Exports from Japan to China of base paper for cardboard are soaring as the Chinese government has restricted the entry of used paper, a key raw material for corrugated cardboard, as a measure against environmental pollution.
There is growing demand for corrugated cardboard in China due to the expansion of online shopping. Competition between Chinese and Japanese manufacturers is expected to intensify.
Corrugated cardboard is made by collecting used paper such as cardboard, returning it to a fibrous form with water and removing foreign matter. Used paper accounts for more than 90% of the raw material.
However, chemical materials and metals are sometimes found in used paper. If these materials are not properly disposed of during the recycling process, they may cause environmental pollution. The Chinese government partially banned imports of solid waste, including used paper, from around 2018 and completely banned them from January this year.
As a result, it has become difficult to obtain used paper in China, and exports from Japan increased to make up for the shortage of base paper. According to the Japan Paper Association (JPA), between January and November 2020, exports of base paper amounted to 813,000 tons, about double that of the same period last year and already a new annual record.
Of this amount, exports to China accounted for about 40%, about 6.6 times the level in the same period last year.
Used paper is also collected in China, but the quality of the paper is said to be low due to poor sorting. JPA Chairman Toru Nozawa, who is also president of Nippon Paper Industries Co., said that demand growth for Japanese companies was expected to continue for the time being.
Many Chinese manufacturers are moving their base paper plants to Southeast Asia. Nine Dragons Paper Ltd. will start operating a new plant in Malaysia in 2022. If exports to China from Malaysia begin in earnest, they will be a formidable rival for exports from Japan.
Japanese paper makers have been increasing their production bases in Southeast Asia, as that market is expected to expand. Oji Holdings Corp. plans to expand production facilities for base paper of corrugated cardboard in Malaysia and start commercial operations in April. The company also opened new cardboard factories in Cambodia and India.
In January last year, Rengo Co. invested in a paper company in the Philippines and is expanding production facilities for base paper of cardboard.
Japanese and Chinese paper makers may clash over local demand. "Japanese paper manufacturers need to speed up the reinforcement of their production facilities." said Yu Sato, a senior analyst at SMBC Nikko Securities Inc.
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