Sichuan Paper Industry Survey: Bamboo Pulp, Packaging Board and Tissue Paper Performance in 2020 and Jan-Aug 2021

To obtain a clear picture of Sichuan's paper sector operations and business conditions, the Sichuan Paper Industry Association and the Sichuan Paper Society carried out on-site visits and research between August 30 and September 10, 2021, covering selected enterprises engaged in bamboo pulping and papermaking, packaging paperboard production, tissue paper production and tissue paper processing.

The tour covered 22 companies: Sichuan Meishan Fenghua Paper Co., Ltd., Sichuan Huanlong New Materials Co., Ltd., Jiajiang Huifeng Paper Co., Ltd., Sichuan Jinfu Paper Products Co., Ltd., Sichuan Yongfeng Paper Group—Muchuan Hefeng Paper Co., Ltd., Sichuan Yongfeng Paper Co., Ltd., Sichuan Yongfeng Pulp and Paper Co., Ltd., Nine Dragons Paper (Leshan) Co., Ltd., Sichuan Fengsheng Paper Technology Co., Ltd., Yibin Paper Co., Ltd., Luzhou Yongfeng Pulp and Paper Co., Ltd., Sichuan Tianzhu Bamboo Resources Development Co., Ltd., Sichuan Yinge Bamboo Pulp Paper Co., Ltd., Sichuan Jintian Paper Co., Ltd., Sichuan Sinopec Yashi Paper Co., Ltd., Zhongshun Jierou (Sichuan) Paper Co., Ltd., Sichuan Shubang Industrial Co., Ltd., Sichuan Shifang Wangfeng Green Apple Paper Co., Ltd., Sichuan Yuanzhou Industrial Co., Ltd., Sichuan Weibang Paper Co., Ltd., Sichuan Yongsheng Printing Co., Ltd., and Sichuan Renliang Industrial Co., Ltd.

Information gathered through site inspections and talks with company leaders, engineering and technical staff and sales managers was consolidated into a survey report, whose key findings are set out below:

1. Production and operations in 2020 and January-August 2021

1.1 Bamboo pulping and papermaking enterprises

The overseas pandemic tightened wood pulp supply and drove prices sharply higher, allowing non-wood pulp substitution to emerge and demand to rise; bamboo pulp continued to strengthen its role in papermaking. Data show that from 2010 to 2020, the share of all papermaking raw materials other than wood pulp and bamboo pulp in total output declined, while bamboo pulp's share increased from 9.5% in 2010 to 10.5 in 2020. Sichuan hosts more than 60% of China's bamboo pulp capacity and produced 1.183 million tonnes in 2020, making it the country's leading bamboo pulp province.

In 2020, imported pulp prices shaped the bamboo pulp market, which ran low throughout the year. The first half was comparatively stronger, with bamboo pulp prices reaching international wood pulp levels; in the second half, prices slid to a multi-year low. Dedicated pulping companies had virtually no profit and largely operated to preserve cash flow. Raw material bamboo chip shortages and high pulp board inventories also weighed on producers, dragging down industry operating rates. Although full-year output rose versus 2019, most companies posted lower tax and profit contributions.

In 2021, international pulp prices pushed bamboo pulp prices sharply up in the first quarter; as imported pulp prices retreated and the downstream market entered its off-season, bamboo pulp prices began falling from May. Bamboo pulp output edged up year on year, but higher logistics and energy costs squeezed margins, with some companies slipping into losses.

1.2 Packaging paperboard enterprises

Sichuan had 20 packaging paperboard companies in 2020, two fewer than a year earlier. Output and consumption of the three main grades—white paperboard, containerboard and corrugating medium—all increased from 2019. Raw material costs pushed packaging paperboard prices gradually upward from the second half of the year, while above-scale companies saw tax and profit rise sharply from the previous year and maintained ample cash flow. Stricter environmental rules, large and rapid swings in domestic waste paper prices, and intensifying competition led smaller companies to produce against orders; higher waste paper prices and production costs left some SMEs with only razor-thin margins.

In 2021, under the plastic restriction order, containerboard and corrugating medium became key substitutes for plastic packaging materials. As the national waste ban and plastic restriction order took effect and advanced, pulp moulding emerged as a standout in packaging under the plastic ban and restriction trend, prompting packaging paperboard companies from both inside and outside Sichuan to invest in new plants or expand capacity in the province. With demand stronger and inventories generally reasonable, output and sales were brisk, and tax and profit are expected to rise from 2020.

1.3 Tissue paper base paper producers

Tissue paper is a daily necessity. In the first quarter of 2020, delayed starts, low inventories and pulp prices pushed prices upward; from April, prices fell, dropping by nearly RMB 1,000 per tonne. Market adjustments and production cuts or stoppages by some companies reduced 2020 output from 2019, but lower pulp prices still left many tissue producers with thin profits.

Statistics from the Tissue Paper Committee show that by the end of June 2021, about 1.508 million t of tissue paper capacity had come on stream in 2021, the highest level for the same period on record, making phased overcapacity very clear. From January to August 2021, paper prices spiked and then retreated, with a peak-to-trough gap of about RMB 1,500 per tonne. Some large mills with integrated forestry-pulp-paper operations benefited from raw material cost advantages and kept profit pressure relatively manageable, while many SMEs buying market pulp faced a tougher situation; some were forced to cut or halt output, and a small number adjusted their product mix toward customized and differentiated products and expanded sales channels such as base paper contract production and finished product contract manufacturing to serve different customer groups and keep production running.

1.4 Tissue paper processing enterprises

In 2020, competition from wood pulp and out-of-province producers reduced overall output and sales; on exports, the pandemic and soaring ocean freight caused bamboo pulp paper exports to fall markedly.

In 2021, globally rising upstream pulp, logistics and energy prices, together with disorderly market competition, caused cost inversion between pulp and some paper prices, further highlighting the advantages of bamboo pulp and paper integration. At the same time, severe global container supply-demand imbalance drove freight costs higher, cutting exports further. Beyond offline supermarkets, traditional e-commerce sales were also weak; newer channels such as livestream selling and community e-commerce have low entry barriers and fiercer competition, and frequent low prices to attract buyers—along with some companies passing off inferior goods as quality products—have seriously damaged the brand image of Sichuan bamboo pulp paper.

1. Difficulties and problems in enterprise production and operations
2. Accelerate implementation of the bamboo chip VAT verification and deduction policy, reduce tax risks, and secure policy benefits during the peak bamboo chip purchasing season;
3. Progress on the 'dual carbon' agenda is slow and professional training is lacking; companies hope the Sichuan Paper Association and the Society will work with relevant departments to organize training;
4. Companies hope the Sichuan Paper Association and the Society will work with relevant departments to take a holistic view of bamboo pulping and packaging paperboard development, make reasonable arrangements based on resources, environmental capacity and local capacity, optimize the industrial structure and pursue moderate growth;
5. Bamboo forest base policy-making by the Sichuan Forestry Department lags; companies hope the Sichuan Paper Association and the Society will urge relevant departments to prioritize bamboo forest area surveys, low-yield bamboo forest improvement and new bamboo species cultivation;
6. Some companies pass off inferior goods as quality products, buying mixed-pulp base paper and selling it as pure bamboo pulp paper, which seriously disrupts market order; companies hope the Sichuan Paper Industry Association and the Society will leverage the 'bamboo pulp paper' collective trademark and coordinate with the Sichuan Provincial Administration for Market Regulation and other departments to regulate online and offline players and protect the Sichuan 'bamboo pulp paper' brand;
7. Skilled workers are scarce and recruitment is difficult; companies hope to address this through the industry-university-research cooperation platform of the Sichuan Paper Industry Association, the Society and Sichuan University of Science and Engineering;
8. As a communication and exchange platform, the Sichuan Paper Industry Association and the Society should provide relevant information more frequently and promptly, seek policy support for companies, help them connect with relevant functional departments, and resolve difficulties and problems in production and operations.
9. Responses to the problems and difficulties

The survey brought many practical problems and difficulties to light. Based on actual conditions, the Sichuan Paper Industry Association and the Society will coordinate, report and request support from higher-level departments to address the following issues:

1. On verification and deduction of the tax burden on bamboo chip purchases, the Sichuan Paper Industry Association and the Society prepared a report in early September and submitted it to the Sichuan Provincial Tax Service; a reply is pending;
2. On 'dual carbon,' the Sichuan Paper Industry Association and the Society have maintained contact with the Sichuan Provincial Department of Ecology and Environment, the Provincial Environmental Policy Research Institute and relevant carbon asset management companies, and will pass on relevant training opportunities to companies as soon as they arise;
3. For project planning across Sichuan and the explanation and improvement of related policies, the Sichuan Paper Industry Association and the Society will, within their duties, strive for policy support from national and Sichuan provincial departments to support lawful and compliant rational development, and will provide companies with comprehensive consulting services and support;
4. On bamboo forest base construction, low-yield forest improvement and new bamboo species cultivation, the Sichuan Paper Industry Association and the Society will strengthen communication with relevant departments and, through the industry-university-research platform and cooperation with relevant enterprises and institutions, resolve technical issues such as new bamboo species cultivation and low-yield forest improvement;
5. On self-discipline in Sichuan's bamboo pulp paper industry, the Sichuan Paper Industry Association and the Society will use the group standards 'Natural-Colour Bamboo Pulp' and 'Bamboo Pulp Household Paper' and the 'bamboo pulp paper' collective trademark as the basis, monitor implementation, and work with relevant departments on quality supervision and industry conduct;
6. To address the shortage of skilled workers, the Sichuan Paper Industry Association and the Society will use the industry-university-research platform to train existing workshop workers through on-site training and commissioned school training, and feed company needs back to schools so they can adjust student training models and produce talent suited to the industry;
7. The Sichuan Paper Industry Association and the Society should strengthen communication with Sichuan provincial, municipal and relevant departments, provide timely and effective information to companies, and help them obtain more policy and funding support.

Sichuan Paper Industry Association / Sichuan Paper Society

September 13, 2021

——This article is reprinted from China Packaging Network (pack.cn). Original link: http://news.pack.cn/show-378287.html