China Dissolving Pulp Industry, Markets in a State of Flux

In April 2014, Ministry of Commerce People's Republic of China announced the final determination of its dissolving pulp anti-dumping investigation. Starting this past April 6, China will levy tariffs of 17%, 13%, and 6.8% on dissolving pulp produced in the U.S., Canada, and Brazil, respectively. The implementation period will span five years. The tariffs are for the sale of dissolving pulp in China and would hinder the impact of imported dissolving pulp. Although factors including destocking in distribution and weak demand from downstream markets led to price fluctuations, the dissolving pulp industry in China is expected to witness a turning point later this year.

 

A new report being distributed by ChinaMarketResearchReports.com, titled Global and China Dissolving Pulp Industry Report, 2013-2016, nts Hold Steady shows that the world's dissolving pulp industry features quite high producer concentration, with key industrial players consisting of Sappi, Aditya Birla, Lenzing, Sateri, Rayonier, etc. In 2013, the total dissolving pulp capacity of these five producers accounted for roughly 54.5% of the global total. In the forthcoming years, the world's dissolving pulp capacity will continue to grow and the key increments will involve the successively expanded capacity of 300,000 metric tons from Lenzing, 190,000 metric tons switched for production by Rayonier, and the newly built capacity of 175,000 metric tons from Thailand's Double A.

 

Chinese dissolving pulp producers are mainly medium and large papermaking enterprises and chemical fiber enterprises, whereas the papermaking enterprises are chiefly comprised of Yueyang Forest & Paper, Sun Paper, and Zhenlai Xinsheng Paper (started up in 2013), mainly producing wood dissolving pulp, with capacities reaching 300,000 metric tpy, 200,000 metric tpy, and 100,000 metric tpy, respectively. Chemical fiber enterprises include Jilin Chemical Fiber Group and Yibin Grace Group Co., mainly producing bamboo dissolving pulp, of which the 95,000 metric tpy bamboo pulp project of Jilin Chemical Fiber Group is still under construction and expected to startup later this year.

 

As a large consumer of viscose fiber around the globe, China's output of viscose fiber is anticipated to keep a growth rate of 10% or so in the upcoming years, which beyond doubt stimulates a rise in the demand for dissolving pulp, the report notes. Following the anti-dumping tariff levied by China on imported dissolving pulp beginning this year, the output of home-made dissolving pulp in China is expected to grow steadily, reaching around 1 million metric tpy in 2016.

 

In this report, dissolving pulp refers to pulp with cellulose content above 90%, mainly including wood pulp, bamboo pulp, and cotton pulp, with application mainly in viscose fiber downstream. In 2013, global dissolving pulp capacity approximated 6.3 million tons, which were mainly produced in such countries where forest resources are abundant as North America, South Africa, and Brazil. 

 

Because the dissolving pulp industry was fairly profitable during 2009-2011 when a great number of dissolving pulp projects were built in China, the dissolving pulp capacity of China rose to about one million tons till 2013, holding second place in the world. Although it has a rather large dissolving pulp capacity, China has limited forest resources, and the country’s dissolving pulp producers thus have a higher production cost than international counterparts. 

 

In 2012-2013, China's viscose fiber industry remained in the doldrums, resulting in a lower demand for dissolving pulp. This, coupled with the impact of the global low-priced dissolving pulp on the domestic market, led to a universally low operating rate for dissolving pulp devices, thus resulting in an overall loss for the industry. 

 

In 2013, the output of dissolving pulp in China was only around 360,000 metric tons, with a mere 36% operating rate, and an export dependency ratio as much as 83.4%.