Chinese paper industry supply/demand balance, raw material costs to pose challenges in 2010; best outlook for SBS, worst for coated paper

Jan 8, 2010 — ChinaPaperOnline.com

BEIJING, January 8, 2010 (ChinaPaperOnline.com) — With new capacity entering the market in 2010, causing periodic supply/demand imbalances, China’s paper industry will experience ups and downs throughout the year and the situation will vary within the sectors.

The order of prosperity within the paper grades will be as follows: solid bleached sulfate (SBS), uncoated fine paper, newsprint, containerboard, and premium coated paper.

Insiders expect China’s paper sector will see over 25% of growth in profitability in 2010.

However, as capacity increases this year, raw material costs are expected to rise, pulling down the profitability in some paper grades.

Yet, China’s paper industry improved during 2009, with January-November output of 84.674 million tonnes exceeding full-year 2009 production and up 11.9% from the same 11-month period in 2008.

Through the first 11 months of 2009, the paper industry’s income turned up 4.2%. During this time, the decline in profits slowed to -1.4%, which was a return to the average level of 2006. In the fourth-quarter, profits were the second highest to the record level of 2007-2008.

During the year, manufacturers’ inventories were falling and stocks held in the downstream sectors rose to average levels. Many paper firms in China embarked on low-cost expansions during 2009 to take advantage of the low ebbs in the industry.

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