans so that we can avoid over supply. Meanwhile, some paper grade sectors need to be further consolidated and government policies on shutting down polluted and outdated capacity are helping to reach this goal," says Yang Yanliang, Chairman of Bohui Paper.

Today, carbon emissions and ecological sustainability are already of high concern in China, but they are expected to grow in importance as stricter policies are being implemented.

In addition, to secure wood and fiber is also a big challenge for paper producers in China. The government has formulated a forestry-pulp-paper integration policy for the industry in recent years. "However, implementation of these policies in supporting growing forestry for the paper industry is needed," says Song Wangqiu, president of Stora Enso China.

Fast expansion - new faces

It is quite clear that a new round of fast expansion in almost all paper grades (except for newsprint) is the main theme in the next few years amid an improved economy and expected growing domestic demand after a halt impacted by the world financial crisis.

That is part of the reason we can see new faces joining the industry, for example, a newly established China National Paper Industry Investment Corp (CNPIIC), a subsidiary of Chentong Group, a central government controlled group focused on asset management, logistics and international trade, with total assets of RMB 30 billion ($4.39 billion), according to the company's official website.

"We are building our 12-5 plans (in the year of 2011-2015) now and aim to expand our capacity to 3 million tonnes by 2015," says Hong Jun, secretary of the CPC, Deputy General Manager. CNPIIC has taken over five paper companies in the industry so far.

Annie Zhu can be reached at azhu@risi.com.