Improving the security of the supply chain: 7 points

Due to the pandemic-related changes in downstream industries, pulp manufacturers have been forced to adjust their marketing strategies in response to the rapid increase in the use of packaging paper. In the medium term, due to the tightening of environmental supervision, the sustainability of the value chain has become the most important factor.

According to a new report from IndexBox, the global wood pulp market is estimated to be $132.7B. Chemical wood pulp (148 million tons) is the most consumed product, accounting for 77% of total consumption. In addition, chemical wood pulp exceeded the recorded second largest type of mechanical wood pulp (24 million tons) by six times. Semi-chemical wood pulp (11 million tons) ranks third in total consumption, with a share of 5.9%.

The COVID crisis has become a test for the paper industry. Due to the online migration of exhibitions and conferences, advertising and education during the epidemic, the decline in demand for printing and writing paper in digital transformation has further intensified.

Considering that a large part of the population is starting to work from home, cloud technology has become a necessary technology. Even if the COVID crisis is overcome, there is no chance of achieving considerable market growth for printing paper.

Contrary to the decline in the demand for office, school, and restaurant paper in 2020, the demand for household paper (toilet paper, napkins) will increase sharply in 2020. Promote the production of corrugated cardboard and paper packaging factories to operate at full capacity. Insufficient supply of cardboard packaging has led to an increase in cardboard prices in 2020. Pulp producers will adjust their market strategies in accordance with the changes in downstream paper and board mill industries.

The countries with the highest wood pulp consumption in 2019 are the United States (51 million tons), China (39 million tons) and Japan (10 million tons), which together account for 52% of global consumption. It is followed closely by Canada, Sweden, Russia, Finland, Brazil, Germany, India, Indonesia, Italy and France with a further 31%.

From 2012 to 2019, among the major consumer countries, the most significant growth rates of wood pulp consumption were India (+6.2% compound annual growth rate), China (+6.1%) and Russia (+4.1%). The consumption growth of wood pulp by other global leading companies is small, or even slightly negative.

In the medium term, given that paper is an environmentally friendly, biodegradable and recyclable material, global demand for paper packaging is expected to grow steadily. This is due to the adoption of new legislation by the European Union and other countries, the re-joining of the Paris Agreement by the United States, and the strengthening of international efforts to protect the climate.

According to EU packaging regulations, by 2030, at least 85% of all paper and cardboard packaging waste must be recycled. In 2019, in the European Union, the share of secondary raw materials in paper production was 49%, while the share of wood pulp was 41%. This makes the sustainability of the paper value chain a key factor in the future of the industry, which means increased use of recycled raw materials and reduced energy consumption.

In 2019, global wood pulp imports were 64 million tons. In terms of value, wood pulp imports reached $45.4B in 2019 (IndexBox estimate). In March 2020, the blockade caused a sharp drop of 10% in global wood pulp imports. Compared with April 2020, it was 30% lower than March 2019. By May 2020, the decline will be even greater, only 60% lower than May 2019. Since then, there have been attempts to recover, but in 2020, global pulp imports failed to return to the level of 2019, mainly due to the decrease in global printing paper usage.

In 2019, China (24 million tons) was the main importer of wood pulp, accounting for 37% of total imports. From 2012 to 2019, the average annual growth rate of China's wood pulp imports was +5.9%. At the same time, India (+9.4%), Turkey (+6.5%), Poland (+6.3%), Spain (+3.4%), Indonesia (+1.7%), the Netherlands (+1.6%), the United States (+1.5%) And Italy (+1.3%) showed a positive growth rate.

India has become the fastest growing importer in the world, with a compound annual growth rate of +9.4% from 2012 to 2019. Germany, Japan, and South Korea have experienced a relatively flat trend pattern. In contrast, France (-2.0%) showed a downward trend over the same period. In 2020, China should maintain its leading position in imports, as rapid urbanization and income growth have promoted the country's packaging and household paper use.

In terms of value, China ($18.8B) is the world's largest wood pulp import market, accounting for 41% of global imports. Ranked second is the United States ($3.3B), which accounts for 7.2% of global imports. It is followed closely by Germany with 6.5%.

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