Somerset - Sappi

8
PRODUCTION CAPACITY AND EXPORTS OF COATED WOODFREE PAPER OUT OF
CHINA HAVE BEEN ON THE INCREASE IN THE LAST COUPLE OF YEARS. ASIAN
PRODUCERS ARE KNOWN TO BE QUICK TO ADAPT TO CHANGING MARKET
NEEDS AND THIS IS NOW BEING PUT TO THE TEST AS THEY FACE ANTI-DUMPING
DUTIES IN MANY MARKETS AROUND THE WORLD, LOWER DOMESTIC DEMAND
AND RISING COSTS.
HAS THE CHINESE TIGER LOST ITS ROAR?
Since 2000, China has tripled its paper
production. In 2009 China accounted for
over 17% of the world's output and
consolidated its place as one of the
world's largest exporters in the industry.
In the last two years there have been
over three million tons of Coated
Woodfree (CWF) and 350,000 tons of
Lightweight Coated (LWC) capacity
coming on stream in China. The export
of CWF out of China has also been
increasing. Only 930,000 tons in 2007, it
had been expected to grow to
approximately 3 million tons by 2015.
Capacity control is now a very important
issue in the paper industry. Most recent
cutbacks in coated paper capacity have
been in the mature regions, whilst new
capacity has been built in China because
of expected demand growth in the
region, as well as finance and financial
incentives being available to those
willing to commit themselves to this
industry. This has accelerated the “west
to east” shift in the paper industries'
manufacturing centre of gravity and
could see a change in the names of the
leading players (see Table1).
Leading Suppliers of Coated Paper 2012
Capacity '000 tons
Table1 | Source: EMGE March 2012
THE WEST – BARING ITS TEETH
Nervousness about where this capacity
could be heading has led to a number of
anti-dumping and anti-subsidy
investigations, resulting in significant
duties being imposed on Chinese and
other coated paper imports into North
America (2010), Europe (2011), Brazil
(2012) and Argentina (2012). Other
investigations are ongoing in Taiwan,
Pakistan and Thailand. This has meant
that most Chinese new capacity has
been forced back into the Asia region,
causing severe overcapacity.
THE TIGER HISSING BACK
Chinese manufacturers have had to redirect
what tonnage they can to other
markets e.g. Japan, India, Middle East
and Africa. They have also looked at
producing more specific coated paper
grades such as LWC for magazine
printing or one-side coated, even moving
capacity to uncoated to relieve the
pressure. Climbing fibre, energy and
labour costs have become a major issue
for pulp and paper mills in China. They
are also suffering – along with other
paper manufacturers - from sharply
increasing freight costs. This, along with
the severe overcapacity, is forcing
capacity closure decisions.