Outlook for Woodchip Imports in China Bob Flynn Director, International Timber, RISI JOPP Seminar, Tokyo, June11, 2013
Thousand BDMT As recently as 2003, China was the fourth largest supplier of hardwood chips to Japan; but since 2006 China has been a net woodchip importer, and is now the 2 nd largest chip importer 8,000 China: Imports and Exports of Hardwood Chips 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Imports Exports 0-1,000 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12-2,000
Agenda Why does China need to import woodchips? World s biggest producer of paper and paperboard Growing domestic pulp production Shortage of domestic timber resources Historical trend in woodchip imports in China Hardwood Softwood Outlook for woodchip imports in China
Million Tonnes China has become the world s largest paper and paperboard producer; 70% of furnish is recovered paper, but consumption of wood pulp has also been increasing rapidly 80 70 60 50 China: Fiber Consumption for Paper and Paperboard Production Non-Wood Pulp Wood Pulp Recovered Paper 40 30 20 10 0
What s ahead for China s paper industry? China s 12 th Five-year Plan provides strong guidance for the paper industry: Primary focus on domestic market, rather than producing for export. Forest-Paper integration includes acquiring forest resources outside of China. Recovered paper collection and consumption is encouraged. Industry consolidation to increase. Effluent reduction, energy conservation and mill closures.
Kg/Person China s growth in per capita income will mean rising consumption of paper--- although electronic media will have an impact 140 Graphic Paper Consumption and Per Capita Real GDP 120 100 Japan South Korea China 80 60 40 20 Source: RISI, China Pulp Market: A Comprehensive Analysis and Outlook, 2012 0 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Per Capita GDP in US Dollars
RISI projects that newsprint production and demand in China will decrease over the next decade 5,000 China's Newsprint Production and Demand Forecast, 2012-2022 Production Demand 4,000 3,000 2,000 Source: RISI, China Pulp Market: A Comprehensive Analysis and Outlook, 2012 1,000 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
P&W paper production will increase, but net exports will decline as domestic consumption increases 45 40 China's Printing & Writing Paper Forecast, Million tonnes Net Exports (Rt) Production (L) Demand (L) 2.5 35 30 25 20 15 10 5 2.0 1.5 1.0 0.5 Source: RISI, China Pulp Market: A Comprehensive Analysis and Outlook, 2012 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 0.0
Containerboard will be one of the fastest growing segments of the industry, with consumption keeping pace with production Thousand Tonnes Chinese Total Containerboard Consumption and Production 90,000 80,000 70,000 Consumption Production 60,000 50,000 40,000 30,000 20,000 Source: RISI, China Pulp Market: A Comprehensive Analysis and Outlook, 2012 10,000 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Thousand Tonnes Boxboard production seems set to expand faster than domestic consumption, so net exports will increase 25,000 Chinese Total Boxboard Consumption and Production Consumption Production 20,000 15,000 10,000 Source: RISI, China Pulp Market: A Comprehensive Analysis and Outlook, 2012 5,000 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
Thousand Tonnes Tissue is a smaller segment, but rapidly growing in China- which will become the world s leading consumer China Becomes the Leading Consumer of Tissue 14,100 Western Europe North America China 12,100 10,100 8,100 6,100 4,100 Source: RISI, China Pulp Market: A Comprehensive Analysis and Outlook, 2012 2,100 100 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
China s imports of wood pulp have been growing rapidly, but domestic production has also been increasing, with output growing 8% annually since 2004, to more than 9 million tonnes 16 China: Production and Imports of Wood Pulp Imports Production 12 8 4 0
Index: 2004 = 1 But imports of woodchips have been growing much faster than pulp imports, increasing 49% annually since 2004 30 China: Index of Pulp Production and Woodchip Imports 25 Pulp Production Woodchip Imports 20 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012E
Million Hectares China s area of eucalyptus plantations doubled between 2006 and 2012 but will it be enough to meet demand? 4.5 4.0 3.5 Other Guangxi China: Area of Eucalyptus Plantations 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2012 2015E
Some eucalyptus plantations in China are relatively high quality Stora Enso has helped to introduce high-quality eucalyptus forestry to China, using modern technology from the first step. While most harvesting in China is still done by hand, Stora is developing some plantations for mechanical harvesting.
But other plantations are more difficult Plantations are often located on steep slopes, with poor road connections to markets. Agriculture still has priority in China, with forest plantations stuck with less productive sites.
And some plantations are really bad Many Chinese companies think "cheaper is better", but with eucalyptus this can be a problem. Even some flat ground may not be well suited for growing trees, due to very infertile soils, lack of rainfall, etc.
Eucalyptus in China has a problem with frost, and may also have future problems with pests and disease due to very narrow genetic base Frost damage to a young plantation Bacterial wilt damage to a Eucalyptus plantation
Pulpwood is expensive in China, as even very small (8cm+) eucalyptus logs like these are used for veneer, and can cost US$100/cubic meter or more
Thousand BDMT The vast majority of China s woodchip imports have been hardwood, not softwood 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 China Woodchip Imports Hardwood Softwood In January-April 2013, Imports of hardwood chips are 17% higher than in 2012. Imports of softwood chips are 122% higher than in 2012. 0 2008 2012 Jan-Apr 2012 Jan-Apr 2013
Thousand BDMT Nearly 90% of China s hardwood chips are from Southeast Asia 8,000 6,000 4,000 China: Imports of Hardwood Chips Other Indonesia Vietnam Australia Thailand Change in imports by source in January-April 2013 vs. 2012: Vietnam + 42% Thailand - 17% Indonesia + 8% Australia + 70% Other - 36% 2,000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
In some months, China s imports of hardwood chips have already exceeded the volume imported in Japan Thousand BDMT Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Hardwood Chip Imports in Japan and China, 2008 - April 2013 1200 1000 China Japan 800 600 400 200 0
350 300 250 200 Australia has been the primary supplier of softwood chips to China, although the USA would also like to sell a lot more to China China's Softwood Chip Imports, 2008-2012 Thousand BDMT Australia Russia Brazil Fiji N Zealand USA Market shares in January-April 2013: Australia 72% Fiji 10% USA 9% Russia 8% 150 100 50-2008 2009 2010 2011 2012
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Thousand BDMT China s imports of softwood chips have been higher in 2013, but will likely level out in second half 250 Softwood Chip Imports in Asia, January 2009-April 2013 200 China Japan 150 100 50 0
75% of China s hardwood chip imports in 2012 went to just two mills: APRIL at Rizhao and APP on Hainan Island
But other hardwood chip importers have been increasing volumes also In January-March 2013, market share of Others = 30%, up from 25% in 2012
Softwood chip imports have gone to just a few mills, with little change over time
China s Hardwood Chip Import Price: Prices higher in eastern China (Shandong province) due mostly to higher freight USD /BDMT Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Hardwood Chip Price Index, 2009-March 2013 (CIF) 250 200 150 East China South China Source: RISI International Pulpwood Trade Review 2013 100 50 -
Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 US$ per BDMT, CIF Hardwood Chip Price in Rizhao Australian suppliers tried hard to keep their price down, but still higher than SE Asian suppliers Hardwood Chip Price in Rizhao, 2009 - March 2013 240 220 200 180 160 140 Vietnam Thailand Indonesia Australia Source: RISI International Pulpwood Trade Review 2013 120 100
Project List Paper Grade Pulp Project Allocation Type New Capacity Purposed Start Date APP Qinzhou, Guangxi MEC 350 Jan, 2013 Bohui Dafeng, Jiangsu MEC 400 Q2, 2013 MCC Yinhe Linqing, Shandong MEC 70 early 2013 Xinya Henan MEC 250 2013 Jindaxing Guangxi BHK 170 2013 Lee & Man Wuzhou, Guangxi DIS 103 2013 Oji Paper Nantong, Jiangsu BHK 700 2013 Longjiangfu Heilongjiang UKP 340 Q4, 2013 Dingfeng Zhaoqing, Guangdong BHK 80 2013 Stora Enso Beihai, Guangxi BEK 700 2015 AdvanceAgro Dafeng, Jiangsu BHK 840 2014 Nanping Paper Nanping, Fujian DIS 150 2014 Stora Enso Beihai, Guangxi MEC 200 2015 April Rizhao, Shandong MEC 250 2015 April Rizhao, Shandong MEC 250 2016 Tiger Yuanjiang Paper Yuanjiang, Hunan MEC 200 2014 Chenming Shouguang, Shandong BHK 400?
Million Tonnes China is expected to maintain a balance between domestic pulp production and imports 25 20 China: Forecast of Domestic Pulp Production and Pulp Imports Imports Production 15 10 5 0 Note: does not include dissolving pulp 2011 2012 2013F 2014F 2015F 2016F 2017F
Even our relatively conservative forecast indicates that China s market for hardwood chip imports will exceed Japan s by 2015 12 Hardwood Chips Import Forcast, China & Japan Million BDMT 10 8 6 4 2 0 China Japan 2009 2010 2011 2012 2013F 2014F 2015F
RISI s 14 th Annual Asian Pulp and Paper Outlook Conference June 17-19, 2013, Four Seasons Hotel, Shanghai see http://www.risiinfo.com/events/asia_conf/ June 19, 2013 RISI seminar on Global Timberland Investment Trends and Opportunities for Chinese Investors, see http://www.risiinfo.com/events/asia_conf/timberland_investme nts_program.html
7 th International Woodfibre Resources and Trade Conference Focus on international trade in woodchips and biomass. To be held first week in November, 2014, in Chile. Aimed at providing networking opportunities for both suppliers and buyers of woodchips and biomass. Conference web site www.woodfibreconference.com
RISI s International Pulpwood Trade Review (also known as the woodchip bible ) has provided information on international trade in woodchips and biomass for the past 20 years. See www.risi.com/pulpwood Contact: Bob Flynn Email: rflynn@risi.com