Reading the 2021 China Paper Industry Competitiveness Report: A “Silver Age” and Three Structural Contradictions

China National Pulp and Paper Research Institute Co., Ltd.

China Paper Magazine

2021 China Paper Industry Competitiveness Report

Comprehensive analysis, competitiveness index,

innovation index, papermaking raw material analysis,

recycled fiber analysis, pulp and papermaking equipment analysis,

plus a bibliometric review of biomass refining

delivering the latest trend insights to the industry

After decades of expansion, China's paper industry

is now crossing into a new stage of its industry life cycle

The old growth formula — factor inputs, scale expansion and cost-based competition — has run into limits, and innovation-driven technological progress is now the only realistic route to sustainable corporate development.

Yet how competitive and how innovative is China's paper sector really? What level has it reached, and where are the weak links? Those questions call for rigorous, science-based evaluation rather than guesswork.

Global position stays firmly in place

Statistics show that China's paper output grew against the headwinds in 2020, keeping its global standing firmly in place.

Data released by the China Paper Association put China's paper and paperboard output at 112.6 million tonnes in 2020, a 4.6% year-on-year increase — close to the all-time high set in 2017, with positive growth achieved against the trend and a rapid return to peak levels. Pulp output told a different story: after the waste paper ban began in 2017, annual pulp output held in the 72–74 million tonne band from 2018 to 2020, below the 79–80 million tonnes seen in earlier years.

The reason lies in shrinking waste paper imports and limited headroom for growth in domestic recovery, which left recycled fiber raw materials in acute short supply. With waste paper imports halted completely from 2021, the fiber squeeze will not ease in the near term.

Paper products have swung widely. Output fell sharply in both 2017 and 2018, edged up in 2019 and slipped again in 2020 as the pandemic dampened consumer demand and pushed the segment into a mild recession. With China's economy back on track and downstream consumption recovering across the board, 2021 brought renewed growth.

Rising output came alongside a surge in paper imports. Results improved, but the pressure ahead jumped sharply, driven by three factors: the far-reaching impact of the dual carbon goals, coal shortages and power cuts that decide whether some mills survive, and cost inflation that erodes competitive advantage.

Viewed globally, the report gathered 28 specific indicators across eight dimensions — fundamentals, economy, market, consumption, science and technology, trade, demand and potential — standardized the data, applied reasonable weightings and produced a composite ranking of 97 countries. China and the United States sit at the front, yet China's paper industry still trails the US on economic competitiveness and technological competitiveness.

Industrial innovation capability is a composite measure of every innovation-related capacity in the innovation process. Drawing on how industrial innovation actually works, the report built an evaluation index system for global paper industry innovation capability: eight first-tier indicators — innovation environment, ecology, fundamentals, resources, input, performance, output and potential — plus 38 specific indicators, applied to rank 97 countries.

The figures put the United States and China in the lead, but China trails the US on five first-tier indicators: innovation ecology, fundamentals, resources, input and potential. Closing that gap means strengthening innovation capacity across the board, raising the innovation level and accelerating the catch-up.

Structural adjustment: still an uphill task

With several factors converging, raw material shortages and rising prices are weighing on the industry, and reshaping China's papermaking raw material mix remains a formidable challenge.

More specifically, pulp mix adjustment has sped up and wood pulp imports keep climbing; with waste paper imports restricted, the raw material shift continues to deepen; hardwood and softwood chip imports are rising in both volume and price. As large volumes of new papermaking capacity reach the market, raw material shortages grow more acute. Reliance on imported wood pulp remains hard to break, and domestic waste paper quality has fallen further since the ban. Faced with this, mills need a strategic commitment to sustainable development and a multi-pronged approach to securing fiber supply.

China's full waste import ban in 2021 also hit recycled fiber use hard. The fiber mix has shifted visibly: domestic waste paper recovery has risen somewhat, while waste paper pulp imports have grown rapidly.

Worldwide, waste paper recovery and export volumes declined across Asia, Europe and North America. China's waste paper pulp now comes mainly from Southeast Asia. Prices for both waste paper and waste paper pulp have risen and fluctuated to varying degrees. The shortage of recycled fiber will keep constraining China's paper industry for some time to come.

Looking at China's pulp and papermaking equipment sector in recent years, the number of companies keeps shrinking, asset growth is sluggish, performance has dropped sharply and operating pressure keeps building. On the export side, value has improved and the number of destination countries has grown steadily, though unit volumes have swung widely. As domestic equipment advances, demand for imported machinery is falling, with both import value and unit numbers declining.

Even so, Chinese pulp and papermaking equipment is priced well below what international suppliers charge. Lifting those prices by improving the quality and performance of domestically built machinery is a direction for the years ahead.

Meanwhile, after last year's spotlight on nanocellulose, this year's report turns to biomass refining, using bibliometric analysis to map research hotspots and development directions and to give experts, scholars and companies fresh ideas for technological innovation.

The publication data on biomass refining shows China's paper count rising fast and now far ahead of the field. Of the world's top 20 research institutions, seven are Chinese; among the top five, four are Chinese — evidence that China has caught up in biomass refining and is positioning itself for future leadership. On patents, biomass refining filings began to climb from 2000 and accelerated sharply after 2010.

By technology category, activity clusters around pulp or paper stock compositions, cellulose, fiber raw materials, polysaccharides and their derivatives, and polymer compounds.

Three contradictions the industry must confront

The paper industry is in the middle of sweeping change, and the new problems it faces can be grouped into three main contradictions.

1. Carbon peaking versus industry development

Counting from 2000, the sector's first decade deserves the label “golden decade”; from 2011 to 2030 growth slows, marking a “silver period”. Beyond 2030, forecasting in 10-year blocks with upper and lower growth limits points to enormous barriers over the next 30 years. The sharpest contradiction today is how to reconcile the dual carbon goals with capacity growth.

1. Pulp projects versus wood chip supply and demand

Data for 2020 and the first seven months of 2021 show that in just 18 months, domestic companies planned more than 6 million tonnes of new pulp capacity. Solving wood chip supply is a practical problem every company faces.

1. New capacity versus investment running too fast

New or planned papermaking capacity hit 20.2 million tonnes in 2019, 20.8 million tonnes in 2020 and another 4.8 million tonnes in the first seven months of 2021 — nearly 46 million tonnes in total, about one third of China's current paper output. The market cannot absorb that quickly, which will inevitably sharpen competition and accelerate the reshaping of the industry.

Author's affiliation: China National Pulp and Paper Research Institute Co., Ltd.

——Reprinted from China Packaging Network (pack.cn); original link: http://news.pack.cn/show-378798.html