From Silk and Plastic to Cellulosic Fiber – How China’s Sustainability Targets Impact The P&P Industry

China’s strive for sustainability has recently caused major turbulence in the pulp and paper industry. The waste paper import ban has shifted global trade flows while a potential complete ban in 2020 would further impact fiber availability and prices. Tightened national emission standards and control has resulted in consolidation and modernization of the industry through new investments and closure of old uncompetitive capacity.

Actions are not limited only to initiatives targeting heavy and polluting industries. China has banned the distribution of free thin plastic bags and introduced a regional trial for replacing plastic containers in food deliveries. New “green packaging” delivery methods are in the pipeline to meet the booming demand from e-commerce. The government-driven changes increase consumer awareness and the use of recyclable fiber-based alternatives.

The Shortening Steps of the Giant

China’s recently released growth in the final quarter of 2018, at 6.4%, hit the lowest mark since the global financial crisis. Notwithstanding, it remains the biggest contributor to global growth due to its size. A slowdown had been expected after years of robust growth and as a result of a government planned shift from a manufacturing to a consumer economy. Tax cuts and spending programs have been introduced to boost growth. It is, however, unclear with how big a stimulus package the government, cautious about its high debt level, would be prepared to intervene.

The real anxiety is in what lies ahead. The dependency ratio is growing. Imports have reported a decline. Prospects of a continued and deepened trade war are gloomy. Consumer confidence has weakened with car and mobile manufacturers issuing warnings. Another question of uncertainty is the reliability of available data.

The government being the driving force of sustainability, the world will also be keeping its eyes on the implementation and scrutiny of its ambitious environmental regulation and sustainability targets. The extra costs faced in complying with stricter limits often fall victim to other priorities during economic slowdown. Could it, nonetheless, be that the Chinese regime is noticing the long-term economic and social gains of sustainable growth?

Despite potential uncertainties, we believe that the market for cellulosic fiber in China continues to show promising prospects.

If you would like to discuss the topic, please contact Iris Ollila, Consultant at iris.ollila@visionhunters.com  or +358 40 566 2641.

Vision Hunters provides strategic advisory services for the forest industry and energy sectors. We assist leadership teams in making the smartest strategic choices to improve the outcome of their company in the future. We are highly experienced and result oriented and have advised many of the leading companies in our industry.