Survey Report on Sichuan Province's Paper Industry

In order to fully grasp the industry's production and operation situation, the Sichuan Paper Industry Association and the Sichuan Paper Society conducted an industry investigation and survey from August 30 to September 10, 2021 of some bamboo pulping and papermaking, packaging paperboard production, household paper production and household paper processing enterprises in Sichuan Province.

This survey visited a total of 22 enterprises: 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.

Through on-site inspections and discussions and exchanges with enterprise heads, engineering and technical personnel and sales managers, the findings were summarized into an investigation and survey report. The specific findings are as follows:

1. Production and operation in 2020 and January-August 2021
2. Bamboo pulping and papermaking enterprises

Affected by the overseas pandemic, wood pulp supply was tight and prices soared, the substitution role of non-wood pulp emerged and demand increased, among which bamboo pulp's position in the paper industry kept rising. Relevant data show that between 2010 and 2020 the share of papermaking raw materials other than wood pulp and bamboo pulp in total output all declined, while bamboo pulp's share rose from 9.5% in 2010 to 10.5 in 2020. Sichuan Province concentrates more than 60% of the country's bamboo pulp capacity, with annual output of 1.183 million tonnes in 2020, making it the country's main bamboo pulp producing province.

In 2020, affected by imported pulp prices, bamboo pulp prices ran at a low level throughout the year. Conditions were relatively good in the first half, when bamboo pulp prices had risen to the level of international wood pulp prices; in the second half bamboo pulp prices gradually declined, falling to a new low in recent years. Pure pulping enterprises had no profit to speak of and basically produced to maintain cash flow. At the same time, affected by the shortage of raw material bamboo chips and high pulp board inventories, industry operating rates fell. Although annual output rose somewhat compared with 2019, most enterprises saw tax and profit declines.

In 2021, affected by international pulp prices, bamboo pulp prices soared in the first quarter; as imported pulp prices fell back and the downstream market entered its off-season, bamboo pulp prices began to decline from May. Compared with the same period last year, bamboo pulp output grew slightly, but affected by factors such as rising logistics and energy prices, enterprises' profit space narrowed and some even made losses.

1. Packaging paperboard enterprises

In 2020 there were 20 packaging paperboard enterprises in Sichuan, two fewer than the previous year. Output and consumption of the three major packaging paperboard grades—white paperboard, containerboard and corrugating medium—all grew compared with 2019. At the same time, affected by raw material prices, packaging paperboard product prices began rising gradually from the second half of that year, and above-scale enterprises saw large increases in tax and profit compared with the previous year, with ample cash flow. Because environmental protection requirements became stricter, domestic waste paper prices fluctuated greatly and rapidly, and the market competition landscape intensified, smaller enterprises produced according to sales; affected by waste paper prices and rising production costs, some small and medium-sized enterprises were on the edge of thin profits.

In 2021, against the backdrop of the "plastic restriction order," containerboard and corrugating medium became the main substitutes for plastic packaging materials. With the implementation and advancement of the national "waste ban" and "plastic restriction order," pulp moulding became a leader in the packaging industry under the plastic ban and restriction trend, and packaging paperboard enterprises from inside and outside Sichuan invested in building plants or expanding production scale in Sichuan. Because market demand increased and enterprise inventories were basically reasonable, both production and sales flourished, and tax and profit are expected to grow compared with 2020.

1. Household paper base paper production enterprises

As a rigid-demand product in people's daily lives, household paper prices ran upward throughout the first quarter of 2020 because paper companies started work late, inventories were low and pulp prices were high. From April, household paper prices ran downward, falling by nearly 1,000 yuan/tonne. Because of market adjustment and some enterprises cutting or stopping production, output in 2020 fell compared with 2019, but because pulp prices fell, many household paper producers still made thin profits.

According to statistics from the Household Paper Committee, as of the end of June 2021, about 1.508 million t of household paper capacity had been commissioned in 2021, the highest level for the same period in history, and phased overcapacity is very obvious. In January-August 2021 paper prices spiked and then fell back, with a price difference of about 1,500 yuan/tonne between the peak and the trough. Some large paper companies with integrated forestry-pulp-paper layouts, thanks to raw material cost advantages, currently face relatively controllable profit pressure, while many small and medium-sized paper companies that buy market pulp are in a less optimistic situation; some were forced to cut or stop production, and a small number adjusted their product structure to produce customized and differentiated products and expand sales channels (base paper contract production, finished product contract manufacturing) to meet the needs of different customer groups and keep production going.

1. Household paper processing enterprises

In 2020, squeezed in the market by wood pulp and out-of-province enterprises, overall production and sales declined; on exports, affected by the pandemic and soaring ocean freight, exports of bamboo pulp paper showed an obvious downward trend.

In 2021, affected by the globally rising prices of upstream pulp, logistics and energy, and by disorderly market competition, cost inversion appeared between pulp prices and some paper prices, further highlighting the advantages of bamboo pulp and paper integration. At the same time, the severe global imbalance between container supply and demand pushed up freight costs, leading to a further decline in exports. In addition, besides offline supermarkets, sales through traditional e-commerce channels are also not optimistic; moreover, emerging e-commerce such as livestream selling and community e-commerce have low entry thresholds and greater competition, and in order to attract customers low prices are frequently seen, with some enterprises passing off inferior goods as good ones, seriously damaging the brand image of Sichuan bamboo pulp paper.

1. Difficulties and problems in enterprises' production and operation development
2. Speed up the implementation of the verification and deduction of bamboo chip VAT, avoid tax risks, and strive to enjoy policy preferences during the peak bamboo chip purchasing season;
3. Enterprises' progress in "dual carbon" work is slow and there is a lack of training in professional knowledge; it is hoped that the Sichuan Paper Association and the Society can cooperate with relevant departments to organize training;
4. It is hoped that the Sichuan Paper Association and the Society, together with relevant departments, will take a holistic view of the development of bamboo pulping and packaging paperboard and make reasonable arrangements according to the resource situation, environmental capacity and local capacity, optimizing the industrial structure and developing it appropriately;
5. The Sichuan Forestry Department's policy-making for bamboo forest bases lags behind; it is hoped that the Sichuan Paper Association and the Society will call on relevant departments to attach importance to bamboo forest area surveys, the transformation of low-yield bamboo forests and the cultivation of new bamboo species, and so on;
6. Some enterprises pass off inferior goods as good ones, purchasing mixed-pulp base paper and selling it under the name of pure bamboo pulp paper, seriously affecting market order; it is hoped that the Sichuan Paper Industry Association and the Society will make good use of the "bamboo pulp paper" collective trademark and join with the Sichuan Provincial Administration for Market Regulation and other relevant departments to regulate the online and offline industry and safeguard the Sichuan "bamboo pulp paper" brand;
7. Enterprises lack skilled workers and find recruitment difficult; it is hoped that this problem can be solved with the help of the industry-university-research cooperation platform of the Sichuan Paper Industry Association, the Society and Sichuan University of Science and Engineering;
8. As a platform for exchange and communication, the Sichuan Paper Industry Association and the Society should provide relevant information more often and in a timely manner, strive for relevant policy support for enterprises, assist enterprises in liaising with relevant functional departments, and solve the difficulties and problems encountered in enterprises' production and operation.
9. Handling of the problems and difficulties

Through this investigation and survey, enterprises raised many practical problems and difficulties. According to the actual situation, the Sichuan Paper Industry Association and the Society will coordinate, report and request help from higher-level relevant departments to solve the following problems:

1. On the verification and deduction of the tax burden on bamboo chip purchases, the Sichuan Paper Industry Association and the Society formed a report in early September and submitted it to the Sichuan Provincial Tax Service, and are now awaiting a reply;
2. On the "dual carbon" issue, the Sichuan Paper Industry Association and the Society have been in continuous 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 any relevant training opportunities to enterprises at the first opportunity;
3. On project planning in various regions of Sichuan and the explanation and improvement of related policies, the Sichuan Paper Industry Association and the Society will, within the scope of their duties, strive for policy support from national and Sichuan provincial departments to support enterprises' lawful and compliant rational development. The Sichuan Paper Industry Association and the Society will also provide enterprises with comprehensive consulting services and support;
4. On the construction of bamboo forest bases, the transformation of low-yield forests and the cultivation of new bamboo species, the Sichuan Paper Industry Association and the Society will strengthen contact and communication with relevant departments, and at the same time, drawing on the industry-university-research platform and cooperation with relevant enterprises and institutions, solve technical problems such as the cultivation of new bamboo species and the transformation of low-yield forests.
5. On self-discipline in Sichuan's bamboo pulp paper industry, the Sichuan Paper Industry Association and the Society will, on the basis of the group standards "Natural-Colour Bamboo Pulp" and "Bamboo Pulp Household Paper" and the "bamboo pulp paper" collective trademark, supervise implementation, cooperate with relevant departments in carrying out quality supervision of bamboo pulp paper and regulate industry behaviour;
6. On the shortage of skilled workers, the Sichuan Paper Industry Association and the Society will, drawing on the industry-university-research platform, train enterprises' existing workshop workers through on-site training and sending them to schools for commissioned training, and at the same time feed enterprises' needs back to the schools so that they adjust their student training models to produce talent suited to the industry.
7. The Sichuan Paper Industry Association and the Society should strengthen contact and communication with Sichuan provincial, municipal and relevant departments, provide enterprises with relevant information in a timely and effective manner, and help enterprises obtain more policy support 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