Paper360 - May/June 2017 - 29

Nine Dragons headquarters campus in Dongguan, China.

Regarding supply and demand in China's
recycled containerboard market, what do
you think is the main reason behind the
sudden shortage of supply perceived by
many downstream customers in the past
few months?
Earlier I stated the analysis that economic
recovery in China has brought additional
demand in a market with a population of 1.4
billion. As the economy grows, people's living
standards are raised, and there is consumption
growth brought by the convenience and benefits
of online shopping. Demand growth has also
fueled the packaging paperboard price hikes in
the last few months. We can see that the price
hikes this time were not just a flash in the pan,
but have been sustained for over one quarter.
Yet, the market is not an undersupplied one,
because the total amount of packaging paperboard imports is still very limited.
Overall, packaging paperboard supply in the
Chinese market can fulfill its demand. Supply
and demand are growing in parallel, and the
total production and sales volumes are balanced. It is only during a certain period of time
that inventories were on the low side in both the
downstream sector and our own sector, leading
to relatively tighter supply at that stage.
Prices for Chinese recovered paper (RCP),
both imported and domestically collected,
have been soaring, and supply has been
tight. As founder of America Chung Nam
(ACN), the world's largest RCP trader, how
long do you think the RCP price surge will

last? Is RCP availability going to be a big
challenge for Chinese recycled board producers in the future?
I spoke earlier about the continuously rising
prices of recovered paper in the 4th quarter as a
result of robust demand in the Chinese and US
markets, which were passed onto products so
product prices also continuously rose. Recently,
we observed that, due to seasonality and the
cyclical nature of the market, recovered paper
prices (whether domestic or imported) have
shown some adjustments to a certain extent.
These were already transmitted to product
prices. All these are normal market movements.
Back around 2010, there was a gap in our
recovered paper raw material market. Less than
10 percent of the recovered paper we used was
domestic, and for about 90 percent we had to rely
on imports. When raw material prices soared,
we could not pass that on through our product
prices, and there were no other market adjustment mechanics; this resulted in a quick decline
in profitability, and our slim profit had to be
compensated by larger sales volume. The share
price of our listed company was thus depressed.
Subsequently, as consumption in China grew,
we progressively increased the purchasing of
domestic recovered paper raw material. Now
we procure about 40 percent from the domestic
market. As living standards are raised, the volume of domestic recovered paper is still increasing progressively. Therefore, my view is that the
current recovered paper supply situation does
not represent any challenges. It is in a manageable, sound, and healthy condition.

Nine Dragons has recently announced that
it will start up PM 2 at the Vietnam base
by the end of June and add new containerboard machines by the end of 2018 at
four existing production bases in China:
Quanzhou, Chongqing, Hebei Yongxin,
and Shenyang. What is your strategic
planning behind these capacity expansions, both within China and abroad?
What is your view on the prospects of containerboard demand in Southeast Asia?
What do you find is the biggest advantage
and challenge in overseas investment?
As a listed company, Nine Dragons has a
responsibility to its investors. Hence, while
maintaining sound and healthy operations
as the backbone, we should also identify and
target markets with potential for development,
building the capability of "moving outward." Of
course, our major strategic direction is that we
should first fulfill the demand of the population
of 1.4 billion in our country before we "move
outward," and each such move should be made
in an extremely prudent manner.
The investment in PM 2 at our Vietnam
location is mainly based on the development
status of local market demand, in association
with China's "Belt and Road" policy. Though
the Vietnamese market is not large, we believe
entering it now is a secure opportunity.
PM 2 is a new paper machine that represents the
world's most advanced Industry 4.0 standards.
After it begins production, Nine Dragons will
not only be the market leader in the Chinese
paper industry, but also in the Vietnamese market. This realizes for us a truly international
brand in papermaking, and lays a good foundation for building what we call "an enterprise
that can thrive for a century."
The growth of Nine Dragons' production
capacities must be based on growth in market demand. The regions for which we have
announced the four new paper machines are the
regions where we have the smallest capacities. In
our observations of actual market conditions,
we noticed that these markets have recovered
requirements for additional supply after government supply-side reforms led to the elimination of outdated capacities. Based on such a key
criterion, our addition of advanced capacities
in these production bases is reasonable and
appropriate for the market.
I am very positive about the future packaging paperboard market, because packaging
paperboard is closely related to everyday living
and consumption, and its demand will grow as
people's living standards are raised. My view
Paper360º MAY/JUNE 2017

29



Table of Contents for the Digital Edition of Paper360 - May/June 2017

Setpoint
Over the Wire
Leadership for a Changing Industry
An Ode to Small
The Graying of the Paper Industry
Suppliers Reach Out to Mill Leaders
Making a Difference: 2017 TAPPI/PIMA Awards
RISI’s Asian CEO of the Year
TAPPISAFE Offers Solid Benefits for Mills, Contractors
Reinventing Varkaus
Failure Isn’t Just an Option—It’s Unavoidable
Blower Technology Proves Its Worth
TAPPI Journal Summaries
Global Study: Most People Highly Value Paper and Print
The Changing World of OCC
TAPPI News
ASPI News
Index of Advertisers
Paper360 - May/June 2017 - intro
Paper360 - May/June 2017 - ebelly1
Paper360 - May/June 2017 - ebelly2
Paper360 - May/June 2017 - cover1
Paper360 - May/June 2017 - cover2
Paper360 - May/June 2017 - 3
Paper360 - May/June 2017 - 4
Paper360 - May/June 2017 - 5
Paper360 - May/June 2017 - Setpoint
Paper360 - May/June 2017 - 7
Paper360 - May/June 2017 - Over the Wire
Paper360 - May/June 2017 - 9
Paper360 - May/June 2017 - 10
Paper360 - May/June 2017 - 11
Paper360 - May/June 2017 - An Ode to Small
Paper360 - May/June 2017 - 13
Paper360 - May/June 2017 - 14
Paper360 - May/June 2017 - 15
Paper360 - May/June 2017 - The Graying of the Paper Industry
Paper360 - May/June 2017 - 17
Paper360 - May/June 2017 - Suppliers Reach Out to Mill Leaders
Paper360 - May/June 2017 - 19
Paper360 - May/June 2017 - Making a Difference: 2017 TAPPI/PIMA Awards
Paper360 - May/June 2017 - 21
Paper360 - May/June 2017 - 22
Paper360 - May/June 2017 - 23
Paper360 - May/June 2017 - 24
Paper360 - May/June 2017 - 25
Paper360 - May/June 2017 - 26
Paper360 - May/June 2017 - 27
Paper360 - May/June 2017 - RISI’s Asian CEO of the Year
Paper360 - May/June 2017 - 29
Paper360 - May/June 2017 - 30
Paper360 - May/June 2017 - 31
Paper360 - May/June 2017 - TAPPISAFE Offers Solid Benefits for Mills, Contractors
Paper360 - May/June 2017 - 33
Paper360 - May/June 2017 - Reinventing Varkaus
Paper360 - May/June 2017 - 35
Paper360 - May/June 2017 - Failure Isn’t Just an Option—It’s Unavoidable
Paper360 - May/June 2017 - 37
Paper360 - May/June 2017 - Blower Technology Proves Its Worth
Paper360 - May/June 2017 - 39
Paper360 - May/June 2017 - TAPPI Journal Summaries
Paper360 - May/June 2017 - 41
Paper360 - May/June 2017 - Global Study: Most People Highly Value Paper and Print
Paper360 - May/June 2017 - 43
Paper360 - May/June 2017 - 44
Paper360 - May/June 2017 - 45
Paper360 - May/June 2017 - The Changing World of OCC
Paper360 - May/June 2017 - 47
Paper360 - May/June 2017 - TAPPI News
Paper360 - May/June 2017 - ASPI News
Paper360 - May/June 2017 - Index of Advertisers
Paper360 - May/June 2017 - cover3
Paper360 - May/June 2017 - cover4
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