How will 6.5 million tons affect?
During the "Eleventh Five-Year Plan" period, it will shut down 6.5 million tons of papermaking capacity. According to the documents promulgated by the National Development and Reform Commission and the State Environmental Protection Administration, some 550 million tons of backward production capacity will be shut down by the end of 2008.
Judging from the effect of the actual shutdown, the implementation of the policy began to increase in 2007, and we believe that the strength of this policy implementation can be continued in the future. In 2008, it is entirely possible to complete the 6.5 million tons shutdown plan in advance.
Of the 6.5 million tons of production capacity, mainly low-grade cultural paper, low-grade linerboard and corrugated paper are the main products. Among them, the low-grade culture paper accounted for about 40%, and the low-grade paperboard accounted for 60%. That is to say, the cultural paper will close 2.6 million tons, and the cardboard will be shut down 3.9 million tons. In 2006, the production and consumption of cultural paper were 12.2 million tons and 12.11 million tons, respectively, and the basic balance between supply and demand included straw pulp, mixed-leaf paper and wood pulp paper. The production and consumption of linerboard and corrugated paper in 2006 were 22.8 million tons and 24.43 million tons respectively. The main raw materials were straw pulp and waste pulp.
Impact on Linerboard: Supply and demand are still balanced
According to statistics, there is still a lot of pressure on the production capacity of containerboard in 2007 and beyond. The cumulative capacity of Xiaolong, Liwen, Jingxing and Huaxing added about 4 million tons, which is basically the same as the planned backward production capacity. Therefore, the impact of the environmental shutdown on the supply and demand fundamentals of containerboard is not very significant. The resulting increase in the degree of concentration, thus enhancing downstream bargaining power, is the focus of our observation.
It should be noted that the sales radius of containerboard paper is the smallest among all sub-industry products, and it is easy to form a regional monopoly. Although the environmental protection shutdown has little impact on the fundamentals of supply and demand, it has determined the survival of small paper mills and the inability to expand the fate of development. This in turn increases the possibility of the formation of a regional monopoly by a dominant enterprise. Overall, containerboard will directly benefit from this environmental shutdown storm. As the balance between supply and demand remains balanced, and the increase in concentration will increase bargaining power, we expect that the average annual price of containerboard in 2008 will rise slightly by 5% over this year. Some of the companies that form a regional monopoly will have greater increases in their paper prices.
Impact on Culture Paper: Price increases will become the norm
To facilitate the calculation, we use the output of 2006 as the basis for the analysis. Cultural paper closure production capacity accounted for 20% of the total output of 12.2 million tons of culture paper in 2006. What needs to be pointed out in particular is that due to the fact that the shut-down production capacity is all low-grade cultural paper with straw pulp as raw material, the supply and demand structure of low-grade cultural papers has undergone drastic changes. The total production capacity of cultural paper is 12.2 million tons, and that of middle and low grade straw pulp is 5.5 million tons, and that of medium-to-high grade mixed pulp and wood pulp paper is 6.7 million tons. In other words, straw pulp paper will be shut down by 47%.
The closure of 47% of low-grade straw pulp and paper will cause serious shortage of low-grade cultural paper. The expansion of existing production capacity is strictly controlled by the state. The possibility of approval of the new straw production line is almost zero. The result can only be the price of paper products. Rise and replace with pulp and pulp paper. The effect of linkage is that the demand for mixed pulp and wood pulp culture paper will be magnified. From the perspective of its supply, since the construction period of a new construction project generally takes 1.5 to 2 years, it also requires the approval of a number of relevant government departments. The new production line should be put into operation after 2010. During the period, due to factors such as the increase in the utilization rate of existing capacity, the conversion of other paper machines, and the increase in production and technological changes, some of the market vacancies will be made up, but their contribution is limited.
In general, the rise in the price of cultural paper will become the norm, and will be accompanied by an upgrade in the consumption structure. We expect that the average annual price of low-grade cultural paper will increase by 15% from the first half of this year; the price of high-grade cultural paper will increase by 10%.
Environmental impact greater than 6.5 million tons
The closure of 6.5 million tons of backward production capacity due to energy conservation and emission reduction is only one of the environmental protection policies. In 2007, the State Environmental Protection Administration issued a new “Pollution and Paper Industry Pollutant Discharge Standard (Consultation Draft)—GB3544†to replace the original “Pollution and Paper Industry Pollutant Discharge Standard - GB3544-2001â€. According to the plan of the State Environmental Protection Administration, new standards will be implemented starting from January 1, 2008.
Comparing the old and new emission standards, the emission requirements of various pollutants are all more stringent.
COD, the most important pollutant emission, has been doubled. Moreover, the new standard no longer gives grass pulp "preferential policies", and the existing enterprises have increased from 450mg/L to 150mg/L, and the newly-built enterprises are strictly up to 90mg/L.
New indicators such as phosphorus, nitrogen, ammonia nitrogen, and AOX have been newly introduced (AOX is a reference indicator in the old standard and is not mandatory).
Taking AOX as an example, straw pulp ton slurry fixing equipment needs to invest about 300,000 yuan, which means that a 5000-ton straw plant needs to invest 1.5 billion yuan to deal with AOX, almost becoming an insurmountable capital barrier.
For paper-making companies (using purchased food pulp), the change in emission standards is relatively small and there is basically no need to increase too much extra investment. However, for straw pulp and paper companies, to meet the emission standards of new enterprises, three levels of advanced treatment are required, which means huge one-time investment, and the ton water treatment costs will also increase dramatically.
After the straw pulp and paper production is increased by three levels of advanced treatment, the processing cost per ton of water will increase from RMB 0.6 to RMB 1.2/tonne to RMB 1.8 to RMB 3.0/ton, and the reference drainage of tons of paper (pulp) will also be greatly reduced. The cost of water treatment will increase to RMB 4.5/t. For straw pulp paper, the cost per ton of paper will increase by 200-250 yuan.
From the above analysis, it can be predicted that the impact of the new emission standards after the implementation in 2008 on the competitive landscape of the industry is very great. We believe that due to the huge pressure of cost, the profit space of the straw pulp mill will be further compressed. If the new standard can be vigorously implemented, the speed of elimination of medium and small straw pulp and paper mills will increase.
For large straw pulp and paper mills, the emphasis on environmental protection has always been high, and the pressure is relatively small. Taking Shandong and Henan as examples, the local standards currently implemented in Shandong Province are COD 100-150 mg/L, and Henan Province 250 mg/L, which is close to or even meets the requirements of the new standard. Therefore, in the short term, the new standard will have little impact on the existing large-scale straw pulp and paper companies, and it will help them increase market share, such as Bohui Paper and Yinge Investment.
However, we suggest that the grass-pulp companies have a long-standing environmental risk (as of July 1, 2009, Shandong Province will implement more stringent local standards - COD 60mg/L, starting in 2010 pulp and paper companies will implement the new standard 2).
For wood pulp mills and companies using commercial pulp and paper, there is little pressure on environmental protection, and the cost increase on the existing basis is relatively limited.
During the "Eleventh Five-Year Plan" period, it will shut down 6.5 million tons of papermaking capacity. According to the documents promulgated by the National Development and Reform Commission and the State Environmental Protection Administration, some 550 million tons of backward production capacity will be shut down by the end of 2008.
Judging from the effect of the actual shutdown, the implementation of the policy began to increase in 2007, and we believe that the strength of this policy implementation can be continued in the future. In 2008, it is entirely possible to complete the 6.5 million tons shutdown plan in advance.
Of the 6.5 million tons of production capacity, mainly low-grade cultural paper, low-grade linerboard and corrugated paper are the main products. Among them, the low-grade culture paper accounted for about 40%, and the low-grade paperboard accounted for 60%. That is to say, the cultural paper will close 2.6 million tons, and the cardboard will be shut down 3.9 million tons. In 2006, the production and consumption of cultural paper were 12.2 million tons and 12.11 million tons, respectively, and the basic balance between supply and demand included straw pulp, mixed-leaf paper and wood pulp paper. The production and consumption of linerboard and corrugated paper in 2006 were 22.8 million tons and 24.43 million tons respectively. The main raw materials were straw pulp and waste pulp.
Impact on Linerboard: Supply and demand are still balanced
According to statistics, there is still a lot of pressure on the production capacity of containerboard in 2007 and beyond. The cumulative capacity of Xiaolong, Liwen, Jingxing and Huaxing added about 4 million tons, which is basically the same as the planned backward production capacity. Therefore, the impact of the environmental shutdown on the supply and demand fundamentals of containerboard is not very significant. The resulting increase in the degree of concentration, thus enhancing downstream bargaining power, is the focus of our observation.
It should be noted that the sales radius of containerboard paper is the smallest among all sub-industry products, and it is easy to form a regional monopoly. Although the environmental protection shutdown has little impact on the fundamentals of supply and demand, it has determined the survival of small paper mills and the inability to expand the fate of development. This in turn increases the possibility of the formation of a regional monopoly by a dominant enterprise. Overall, containerboard will directly benefit from this environmental shutdown storm. As the balance between supply and demand remains balanced, and the increase in concentration will increase bargaining power, we expect that the average annual price of containerboard in 2008 will rise slightly by 5% over this year. Some of the companies that form a regional monopoly will have greater increases in their paper prices.
Impact on Culture Paper: Price increases will become the norm
To facilitate the calculation, we use the output of 2006 as the basis for the analysis. Cultural paper closure production capacity accounted for 20% of the total output of 12.2 million tons of culture paper in 2006. What needs to be pointed out in particular is that due to the fact that the shut-down production capacity is all low-grade cultural paper with straw pulp as raw material, the supply and demand structure of low-grade cultural papers has undergone drastic changes. The total production capacity of cultural paper is 12.2 million tons, and that of middle and low grade straw pulp is 5.5 million tons, and that of medium-to-high grade mixed pulp and wood pulp paper is 6.7 million tons. In other words, straw pulp paper will be shut down by 47%.
The closure of 47% of low-grade straw pulp and paper will cause serious shortage of low-grade cultural paper. The expansion of existing production capacity is strictly controlled by the state. The possibility of approval of the new straw production line is almost zero. The result can only be the price of paper products. Rise and replace with pulp and pulp paper. The effect of linkage is that the demand for mixed pulp and wood pulp culture paper will be magnified. From the perspective of its supply, since the construction period of a new construction project generally takes 1.5 to 2 years, it also requires the approval of a number of relevant government departments. The new production line should be put into operation after 2010. During the period, due to factors such as the increase in the utilization rate of existing capacity, the conversion of other paper machines, and the increase in production and technological changes, some of the market vacancies will be made up, but their contribution is limited.
In general, the rise in the price of cultural paper will become the norm, and will be accompanied by an upgrade in the consumption structure. We expect that the average annual price of low-grade cultural paper will increase by 15% from the first half of this year; the price of high-grade cultural paper will increase by 10%.
Environmental impact greater than 6.5 million tons
The closure of 6.5 million tons of backward production capacity due to energy conservation and emission reduction is only one of the environmental protection policies. In 2007, the State Environmental Protection Administration issued a new “Pollution and Paper Industry Pollutant Discharge Standard (Consultation Draft)—GB3544†to replace the original “Pollution and Paper Industry Pollutant Discharge Standard - GB3544-2001â€. According to the plan of the State Environmental Protection Administration, new standards will be implemented starting from January 1, 2008.
Comparing the old and new emission standards, the emission requirements of various pollutants are all more stringent.
COD, the most important pollutant emission, has been doubled. Moreover, the new standard no longer gives grass pulp "preferential policies", and the existing enterprises have increased from 450mg/L to 150mg/L, and the newly-built enterprises are strictly up to 90mg/L.
New indicators such as phosphorus, nitrogen, ammonia nitrogen, and AOX have been newly introduced (AOX is a reference indicator in the old standard and is not mandatory).
Taking AOX as an example, straw pulp ton slurry fixing equipment needs to invest about 300,000 yuan, which means that a 5000-ton straw plant needs to invest 1.5 billion yuan to deal with AOX, almost becoming an insurmountable capital barrier.
For paper-making companies (using purchased food pulp), the change in emission standards is relatively small and there is basically no need to increase too much extra investment. However, for straw pulp and paper companies, to meet the emission standards of new enterprises, three levels of advanced treatment are required, which means huge one-time investment, and the ton water treatment costs will also increase dramatically.
After the straw pulp and paper production is increased by three levels of advanced treatment, the processing cost per ton of water will increase from RMB 0.6 to RMB 1.2/tonne to RMB 1.8 to RMB 3.0/ton, and the reference drainage of tons of paper (pulp) will also be greatly reduced. The cost of water treatment will increase to RMB 4.5/t. For straw pulp paper, the cost per ton of paper will increase by 200-250 yuan.
From the above analysis, it can be predicted that the impact of the new emission standards after the implementation in 2008 on the competitive landscape of the industry is very great. We believe that due to the huge pressure of cost, the profit space of the straw pulp mill will be further compressed. If the new standard can be vigorously implemented, the speed of elimination of medium and small straw pulp and paper mills will increase.
For large straw pulp and paper mills, the emphasis on environmental protection has always been high, and the pressure is relatively small. Taking Shandong and Henan as examples, the local standards currently implemented in Shandong Province are COD 100-150 mg/L, and Henan Province 250 mg/L, which is close to or even meets the requirements of the new standard. Therefore, in the short term, the new standard will have little impact on the existing large-scale straw pulp and paper companies, and it will help them increase market share, such as Bohui Paper and Yinge Investment.
However, we suggest that the grass-pulp companies have a long-standing environmental risk (as of July 1, 2009, Shandong Province will implement more stringent local standards - COD 60mg/L, starting in 2010 pulp and paper companies will implement the new standard 2).
For wood pulp mills and companies using commercial pulp and paper, there is little pressure on environmental protection, and the cost increase on the existing basis is relatively limited.