Chinese paperboard capacity expansion: here comes the boxboard!

By Alex He Thu, Aug 05, 2010

SHANGHAI, Aug. 5, 2010 (RISI Blog) -Tracking capacity expansion in China is a very busy job. Paperboard capacity growth in China has been very rapid entering into 2010, averaging 18% and 15% per year from 2000 to 2009 for containerboard and boxboard grades respectively. We show a total combined capacity increase of 39 million tonnes for these two grades during this ten-year period: for containerboard it was almost 30 million tonnes, with the rest of the 9 million going to boxboard. For containerboard grades, there was a surge in investment in 2007-2008, while for boxboard, heavy investment was mainly during 2004-2005, when China added an annual of 1.4-1.5 million tonnes of new capacity each year. Generally, the rapid increase in capacity was driven by expectations of strong demand growth coupled with greater access to financing and a desire on the part of the government to increase China's self-sufficiency in paper and board.

In my previous rounds of Viewpoints, I have paid a lot of attention to the Chinese recycled containerboard expansion especially with Nine Dragons and Lee & Man becoming Number 1 and 2 in the Asia Paperboard industry. In 2008, just three boxboard machines came on line adding 900,000 tonnes of capacity. Last year, only two new lines with a total of 150,000 tonnes started up. However, recently there was a flurry of announcements: 4 new machines with capacity totaling 1.16 million tonnes due in the second half of 2010, besides the 5 machines with a total of 1.2 million tonnes already started up in the first half of the year. It seems that the Chinese boxboard industry has embarked on a new round of capacity expansion. Many of the new machines in 2010 are relatively big (annual capacity of more than 200,000 tonnes) and most of them will make recycled coated duplex board, with a few targeting to make virgin fiber grades such as ivory board (similar with European FBB grade) and liquid packaging board.

The rapid capacity expansion during the last 10 years caused shifts in China's trade patterns and affected market balances and prices. The capacity growth led to a substantial decline in China's boxboard net imports. Between 2000-2009, total Chinese boxboard net imports (including both recycled and virgin fiber grades) dropped 1.1 million tonnes, a 70% decline.

Alex He works out of RISI's Shanghai Representative Office and can be reached by phone: +86.21.6075.1179 or email:ahe@risi.com.

This is an excerpt from a full story that is available in RISI's Pulp & Paper News Service

For details about the Asian boxboard market forecast between 2010-2012, please read the just published RISIAsian Paper Packaging Long Term Forecast.



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