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Suppliers limit impact of high paper costs

Makers of paper-based products in China are taking various steps to minimize the effect of the higher cost of imported pulp on export prices, including incorporating more domestic material in releases.

Higher pulp costs are forcing China suppliers of paper products to raise export prices, although several measures are being implemented to keep increases to a minimum.

Suppliers limit impact of high paper costs
Paper plates from Foshan Yunying

One of the steps paper product companies are taking is to import more paperboard and finished rolls instead of pulp. Between January and May 2010, China purchased 1.47 million tons of paperboard and finished rolls from other countries, up 22 percent year on year. In contrast, procurement of paper pulp in the same period fell 16 percent to 4.7 million tons.

This strategy is employed because prices of paperboard and finished rolls are less volatile. Global demand for such products is not as strong as for pulp as they can be used in fewer applications. Further, the decline in consumption of traditional print media in various countries has caused a reduction in orders for newsprint.

Moreover, suppliers are taking advantage of the increasing domestic pulp, paperboard and finished roll output, incorporating more of these materials in their products. In the first five months of 2010, domestic paper pulp production grew 25 percent year on year to 9.3 million tons. Local paperboard and finished roll yield, meanwhile, went up 18 percent in the same period.

For products such as notebooks, Ningbo Tianjiu Printing Co. Ltd adopts locally made paper, which costs $100 less per ton than imported versions. But for upscale items such as catalogs and desk calendars, the more durable and shinier imported coated paper is still used.

Minimal price increase

For products such as paper cups, raw materials account for more than 60 percent of unit costs. As such, suppliers are often quick to adjust export prices following the fluctuation in raw material costs.

Compared with the start of 2010, current paper pulp costs are now higher by 1,000 to 2,000 yuan ($149 to $297) per ton. Consequently, prices at paper tableware products maker Foshan Yunying Paper Co. Ltd have increased by 0.001 to 0.01 yuan ($0.00015 to $0.00149) per piece.

Prices of paperboard products at Yiwu Buyi Stationery Manufacturer went from 4,000 yuan ($595) per ton in late 2009 to about 6,000 yuan ($892) per ton this year.

Apart from raising export prices, some finished product suppliers are emphasizing high-value items. Wenzhou Wanshida Printing Industry Co. Ltd, for instance, ships printed paper products such as stationery, notebooks and gift bags. But the company is focusing on gift bags because the line yields higher profits.

Wenzhou Success Group Paper Articles Co. Ltd, on the other hand, accessorizes its notebooks with fabric, lace or synthetic leather covers, and metal logos or badges.

Companies are investing in equipment upgrades as well. Ningbo Tianjiu purchased advanced printing machines from Japan and Germany to improve and stabilize quality. Locally made units may sometimes print patterns out of line, but imported machines are much more precise.

Higher paper pulp prices

Paper pulp prices began climbing in Q2 2009 and have risen steadily since, moving from roughly $350 per ton to a high of $1,000 per ton. The industry benchmark grade for pulp, NBSK, was $640 per ton in mid-2009 and escalated to $1,020 per ton in late July 2010. Although prices have since fallen to $990 per ton, they are still 19 percent higher year on year.

The short supply of paper pulp is the main reason behind the price hike. The global financial downturn caused some pulp mills to shut down between late 2008 and 2009. The February 2010 earthquake in Chile, one of the world's major paper pulp suppliers, reduced the global output further. Chile is estimated to have contributed 8 percent to the world's pulp yield and 10 percent to China's supply.

Growing demand for paper pulp that came as a result of a better global economy is exacerbating the situation further. Apart from China, none of the world's paper pulp suppliers are expected to boost output this year.


Note: This article "Suppliers limit impact of high paper costs" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.

All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.

Disclaimer: All product images are provided by the companies interviewed and are for reference purposes only. Those product images featuring products with trademarks, brand names or logos are not intended for sale. We, our affiliates, and our affiliates' respective directors, officers, employees, representatives, agents or contractors, do not accept and will not have any responsibility or liability for product images (or any part thereof) which infringe on any intellectual property or other rights of a third party.

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