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Life After COVID-19: China Pulp & Paper Focused on OCC, Plastics Bans

June 16, 2020
Author: Neo Wu

It’s been a handful of months since the spread of coronavirus started in China. And though the pandemic crippled Chinese markets early on, the country’s pulp and paper industry has avoided major impacts due to COVID-19.

Since mid-March, the consumer goods price (which includes rice, eggs, vegetables, etc.) is overall in declining pattern and back to a “normal” status. Not only the consumer goods, but also restaurants and even high-end luxury goods are growing again. Per CEO of Volkswagen Herbert Diess, besides China, VW has almost no revenue from the rest of the world. And giant Chinese hot-pot food service company, Haidilao, remains 65 times PE after the COVID-19 spread. All of this signals a stable, “back-to-norm” Chinese economy.

China Consumer Price Index (CPI)

The “State of the Country” report in China Congress Conference on May 22 didn’t set clear GDP growth target, instead the focus has been switched to the consumer factors. The target unemployment rate is 6 percent, which actually implies the GDP rate will be no lower than 3 percent. Given the facts of the global recession in almost all countries worldwide, a target of 3 percent is still ambitious.

As for the paper industry in China, it didn’t see much damage from the coronavirus outbreak. Total exports of paper in April increased because of fulfillment of previous overseas orders from before COVID-19.

From the capacity perspective, Q22020 numbers should remain stable, while from the general economic perspective the PMI (Purchasing Manager’s Index) number is likely to be around 51 percent in the coming months as overall manufacturing is back to normal after falling to roughly 36 percent in February.

China NBS Manufacturing PMI

While China's domestic demand is stable and growing slightly, the export business was greatly hurt. According to Fisher China’s resources, Chinese tech giant, Huawei, may see declining orders of electronic consumer products for overseas markets, and that could have a significant impact packaging materials for such goods (some of the decline, of course, reflects the trade tension between China and the United States).

Packaging for example, has relative weaker demand in south China provinces such as Guangdong, Fujian, and Zhejiang, which focus more on light industry for exporting. North China states, however, aren’t as heavily impacted since their industries are well-prepared to service local demands.

WATCH: Neo Wu Discusses China's Pulp and Paper Industry


COVID-19 may also lead to radical change of industry infrastructures.

Online shopping saw a massive boost during the stay-at-home period and seems to be a new norm in people’s daily lives, which creates some demands for eCommerce packaging. Hygiene products are at the front of people’s minds, so tissue and non-woven industry may experience some growth and drive the growth of virgin pulp demands. Medical-related specialties grades are experiencing potential growth, as well.

But with the pandemic greatly recovering, the focus of Chinese paper industry is back to two key areas of reform that could create opportunities for overseas finished paper products and the wood/pulp supply chain:

  1. The OCC ban effective in 2021
  2. The ban of single-use plastics by 2022

According to FisherSolveTM Next, China has significantly reduced its importation of recovered paper (RCP) since the country announced a ban on certain items (including OCC) in mid-2017. Still, with an all-out ban beginning in 2021, China must find a way to fill a 10-million-ton gap in RCP.

China Recovered Paper Imports (2010-2019)

Although China was still the world’s largest importer of RCP in 2019 at 23 percent of total imports, it was a far cry from just a few years ago (2015) when it accounted for a massive 51 percent of RCP imports.

Top Importers of Recovered Paper (2015)Top Importers of Recovered Paper (2019)

The OCC ban will be good for China’s landfills but will certainly present a challenge for a country that relies so heavily on recycled pulp.

China’s Consumption of Pulp by Type (2010-2019)

As for the ban on single-use plastics, there will be massive opportunity for those in the industry to develop sustainable products for a country with a population charging toward 1.5 billion people … that’s quite a lot of grocery bags, drink bottles, food containers, straws, and more.

China’s Recovered Paper Problem

Neo Wu is a paper industry professional with over 10 years of experience in R&D, market research, and consulting in business development and strategic planning. At Fisher, Neo is instrumental in helping pulp and paper producers and industry suppliers emerge from the frenetic growth phase that characterized China’s paper industry over the past decade to bring about market stability and growth through data-driven management.

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