With mill closures threatened throughout China to reduce pollution, how is China's tissue industry placed to meet growing demand?

There are two faces to the Chinese paper industry. It will come as no great surprise that around half of the world's new tissue machines in 2010/11 were installed in China.
At Toscotec we have seen our installed base in China grow considerably. The state-of-the-art new machines which are announced in the media on a regular basis give an impression of an industry which is leading the world in its use of technology.

In many respects this is true. There remains however, a wide scattering of older, more polluting paper technology around the country, which the Chinese Government is

keen to retire as soon as possible. In fact an announcement at the end of last year indicated that these closures would take place at a faster pace than originally anticipated: The Chinese Ministry of Industry and Information Technology (MIIT) pinpointed 599 pulp and paper companies operating units which had to be closed by the end of last year.

The bulk of these machines are producing brown paper or printings/writings, but the tissue industry cannot go untouched. As far as capacity is concerned, however, the new capacity slated to come on stream should cover any loss of capacity as well as increased demand.
But the MIIT's initiative can only hasten the process of reinvention which has taken place in the Chinese tissue industry.

The strong investment push by the main tissue players in China in the last two years combined with the stricter environmental controls leaves those on the second rung of the ladder with a challenge.

If they do not invest, they will either fail to meet environmental standards and be closed down, or risk being left behind as they cease to be competitive. The smallest producers really will struggle. They simply cannot compete in terms of quality and their processes, usually based on straw, bagasse or bamboo, are just out of line with where the Chinese tissue industry is going, not to mention environmental legislation.
With this in mind, we need to realise that not all new machines in China are "new" capacity, but outdated lines, even if they are not at the same location.

What is clear is that Chinese consumers have got the taste for tissue and the country is now well on the way to having the world's most modern tissue machine "fleet". It is noticeable, however, that the very biggest, fastest machines are no longer the only thing on the menu. Producers are increasingly looking at technology which, while matching the sophistication of the biggest lines, is designed for a more modest output. Such lines, in addition to representing a smaller investment, might be more suitable to supply just the local population, without having to transport the tissue at great expense to other locations to use up the capacity. Energy consumption by the tissue machine is also an increasingly relevant consideration when tissue makers make purchasing decisions, and this is something on which we at Toscotec have focused particular attention. 

Encouraged to locate inland
Another change to watch for is the location of new tissue projects. Of course, unlike Europe, there is considerable potential for Greenfield projects in this country, but they have tended to cluster around the main cities on the coast. In an attempt to slow down the recent tendency of the Chinese to migrate to coastal cities where the standard of living is higher, new mill projects
are actively being encouraged inland in areas such as Chongqing and Sichuan. As these new mills bring quality tissue to new areas, so the market for tissue in China will gain even more momentum.

Fibre is of course an important practical consideration. The fast, wide new machines being installed in China consume virgin fibre. The infrastructure for sourcing good quality recycled fibre does not yet exist in China, and suitable stock preparation equipment to process it
has not been installed either. None of the big projects in the past two years has involved deinking. This situation clearly favours coastal mills, with their easier access to imported virgin fibre. The transport infrastructure is improving, however, which will strengthen the competitive
case for inland mills, and reduce the fibre division that has existed, whereby coastal mills have produced high quality tissue from virgin fibre, while inland mills have only produced an inferior product from straw, bamboo or bagasse.

The supply of fibre is, at present, plentiful. The pulp market is relatively soft, and large pulp mill projects are due to come on stream in the region in the not-to-distant future. There will always be a softwood pulp requirement for tissue, and local pulp projects will inevitably focus on hardwood pulp. But supply of softwood pulp has proved reliable, and the exchange rate with the Euro favours Chinese buyers at present.

The gas factor
There is another factor which divides the country in terms of tissue production. Gas is not on tap throughout China. Guangdong for example, has virtually none. Most tissue machines in the 30 to 50 tpd category in China rely on coal to generate steam. Mills on sites without access to gas have to consider their technology very carefully if they plan to step up production. Coal cannot
produce steam at as high a rate as gas, so speeds close to 1,700 mpm in rather than 2,000 mpm are realistic. At Toscotec we believe, however, that with world-class runnability this can still put a mill in a strong position, by significantly reducing production costs. Our message is that with the right technology, (we would of course advocate our energy-saving steel yankee), you can still
be competitive with coal.

The investment in state-of-the-art tissue lines means that the evolution of quality in China has been rapid. Within a short time, consumers have come to expect a quality of virgin-fibre tissue which is a match for what is sold Europe, and often better.

An everyday item
China has gained a reputation as a highly competitive place to make products. It is worth remembering, however, that this country pays energy and raw material prices at the same level as anywhere else - often more - and the main competitive advantage is the low cost of manpower. But tissue is capital-intensive to produce and as living standards improve and skills start to attract more of a premium, wage pressure will be upwards anyway. As wage cost pressures increase, producers will be ever more conscious of other burdens on company finances, such as energy. China is undoubtedly one of the most exciting places in the world to be involved in the tissue business, but as market conditions and demands evolve, the subtleties such as energy consumption will rise up the agenda, as sheer volume ceases to be the only answer.

source: http://www.toscotec.com/