Dashengda's RMB 500 Million Hainan Bet: Why Molded Pulp Is Heating Up

The packaging sector is abuzz over Dashengda's new molded pulp eco-friendly tableware project in Hainan.

A few days ago, Dashengda confirmed a strategic cooperation agreement with Jiteli. The two companies will jointly establish Hainan Dashengda Environmental Technology Co., Ltd. and develop the 'Molded Pulp Eco-Friendly Tableware Intelligent R&D and Production Base Project' in Haikou National High-tech Zone, with total investment of RMB 500 million.

Hainan Dashengda was officially registered on November 10. Once fully built, the project is designed for 30,000 tonnes per year of molded pulp eco-friendly tableware and projected annual sales revenue of RMB 626 million. Dashengda owns 90% of the Hainan venture; Jiteli Environmental Technology (Xiamen) Co., Ltd. holds 10%. Per its latest announcement, Dashengda intends to redirect RMB 277 million in raised funds, originally for the 'annual output of 150 million square meters green, eco-friendly, intelligent high-end packaging carton technical renovation project', to Hainan Dashengda's molded pulp project. This shift signals the company's high expectations for molded pulp.

After completion, Hainan Dashengda will receive Jiteli's support in orders, equipment and production. So who is Jiteli? Let's take a closer look.

Public filings show Jiteli is a leading player in China's molded pulp industry and entered the market early. It supplies both molded pulp equipment and molded pulp products. The company was formed through investment by Far East Environmental Technology and a Hong Kong foreign investor, focusing on low-carbon new materials and the R&D, process development and production of low-carbon eco-friendly food packaging, industrial packaging, daily necessities, new building decoration materials and related product lines.

Far East Jiteli Equipment operates 36 internationally advanced green packaging production lines and holds 95 national invention and utility model patents. It has been described as Asia's strongest molded pulp eco-friendly food packaging production base.

The Dashengda-Jiteli tie-up combines capital, production lines and technology, creating a strong alliance with notable execution efficiency.

A comparable move came in April 2020, when Yuto Technology announced plans to invest RMB 400 million in the Haikou National High-tech Industrial Development Zone to build an eco-friendly degradable products and supporting high-end packaging industrial base.

Yuto's Hainan project is planned to cover about 80 mu and, upon full production, generate annual output value of about RMB 640 million, roughly similar in scale to Hainan Dashengda. It also lists molded pulp tableware as a key target.

Yuto's recent updates indicate that the molded pulp production line at its Hainan project has entered trial production. Media reports suggest Hainan Dashengda's chosen site may be only 20 to 30 kilometers from Hainan Yuto.

Who would have expected that Yuto, once known for premium boxes, and Dashengda, once centered on cartons, would become competitors in molded pulp?

Yet this unexpected shift has unfolded quietly.

It also underscores how rapidly the molded pulp market has heated up over the past two to three years amid the plastic-to-paper wave.

Notably, Dashengda is partnering with Jiteli to expand in molded pulp, and one of Jiteli's major shareholders is Shanying International. Asked about potential competition among the three companies, a Dashengda executive said the molded pulp industry remains in a high-growth phase, manufacturers are more inclined to cooperate than compete, and the company currently sees no such concern.

In recent years, as plastic-to-paper demand has been gradually unlocked, segments such as molded pulp have drawn capital from multiple sides and become the next hotspot in the paper industry chain. Packaging giants including Yuto Technology, Shanying International, Yongfa Group, Kaicheng Technology, Jielong Industry, Meiyingsen, Hexing, Jihong, Stora Enso and Huilin Packaging have all quietly positioned themselves in molded pulp.

Beyond Yuto's additional RMB 400 million investment in a new Hainan molded pulp base, Jielong built five new molded pulp plants within two years, while Jihong spent RMB 10.75 million in 2018 to acquire a 33% stake in Anhui Weizhi Eco-friendly Paper Products Co., Ltd.

Jihong commented that with food safety under greater scrutiny and plastic restriction orders in place, eco-friendly packaging has become a key part of food safety. As mobile internet growth popularizes food delivery, restrictions will gradually extend to plastic tableware, and demand for food-grade packaging with environmental benefits, such as eco-friendly takeout containers, will continue to grow relatively quickly alongside the food delivery sector.

Yongfa, a Hong Kong-listed century-old company, showed sharp market instincts by entering molded pulp in 2014. Its molded pulp operations include four entities: Yongfa (Shanghai) Molding, Yongfa (Henan) Molding, Yongfa (Jiangsu) Molding and Qingdao Yongfa Molding.

These giants' early bets on eco-friendly packaging, especially takeout food containers, are clearly driven by the increasingly vocal full plastic ban process.

If the plastic ban opens market room for alternatives, paper packaging is likely to be a leading beneficiary. At present, paper boxes, paper bags and molded pulp products appear to be among the few practical substitutes for hard-to-degrade disposable plastics. This is likely the core logic behind Yuto, Jihong and other industry players' eagerness to explore the plastic-to-paper market.

The question is: under the plastic ban, why did Yuto and Jihong independently choose eco-friendly food containers centered on takeout packaging?

A review of rules from Jilin, Hainan and the National Development and Reform Commission shows that although many media outlets call it a 'comprehensive plastic ban', the main prohibited items are actually two categories: disposable plastic bags and disposable plastic tableware. Restrictions on plastic bags began in 2008 and have now lasted 13 years. The banned scope is expanding, but the market's room for imagination is no longer very large.

Disposable plastic tableware, meanwhile, has become one of the main sources of plastic waste as food delivery explodes. The share of alternative eco-friendly products remains limited.

While the domestic market is booming, overseas molded pulp giants are watching. Denmark's Thornico is also positioning itself in China; it is the world's largest molded fiber packaging producer. At the end of 2019, Chuzhou Senwo Paper Packaging Co., Ltd. began construction. The project involves total investment of about RMB 120 million and plans an annual output of 200 million pieces of molded egg packaging. Its production technology comes from Hartmann, a company under Thornico Group. The paper egg packaging will use 100% recyclable and biodegradable materials, with an environmentally friendly and sustainable business model throughout.

As plastic pollution worsens and global plastic restrictions advance, more countries will join the global plastic restriction movement, making it a major worldwide trend. In 2007, the State Council announced a plastic restriction order effective from June 2008. It worked well initially, but later effects were less significant as plastic demand grew in food delivery and logistics express sectors.

In 2020, China issued a new plastic ban. Compared with the 2008 plastic restriction order, the 2020 version features gradual targets, full coverage and synergy. The new order specifically explains plastic substitutes. However, China's biodegradable plastics capacity gap is large, and manufacturing processes and recycling systems remain incomplete, so they cannot offset the plastic volume reduced by the ban. China's paper industry is relatively mature, with white cardboard and containerboard capacity rising steadily over the years. Paper products are expected to become the backbone of plastic substitution under the plastic restriction order.

—This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378755.html