Paper360 - July/August 2017 - 56

the bottom line | ASIA

How Does China's
Market Compare
MATT ELHARDT, FISHER INTERNATIONAL

Fig. 4

Fig. 3

Fig. 2

Fig. 1

China and the United States are the two biggest containerboard
markets in the world, accounting for 50 percent of the world's total production of the grade between them. Yet China's capacity has grown rapidly since
2007 (about 10 percent per year), while that of the US has remained fairly
flat (Fig. 1 tracks capacity trends for each country over the past 10 years).
More recently, China has been slowing from the very rapid growth that
characterized the early part of the century (Fig. 2), and this has led to significant overcapacity. Operating rates have fallen from the 2008-09 levels, though more as a result of investment in new capacity than any drop
in demand.
Whereas the US took 50-60 years to evolve, China has essentially built
its market in the past 20 years. Nine Dragons Dongguan, a single mill
in China, has built twice as many machines as the entire US since 2000.
The rapid growth has led to far more fragmented capacity in China than
in the US (Fig. 3). In the US, four companies have a dominant share and
there are only 29 producers in total. In China, there are only two producers
with a significant percentage share of output (30 percent between them)
and a total of 191 producers, more than half of them with less than 1 percent of the capacity. This clearly leads to far more volatility in the market.
As Fig. 4 illustrates, Chinese and US containerboard product mix and
channel dynamics are quite different. In the US, virgin kraftliner accounts
for about half of all production, followed by recycled corrugating medium,
recycled liner, and other grades. Most of this (70 percent) is integrated
into box plants, with half of the rest open for forward sales and exports
(nearly all of it virgin kraftliner).
China is much more skewed to recycled grades, which account for
almost all output: half corrugating medium, around 40 percent recycled
liner, with the rest made up of recycled white-top liner and other grades.
Sales channels are also completely different from those of the US, with
only 20 percent integrated and almost all the remaining 80 percent going
to independent box plants, while exports are virtually zero. This creates a
lack of flexibility for Chinese producers, who cannot easily divert production to another outlet if demand changes.
China imports almost all of its OCC from the US and Europe. This means
it is not logical that Chinese producers could become exporters in the foreseeable future, processing imported wastepaper at significant cost only to ship
finished product back to the countries that provided the raw material. In
other words, China has invested in new capacity to serve the local market.
Given this fact and recent operating rates-down to around 80 percent
today-we would expect prices to be on the floor. In the past couple of
years, prices have been at about 3000 RMB (about US$437) per ton, which
is the floor price, defined here as the price at which enough producers
can make a profit to satisfy overall demand (i.e., the most efficient 80
percent of producers).
Because China relies so heavily on imported OCC, its cost structure is
generally higher than that of the US. Its fiber costs tends to be about US$30
per ton higher. China's greater use of OCC rather than virgin fiber also

56

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JULY/AUGUST 2017

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Table of Contents for the Digital Edition of Paper360 - July/August 2017

Setpoint
Over the Wire
Euroports Extends Its Reach
Ensuring a Tight Load
Riding the Rails
Trailer Flooring Makes a Difference in Paper Roll Transport
Top 50 Power List
CEPI’s New Director General: ‘A Remarkable Industry'
Värö’s Expansion for the Future
Model Behavior: Understanding Virtual Process Integration
Mondi Štĕtí Chooses Direct Drive Technology
The Knowledge Trail
TAPPI Journal Summaries
How Does China’s Containerboard Market Compare to the US?
Industry Trends in Graphic Paper
Will China Ban Mixed Paper Imports?
TAPPI News
ASPI News
Index of Advertisers
Paper360 - July/August 2017 - intro
Paper360 - July/August 2017 - bellyband1
Paper360 - July/August 2017 - bellyband2
Paper360 - July/August 2017 - cover1
Paper360 - July/August 2017 - cover2
Paper360 - July/August 2017 - 3
Paper360 - July/August 2017 - 4
Paper360 - July/August 2017 - 5
Paper360 - July/August 2017 - Setpoint
Paper360 - July/August 2017 - 7
Paper360 - July/August 2017 - Over the Wire
Paper360 - July/August 2017 - 9
Paper360 - July/August 2017 - 10
Paper360 - July/August 2017 - 11
Paper360 - July/August 2017 - 12
Paper360 - July/August 2017 - 13
Paper360 - July/August 2017 - Euroports Extends Its Reach
Paper360 - July/August 2017 - 15
Paper360 - July/August 2017 - 16
Paper360 - July/August 2017 - 17
Paper360 - July/August 2017 - 18
Paper360 - July/August 2017 - 19
Paper360 - July/August 2017 - Ensuring a Tight Load
Paper360 - July/August 2017 - 21
Paper360 - July/August 2017 - Riding the Rails
Paper360 - July/August 2017 - 23
Paper360 - July/August 2017 - Trailer Flooring Makes a Difference in Paper Roll Transport
Paper360 - July/August 2017 - 25
Paper360 - July/August 2017 - 26
Paper360 - July/August 2017 - Top 50 Power List
Paper360 - July/August 2017 - 28
Paper360 - July/August 2017 - 29
Paper360 - July/August 2017 - 30
Paper360 - July/August 2017 - 31
Paper360 - July/August 2017 - 32
Paper360 - July/August 2017 - 33
Paper360 - July/August 2017 - 34
Paper360 - July/August 2017 - 35
Paper360 - July/August 2017 - 36
Paper360 - July/August 2017 - 37
Paper360 - July/August 2017 - CEPI’s New Director General: ‘A Remarkable Industry'
Paper360 - July/August 2017 - 39
Paper360 - July/August 2017 - 40
Paper360 - July/August 2017 - 41
Paper360 - July/August 2017 - Värö’s Expansion for the Future
Paper360 - July/August 2017 - 43
Paper360 - July/August 2017 - Model Behavior: Understanding Virtual Process Integration
Paper360 - July/August 2017 - 45
Paper360 - July/August 2017 - 46
Paper360 - July/August 2017 - 47
Paper360 - July/August 2017 - Mondi Štĕtí Chooses Direct Drive Technology
Paper360 - July/August 2017 - 49
Paper360 - July/August 2017 - The Knowledge Trail
Paper360 - July/August 2017 - 51
Paper360 - July/August 2017 - TAPPI Journal Summaries
Paper360 - July/August 2017 - 53
Paper360 - July/August 2017 - 54
Paper360 - July/August 2017 - 55
Paper360 - July/August 2017 - How Does China’s Containerboard Market Compare to the US?
Paper360 - July/August 2017 - 57
Paper360 - July/August 2017 - Industry Trends in Graphic Paper
Paper360 - July/August 2017 - 59
Paper360 - July/August 2017 - Will China Ban Mixed Paper Imports?
Paper360 - July/August 2017 - 61
Paper360 - July/August 2017 - 62
Paper360 - July/August 2017 - 63
Paper360 - July/August 2017 - 64
Paper360 - July/August 2017 - 65
Paper360 - July/August 2017 - 66
Paper360 - July/August 2017 - TAPPI News
Paper360 - July/August 2017 - ASPI News
Paper360 - July/August 2017 - 69
Paper360 - July/August 2017 - Index of Advertisers
Paper360 - July/August 2017 - cover3
Paper360 - July/August 2017 - cover4
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