In the last 20 years, China's rapid economic development has caught the attention of the world's major paper companies, with many hoping to gain a foothold in China's paper market. Secretary General Zhang Shen Jin of the National Federation of Industry and Commerce believes that China's future paper market will not have significant growth, so maintaining a parity between capacity and consumption is the idealized goal.
Zhang believes that with the number of Chinese paper companies and industry concentration, standards are weak, small-enterprise self-discipline is poor and market competition is intense. The result is a low price for paper products with adverse effects on company profits. Since 2011, China's economic growth has also been in decline and the downturn in the paper industry has been evident. Simply put, paper companies, traders and consumers currently have a lack of confidence in the industry.
Consequently, while China's paper production in 2014 reached 118 million tonnes, future market demand is unlikely to show significant growth. The market for different products will also become more diverse and the output of different paper types and market sales will shift. Newsprint and book paper sales, for example, are expected to decline, while packaging paper consumption will rise. Special paper (decorative and medical paper, etc.) will show rapid growth in the short term, but with an excess of market output relative to demand. Likewise, packaging and domestic paper will maintain growth in the short term, but the growth rate will decline. However, sales from Chinese companies are likely to remain strong, with Sun Paper and Nine Dragons Paper continuing to keep their quality high and their supply stable. They could, therefore, dominate the market.
Furthermore, Chinese consumers are becoming increasingly aware of the so called 'brand effect.' High-end consumers currently have a strong demand for paper brands. Small and medium-sized enterprises understand the importance of the brand, but to win market share, long-term nurturing and persistence is required. In the next few years, major paper companies will presumably command a greater market share, leading to a corresponding downturn for small- and medium-sized enterprises.
SUPPLY AND DEMAND CHALLENGES
Regarding the global allocation of resources, China remains a country that is relatively short of forest resources and relies heavily on imported paper pulp. Europe and North America are China's traditional pulp suppliers and Finland is a leading European supplier, as it is rich in forest resources, has advanced technology and a long history of papermaking. Finnish pulp has been highly praised by both Chinese companies and consumers, and Finland's large paper companies and Chinese concerns continue to enjoy a strong cooperative relationship.
Chinese consumers are becoming increasingly aware of the so-called "brand effect"
Metsä Fibre is a well-known pulp supplier to the Chinese market and supplies large export volumes. However, countries including South America and Russia are also now developing their own pulp supplies to the region. Coupled with the continuously improving ability of China's companies to produce their own pulp-capacity, how should Metsä Fibre maintain and enhance its competitiveness?
Secretary General Zhang suggests that the company should maintain its successful brand image and strong market visibility. It should continue to focus on environmental protection and sustainable development and use its expertise to guide and assist Chinese paper companies in sustainable development. "Metsä Fibre must further establish a reliable customer relationship in China. It must have a stable customer supply capacity, and cannot let the market affect the customers' product supply. With the company's outstanding product quality and reasonable product price and by working together with the Chinese paper companies, it can create a win-win cooperation mechanism," states Zhang.