It has been several months since the coronavirus spread in China. Although the pandemic crippled the Chinese market earlier, the country’s pulp and paper industry avoided a major impact from the new coronavirus.
Since mid-March, prices of consumer goods (including rice, eggs, vegetables, etc.). are generally on the decline and have returned to normal. Not only consumer goods, but also restaurants and even high-end luxury goods are growing again. Volkswagen’s CEO, Herbert Deiss, has virtually no revenue from anywhere else in the world but China. All of this bodes well for a stable, back-to-normal Chinese economy.
China’s consumer price index
The State of the Nation report for the May 22nd NPC meeting did not set a clear target for GDP growth, instead of shifting the focus to consumption factors. The target unemployment rate is 6%, which effectively means that GDP will not fall below 3%. Given the fact that almost all countries around the world are in a recession, a 3% target is still ambitious.
As for China’s paper industry, not much damage has been seen from the coronavirus outbreak. Total paper exports increased in April as a result of fulfilling overseas orders placed prior to the new coronavirus outbreak.
From a capacity perspective, the second quarter of 2020 should remain stable, while from a general economic perspective, the purchasing managers’ index (PMI) is likely to remain around 51% in the coming months as the overall manufacturing sector has returned to normal after falling to around 36% in February.
China NBS Manufacturing PMI
While domestic demand in China is steady and growing slightly, the export business has taken a big hit. According to Fisher China Resources, Chinese tech giant Huawei (Huawei) could see a decline in orders for consumer electronics products in overseas markets, which could have a significant impact on packaging materials for such products (although some of the declines reflect trade tensions between the U.S. and China).
For example, the demand for packaging is relatively weak in southern Chinese provinces such as Guangdong, Fujian, and Zhejiang, which are more focused on exporting the light industry. However, the North China states were not so severely affected, as their industries were well-positioned to meet local demand.
Neo-coronary pneumonia could also lead to a radical change in industrial infrastructure
Online shopping has received a huge boost during a stay at home and seems to be a new norm in people’s daily life, which has created some added demand for e-commerce packaging. Hygienic products are in front of people, so the paper towel and non-woven industry are likely to experience some growth, driving demand for raw pulp. Medical-related specialty industries are also experiencing potential growth.
But with a significant recovery from the epidemic, the focus of the Chinese paper industry is back on two key areas of reform, creating opportunities for overseas finished products and wood pulp supply chains…
– The OCC ban takes effect in 2021
– Ban single-use plastics by 2022
Since mid-2017, when China announced a ban on imports of recycled paper (RCP) for certain products (including OCC), it has significantly reduced its imports. However, with the full ban beginning in 2021, China must find a way to fill the 10 million tonne gap in recycled waste paper.
While China remains the world’s largest importer of RCP in 2019, accounting for 23% of total imports, it accounts for 51% of RCP imports compared to a few years ago (2015).
The OCC ban will benefit China’s landfills but is certainly a challenge for a country that relies heavily on recycled pulp.
As for banning single-use plastics, those in this industry will have a tremendous opportunity to develop sustainable products for a country with a population of 1.5 billion…people. That’s quite a lot of grocery bags, beverage bottles, food containers, straws, and more.
