Botnia to hike up pulp price in China

November 27, 2010 by timbercommunity

Metsä Botnia plans to bring up the softwood pulp price in China. Metsä Botnia has announced that it is raising their own price of northern bleached softwood kraft pulp, NBSK, in China, according to RISI.
Botnia's new price is 830 dollars per ton and is effective for all new business.

From latest magazine Botnia Echo 1-2010 earlier this year from Metsä Botnia there is an article about the paper and pulp market in China.

China’s fast-moving paper and pulp market

The Chinese pulp and paper market is developing and maturing very quickly, in line with the rapidly growing economy. Key themes include the drive to stay cost competitive while retaining quality standards,
optimizing fibre usage, and learning from international suppliers and partners. Local paper and pulp mills are trending towards increased size and capacity as 2010 prices continue on an upward path.
– Price is still very important in China, explained Botnia Vice President of Sales and China Chief Representative Maria Pennanen. Customers increasingly move to more mature ways
of doing business and using long-term contracts in order to better stabilize purchasing costs and to secure fibre availability. This reduces reliance on spot purchases.

– Prices are indeed trending higher, for both pulp and paper, agreed Yao Guanjun, Supplier Manager for the Chinese Chamber of Commerce for the Paper Industry. Although end-user prices are stickier over the short term and less resistant to cost fluctuations, the impact of rapid price movements to individual mills can be significant.

According to Wang Chengjia, Secretary General of the Shanghai Paper Trade Association, China currently has about 3,600 mid- to large-scale paper and pulp mills; fully 25% have foreign-owned shares. Every year around 50 new paper and pulp mills are founded in China, with a growth rate right at
1.4%. China has accelerated technological improvements and closed certain types of production lines in order to conserve energy as well as protect the environment, in line with State Council directives to phase out obsolete or low-production lines by 2011.

The annual production of paper and paperboard is 83 million tons. – Currently, according to Mr Wang, – key drivers of the industry are marketing needs and profits. – Among Chinese companies there seems to be a trend toward growth and acquisition of market share; this has mainly been realized by building Greenfield plants, yet there is room for consolidation. Nine Dragon is clearly leading the way as China’s largest paper company, but other companies – such as Lee Man, Sun Paper, Chenming, APP and Huatai to name a few – are also growing expansively, said Ms Pennanen. – I think the quality of large-scale company products is pretty good; it will continue to improve as more mills develop into mid or large-scale operations, explained Ms Yao.

In addition to size, other key factors include equipment and facilities. Middle and large-scale paper and pulp mills tend to use all-wood pulp, while smaller sized mills use non-wood pulps. Paper and pulp mills are purchasing machinery with the latest technology, with the inclination towards machinery that is not complicated and is easy to maintain and operate. The rise of local copycat machine manufacturers selling equipment below international prices is another important trend that may affect quality.
– Using standard, even quality fibres is another important factor for these mills, said Ms Pennanen. Maintaining low running costs and optimizing operations are important keys to success.

On the pulp supply side, technical know-how and experience helps leaders such as Botnia retain a competitive edge in the market. Ms Pennanen appreciates how Botnia promotes their technical experience in Europe, and their aim is to continue this attitude in China as well. Botnia has spent substantial
time in the market learning and gaining wisdom, building relationships and local expertise.
The technical customer service representative Tao Zhang started his work in September out of our Shanghai office, which increased direct customer support. Advanced, thorough training of local Chinese staff gives a further advantage to foreign pulp suppliers who are then be able to work more closely with Chinese paper and pulp mills, improving technical support.

– Foreign firms are quite a good source for Chinese companies to learn from, especially regarding technology, remarks Ms Yao. She also mentions managerial experience and advanced processes as other key advantages for foreign companies.
– I think foreign companies coming to China will surely grow together with local companies in the industry.
This year the industry trend is “development as we adjust”, said Mr Wang. Paper and pulp mills are slowing or stopping production of some oversupplied products. This is done while increasing and developing products that are in short supply as well as introducing new products and products with high added-value.
Ms Yao maintains that the expanding market still has a lot of room for growth, and that the situation is mutually beneficial for local as well as international firms playing a role in the Chinese industry.

The paper and pulp industry in China is growing at a good rate and continues to have major potential. This will in turn motivate yet more companies to develop further and aid growth of the industry in China. Of course, much also depends on the environmental protection policy and measures taken by the government.