Why is Chinese paper so competitive?

By
Published: Tuesday, 23 November 2010

Ian Wilson and Larry Lai examine how China’s paper industry has carved such a dominant global position and the impact this has had on filler and coating mineral consumption



In 2009, China became the world’s largest producer of paper and board (P&B) with an estimated 90m. tpa worth of production up from 78m. tpa in 2008. It is projected that Chinese P&B output could reach 98m. tpa by the end of this year.

The growth has been rapid from the 20m. tpa figure in 1995 and is based on the following key factors which help to make Chinese paper so competitive in the world market.

China has the largest population in the world and has shown strong growth. The country’s population today stands at 1.34bn, accounting for 20% of the world’s people and this is in a country where child birth is government controlled.

The dragon has shown continuing GDP growth of between 8-10% over the last decade.

This has driven P&B demand per capita (kg) in China from 36kg in 2003 to 59kg in 2008 and the remaining growth left in the country is providing strong fundamentals for continuing growth.

China is deficient in pulp fibre and imports mainly from Asia and South America. It also imports 46% of the world’s recovered paper. While shortage of fibre is a negative the utilisation of so much of the world’s recovered paper is a plus as it does not have to be burned (adding to CO2 in the atmosphere) or dumped in landfill sites.

Investment in key areas has been encouraged by the Chinese government and large international companies have invested in state-of-the-art modern paper mills. The whole sector has been a bonanza for equipment and other suppliers. Projects are mega-scale with just one new proposed paper machine planned to produce 1.6m. tpa paper.

China has also state-of-the art paper machines handling both speed and width imported from Metso and Voith.

Modern machines produce a better base paper than older machines which is an advantage for China. With new machines, the quality of paper can be checked automatically online and does not need such experienced paper engineers to operate as older machines.

Ground calcium carbonate (GCC) is the main paper pigment utilised as filler, pre-coating and coating pigment. In China, there is a shortage of high quality kaolin deposits suitable for paper coating although it does have abundant sources of high quality marble near to the main papermaking areas.

Key developments have been the installation of satellite wet-grinding technology for GCC.

The first satellite plant in China was at APP Ningbo Chung Hua mill in 1993 with a capacity of 30,000 tpa. In 1997, APP Dagang commissioned ECC International (now Imerys) to build a turnkey 250,000 tpa GCC satellite plant.

Now, finer grades are being developed (up to 98 %<2μm). Previously topcoats were a blend of 70% GCC and 30% kaolin. The ratio is now 85-90% GCC plus 10-15% kaolin. With more GCC usage in the higher coating colour solids saves energy on drying costs.

Chinese Printing and Writing paper (P&W) is being developed with a much higher pigment loading than elsewhere in the world. Pigment loadings of 40-50% are now common and new machines will run, for the first time anywhere in the world, with up to 55% pigment loading (mainly GCC).

This gives clear cost advantages as GCC in China is relatively cheap (compared with GCC offered in other parts of the world) and helps to offset the more expensive pulp fibre (often ~$890-930/tonne).

In many of the Chinese paper mills an experienced workforce from Taiwan are involved in the manufacture, research and development, and planning which helps to shorten time for commissioning of new project within a two year period.

Another important aspect is that Taiwanese have been the bridge to transfer western technology to China primarily because of the common language between the two as well as cultural similarities.

Good infrastructure and logistics has also been a strong point for China. Large ports and container traffic make it a good place to export from. Internal logistics are also good with modern highways and shipment by rivers and canals.


Figure 1: World P&B production in 2008 by region
for 391 mt



P&B Asia production of 152.2mt for 2008 by country (5)
Source: RISI Global Report


Figure 2: Growth of GCC in China from 1992 to 2008
(KT) for all markets




Paper and board production


The global production of Paper and Board in 2008 was 391m. tonnes and a geographical split in Figure 1 shows Asia with 39% followed by Europe (28%) and North America (25%).

For Asia with 39% of global production, China has 52% of production with Japan in second place with 20%.

China accounted for 20.5% of world production in 2008 but in 2009 achieved production of 90m. tpa thus becoming the world leader. In 2008, four countries USA, China, Japan and Germany accounted for 55% of global production with the top ten countries accounting for 72%.

In 2009, Chinese P&W paper has increased significantly giving it the number one position for production in the world.

For its wood pulp China relies heavily on imported material mainly from Asia and South America. World imports of wood pulp total almost 44m. tpa of which China imports 8.04m. tpa or 20.3% of the total.

China’s pulp imports in December 2009 reached 1m. tpa according to the General Administration of Customs in China. Imports of pulp rose 44% from 2008 levels to 13.68m. tpa.

The world use of recovered paper is 50.84m. tpa of which 24.2m. tpa (48%) is imported into China Ð this is a very significant quantity and shows that China is mopping up almost half of the world’s waste paper.

In 2008, the total wood pulp apparent consumption in China was 16.9m. tpa, up 11.5% from 2007. Total wood pulp exports in the world in 2008 was 50.84m. tpa and not surprisingly China only exported 10,000 tonnes (0.02% of total).

One of the main driving forces in development of the Chinese paper industry has been the rapid increase of P&B demand per capita in kg.

For 2008, USA per capita demand was 265.9/kg and China was 59.1/kg. The world average was 57.8/kg with average for Asia put at 40.4/kg Other figures are Hong Kong 184.2/kg and at the other end of the scale India is just 8.5/kg and Iraq 1.5/kg. China is thus developing very quickly as its figure back in 2003 was just 36/kg.

The price of NBSK pulp in the USA in February 2010 was $874/tonne and $849/tonne in Europe. The price of Chinese pulp is at present $890/tonne with imported NBSK pulp at $923/tonnes.

China has developed very quickly over the last 15 years and a comparison of P&B output with production of close to 80m. tpa. Food packaging is the biggest market for P&B accounting for 55% of consumption. Other major markets are printing, news and tissue paper.



An engineer inspects a roll of paper at UPM-Kymmene
UPM-Kymmene


A comparison of P&B production for USA, China and Japan, the top three producers in the world indicates that in 2009 China assumed the leading production position with 90m. tpa. The USA and Japan show decreases in production from 2007 to 2009.

One of the important sectors is P&W uncoated and coated grades. China is the largest producer of uncoated wood-free with coated wood-free grades showing similar output from USA, China and Japan.

However, in 2009, China increased its CWF significantly and is now number one in the world. China has low output of uncoated mechanical and coated mechanical compared to USA, Japan, Germany and Finland.

Paper mills are widespread in coastal China with the main concentration of production in the provinces of Shandong, Yangzte River area (inland from Shanghai), Zhejiang and Guangdong provinces and Hainan Island.

An important producing region is the Yangzte river area inland from Shanghai. Here international paper group such as APP (an Indonesia/Singapore group), YFYu (Taiwan), UPM-Kymmene (Finland), Stora Enso (Sweden) and planned Oji (Japan) mill.

Some paper mills in Shandong province including IP Sun (Sun Paper and International Paper), Chenming, Hua Tai and Rizhao Sen Bo.

Metso will supply a coated fine paper production line to Shandong Huatai Paper Co. Ltd, member of Huatai Group, in Dong Ying City, Shandong Province, China. The start-up of the production line is scheduled for the first quarter of 2011. The total value of the order is approximately Û70m. ($236m.).

The Shandong Huatai mill is located in Dong Ying City, Shandong Province. Huatai Group has three production bases, Huatai Green Industry Park, Huatai Qinghe Green Ecology Industry Park and Rizhao Huatai Pulp & Paper Industry Park, with an annual capacity of 1.6m. tpa.

China continues to increase its capacity with some major new projects totalling 6.3m. tpa due to be commissioned in the next few years.


Figure 3: P&B production from 1994-2009 (Estimated)
for Japan and China (MT)




Pigments used in China paper mills


The main pigment used in paper in China is GCC. Local kaolin is available for coating and much is still imported. PCC has become acceptable as a filler pigment but coating is still being developed.

Talc continues to be used mainly for pitch control based on resources in China (still the largest talc producer in the world). Talc as a filler has largely been replaced by GCC due to lower cost and availability. Other minerals such as calcined clay are utilised. There is still the opportunity for new products to be used such as Synthetic Calcium Carbonate (SCC) and some other minerals as well.

GCC

Back in the early 1990s the production of wet ground calcium carbonate (GCC) in China was very limited with low brightness chalk being imported from ECC in the UK and Omya’s French operations as powder and made-down on-site into slurry for use as a coating pigment.

The growth of GCC, almost all based on marble, for all uses has been dramatic with an increase from 280,000 tpa in 1992 to an estimated 18.44m. tpa in 2008.

Marble deposits are widespread in China with major areas of production in Guangxi, Anhui, Zhejiang and other provinces.

With finer grinding to 98wt.% <2 μm there will a reduction in brightness if traces of graphite and pyrites are present Ð the presence of small amounts (often just 100-200ppm) tends to have a smearing effect.

This graphite and pyrites can be removed by air flotation but generally no flotation is carried out in China.

Global GCC production for 2008 is estimated at 80m. tpa with Asia now accounting for 35%.

In Asia, China accounts for 66% of production and 23% of total GCC global production China is now the leading producer in the world of finer-grade products (USA with 24% of production includes coarser-grained products).

The market utilisation in China shows 35% utilised in paper.

In 2008 total output of GCC was 18.44m. tpa (of which 35% or 6.45m. tpa was for paper) with estimates for total GCC output in 2009 put at 21m. tpa. A plot of P&B output against GCC output from 1994 to 2009. This graph is directional as clearly total P&B includes tissue paper and newsprint which does not use GCC.


Figure 4: Production of GCC in Asia
for all markets for 2008/2009 (%)


GCC capacity in Asia of 27.8mt by country in 2008/9 (%)


Figure 5: Chinese O&W production for 2007 and 2008 (‘000 tonnes)

Production 2007 2008 2009 (Estimate)
Total Paper and Board 73500 79800 90,000
  % Increase over previous year 13.00% 8.60% 12.80%
Printing & Writing 17951 19030
  % Increase over previous year 11.50% 6.00%
  Uncoated Woodfree 12,650 13,000 14,000
  Coated Woodfree 4,200 4,600 5,500
  Uncoated Mechanical 214 430
  Coated Mechanical 886 1,000


PCC

PCC has been used for many years as a filler pigment in paper. However, PCC for coating has not become established yet in China. It is understood that the main reason for this is the difficulty of finding a suitable limestone with the correct chemistry that will produce an acceptable coating PCC.

However, the main reason is probably that GCC is high quality and cheaper to produce. On site PCC production is carried out at APP Dagang (APP Gold East Paper) with filler and coating products though, the use of coating PCC is said to be limited.

Capacity of PCC Coating at APP Gold East is said to be 50,000 tpa and 100,000 tpa for filler. At APP Gold Hua Suzhou the filler PCC capacity is 50,000 tpa.

Hangzhou Huajing Calcium Carbonate Co., Ltd. was established in March 2002 producing high quality PCC. It is located in Hangzhou City, the capital of Zhejiang Province.

It is situated close to Hangzhou Hua Feng Paper Co., Ltd. It is not a satellite plant of Hua Feng Paper but a merchant PCC plant. Hangzhou Huajing was set up as a joint venture between Hangzhou Hua Feng Paper Co., Ltd. and Hong Kong Xu Rong Co. Ltd.

The company imported PCC technology and processing line from the Italian company Cimprogetti in 2002 and 2003 to produce high quality PCC for cigarette paper. Hua Feng Paper used to own 30% of Hangzhou Huajing and Hongkong Xu Rong held 70% of the company shares.

In 2005, Schaefer Kalk started to give technical help to Hangzhou Huajing and this led to them taking a 70% controlling interest in the company with remaining shares belong to Hua Feng Paper (9%) and other minority shareholders.

There are many other PCC producers in China and overall production is estimated at 3m. tpa for all markets. Coal, a cheap source of energy in China, is used to convert the limestone to lime.

Kaolin

Coating clay continues to be imported from Brazil. Other countries are looking at exporting kaolin to China and WAK Holdings Pty Ltd, developing coating clay from its deposits in Western Australia, has carried out successful pilot trials in China.

The search for high quality kaolin deposits in China continues as significant production is limited to Maoming in Guangdong Province.

The main producer is Maoming Kaolin Science & Technology Co. Ltd, often referred to as Gao Ke with plant capacity of 250,000 tpa based on 150,000 tpa of spray-dried product at 1.5% (3 spray dryers each with capacity of 50,000 tpa and 100,000 tpa of filter cake product at 35% moisture.

Gao Ke MMK produces Grades MM01, MM02, MO1 and MO2 are for paper coating and MO3 is for pre-coating of paper. However, the sedimentary kaolinitic sand of Maoming has a low yield from matrix and for the 95% <2 micron grade is probably less than 10%.

At present some MM01 is used by UPM Kymmene in topcoat blended with GCC at 95wt.% <2μm (GCC 80%: kaolin 20%). Quality of MM01 has improved over the last few years and whilst rheology is not as good as imported kaolin it is used without problems as only at 20% loading as blended with GCC.

At present some 30,000 tpa of calcined clay is used in paper each year. This is mainly being used in the precoat formulation in coated board to improve opacity.

Foreign investment

Most of the world’s leading paper producers now have a presence in China. As growth in North America and Europe has slowed, China, with a large population and steady rise of GDP has been attractive for establishment of new operations.

While paper mills are closing elsewhere China continues to grow. An attempt here is made to look at some of the paper sectors and determine what market share foreign companies have.

The P&W production figures for China for 2007 and 2008 are shown in Figure 5.

For coated wood-free (CWF) the output in 2008 was 4.6m. tonnes and for 2009 this is estimated at 5.5m. tonnes. Of this 5.5m. tonnes it is estimated that foreign companies account for 2.5m. tonnes of output in 2009 representing 45%. This is significant and with additional capacity being added in 2010 this figure will increase again.

For uncoated wood-free the production is 2009 is estimated at 14m. tpa with foreign companies just accounting for over 4% of output.

For other grades foreign companies account for 37.5% of corrugating packaging, 16% of tissue grades and just 3% of newsprint.

Overall, foreign companies account for about 19% of Chinese paper production.

At present APP China is mulling over an investment in 1.2m. tpa of additional printing/writing (P&W) paper capacity at Dagang. Oji Paper (Japan) will also commence its operations in the next year or so.

Contributors:
Ian Wilson is a UK-based consultant in industrial minerals. Larry Lai is president of Shanghai-based Yie-Lie Enterprise in China.


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Based on an output of 79.8m. tpa from china