Analysis of the development trend of China's pulp and paper industry

01Wood consumption in pulp and paper
The global wood consumption of the pulp and paper industry is estimated to be around 400 million tonnes per year. About 80% of consumption comes from the top 10 papermaking countries
Among them, the United States leads the consumption of wood fiber, followed by Brazil. China is the third largest consumer of wood raw materials for papermaking, with an estimated consumption of about 34 million tonnes this year.
Different countries show significant differences in the use of long and short fibers. North America and Europe tend to prefer long fibers, while Asian and Latin American countries tend to prefer short fibers. This preference is largely driven by the availability of local forest resources.
In the past few years, China's paper industry has undergone significant changes due to the implementation of plastic bans and restrictions and the introduction of scrapping orders. This has led to changes in the raw materials for paper making and a growing demand for wood pulp.
China is a major importer of commercial pulp, and companies are investing more and more in pulp production lines. These investments aim to reduce the country's dependence on imported pulp and capture all the revenue in the value chain. ResourceWise noted that 2022 saw a record number of new pulp lines added to China's capacity, and this trend appears to be continuing.
02Global distribution of forest resources
Forests are essential for sustaining the lives of more than one billion people, providing basic resources such as food, medicine and biofuels. Not only are they essential for biodiversity conservation and soil and water conservation, but they are also powerful tools in the fight against climate change. Their importance cannot be overstated.
Forests cover 4.06 billion hectares, or one-third of the Earth's land area. However, their geographical distribution and distribution among different populations are very uneven. The tropics have the highest proportion of forests in the world, up to 45 per cent. This is followed by the cold, temperate, and subtropical regions.

Russia, Brazil, Canada, the United States and China are among the countries with the largest forest area. Together, they cover more than half (54%) of the world's forest land and cover more than 2 billion hectares.

Forests are made up of natural regeneration forests and planted forests, with bamboo forests in Asia (especially China and India). Forest management objectives include the production of timber and non-timber forest products, soil and water conservation, biodiversity conservation, and social services such as recreation and research. About 30 percent of the world's forests are mainly used for the production of timber and non-timber forest products.

Over the past 30 years, the world's forest area has lost by about 170 million hectares. However, this rate of decline has slowed due to reduced deforestation in some countries, afforestation efforts in other areas, and natural expansion of forests. Forests have increased in Asia and Europe, while forests have decreased significantly in Africa and South America
The area of naturally regenerated forests remained largely unchanged in different regions. In Africa and South America, 98% of forests are naturally regenerated. In Europe, North America and Oceania, the figure is 95%. Asia is home to 78% of naturally regenerated forests, reflecting reforestation efforts, especially in China. However, the area of naturally regenerated forest decreased in all regions except Europe and Oceania, with sub-Saharan Africa and Brazil losing the most.

In terms of changes in plantations in different regions, Asia has the largest area of plantations, followed by Europe and North America. However, not all plantations are used for industrial production. South America has the highest proportion of industrial plantations, while Oceania has the highest proportion of planted forests. In Asia, 60% of planted forests are planted.

According to the China Forestry and Grassland Statistical Yearbook, the growth of industrial plantations in the top 10 papermaking countries (Figure 4). Brazil, Indonesia and Chile have large pulp production capacities and are entirely dependent on industrial plantations for the production of wood fiber. More than half of the forest area in China and the United States is industrial plantations, while other countries have a mix of different types of plantations.
In 2022, China's forest area reached 220 million hectares, accounting for 5% of the world's forest area. The national average forest coverage rate is 23%, with large regional differences. Fujian province has the highest coverage rate of 66.8 percent, while provinces such as Xinjiang and Qinghai have less than 5 percent.

China's forests are mainly divided into arbor forests, bamboo forests, and shrub forests. Arbor forests dominate, with 6.4 million hectares of bamboo forests in the country. Fujian has the largest bamboo forest area at 1.14 million hectares, followed by Jiangxi and Hunan, accounting for 45% of China's bamboo forest area.
03Wood chip supply and price trends
Let's take a look at global timber prices, including hardwoods, softwood logs, and wood chips. Hardwood prices are lowest in the Americas (Brazil, Chile, USA, Canada), while prices are relatively high in Europe and Asia. The price trend of cork is similar.

Supply and demand affect prices, with Brazil and Chile having 100% industrial plantations, North America more than 50%, and Europe mainly consisting of general industrial forests. Japan and China are dependent on imports, resulting in higher prices.

ResourceWise's WoodMarket Price, which provides softwood and hardwood pricing data, has been relatively stable at $80-$100 over the past 20 years (Figure 5). However, starting in 2021, prices have risen significantly, especially for hardwoods. Global hardwood prices hit a record high of more than $110 last quarter, impacting pulp mills' profits. This trend has also contributed to the continued increase in pulp prices.
Since 2011, driven by the continuous growth of the paper industry, China's hardwood chips imports have grown steadily. Imports in 2011 were 6.2 million tonnes, almost tripling in 2022. It is worth noting that even during the pandemic, imports did not decrease. Imports in 2020 were 13 million tonnes and in 2021 they were close to 15 million tonnes, showing significant growth.

Vietnam is a major supplier of Chinese hardwood chips, accounting for 60% of imports from the Chinese market. Australia is the second largest source country, with its market share peaking in 2017. China has recently lifted its ban on Australian timber, so the share of Australian woodchips is likely to increase gradually. In terms of softwood, the United States, Australia and Russia are the main sources of imports. Figure 6 shows the price trajectory of wood chips imported into China from different hardwood chip source countries.
Wood chips from Vietnam and Thailand cost less than wood chips from Australia and Chile. However, the superior quality of Australian woodchips makes it a top choice for domestic businesses. These companies use Australian wood chips to produce high-end pulp varieties such as dissolving pulp and fluff pulp. As China's woodchip imports continue to surge, it has brought about changes in the price and supply dynamics of woodchips in the Asian market.