China contends with coronavirus

Shutdowns add to uncertainty for paper industry

While the coronavirus outbreak is becoming a global concern, its impact is most acute in China's Hubei province, where it originated. This unfolding public health crisis is also disrupting the region's large pulp and paper industry, and its many employees, suppliers and customers.

Fastmarkets reporters and analysts are tracking these and other developments during this turbulent time - read on for a report from our China team.

Coronavirus outbreak hits China paper industry, muting supply and demand

BEIJING, Feb 6, 2020 (Fastmarkets RISI) - The coronavirus outbreak in China has brought the country’s paper and board industry to a semi-standstill with both production and logistics slowing down.

Most provincial governments have extended the Lunar New Year (LNY) holiday to February 9 to limit the flow of people. This is an endeavor to contain the spread of the never-seen-before virus, which has claimed 565 lives as of Thursday. The break was originally meant to run from January 24 to January 30.

In the central province of Hubei, non-essential enterprises have been ordered not to reopen before February 14.

Its capital Wuhan (where the coronavirus originated) and other major cities there are under a lockdown that started as early as January 23.

All pulp and paper mills in the province have stopped operation.

According to preliminary data from the National Bureau of Statistics of China, Hubei saw total paper and board production of 4.16 million tonnes in 2019, ranking its industry 7th out of 31 provinces in the country.

Shandong Chenming Paper Holdings have two mills in Hubei. The one in Huanggang city houses a 500,000 tonne/yr chemical pulp line which can swing between paper grades and dissolving grades. The other, in Wuhan, has 220,000 tonnes/yr of tissue, specialty paper and graphic paper capacity. Both facilities have been stopped for nearly two weeks.

The city of Xiaogan is a major hub for tissue production in China. Top producers, including APP China, Vinda International and C&S Paper, have a total of approximately 680,000 tonnes/yr tissue capacity in the city. All of them are understood to be out of operation.

Hubei is also home to several large recycled containerboard plants. Long Chen Paper’s 1.15 million tonne/yr Songzi mill and Shanying International’s 550,000 tonne/yr Jingzhou mill shut down January 28 and January 29.

Golden Phoenix Paper, Hubei Shengda Paper and Hubei Xiangxing Paper Technology, which boast a total recycled containerboard capacity of 2.26 million tonnes/yr, have been down for about two weeks.

Contacts from the affected producers told Fastmarkets RISI that they highly doubt whether the facilities will be able to resume operations on February 14 as currently scheduled, as the number of confirmed cases of the coronavirus is still surging in the province and mandated lockdowns are expected to continue.

Paper and board manufacturers outside Hubei are also in a challenging situation. Most recycled packaging board plants arranged downtime over LNY holiday this year as usual. Now that people across the country are being urged to stay home to avoid spreading infection, domestic recovered paper collection has practically stopped.

Mill workers who went back to their hometowns for LNY are struggling to get back to work as quarantine efforts have been stepped up beyond Hubei. Faced with a short supply of fiber and labor, small and medium-sized recycled board mills in China are mostly down, while leading producers are keeping a handful of BMs running.

In the virgin fiber-based sector, operating rates appear to be relatively higher as mills have sufficient wood pulp stocks. However, their inventories of finished products are rapidly increasing as stalled logistics blocks output at their own warehouses.

Trucking is the most important shipping method in China’s paper and board market. Producers that have nationwide sales networks in China do use water or rail transport for long-distance delivery but need truck transport to connect their warehouses with ports and railway stations.

Meanwhile, demand for paper and board is also weak as downstream industries have not resumed business either. Most converters and box plants are closed, except for those providing packaging materials for key medical goods, such as protective clothing and face masks.

“We restarted on January 28, six days earlier than previously scheduled, to produce boxes for a few customers in the medical industry,” said a box plant contact.

“But orders from such customers account for only a small fraction of our business, and so far other customers are still very quiet, which I find very worrying.”

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