Suppliers Limit Impact of High Paper Costs

Suppliers Limit Impact of High Paper Costs

China’s paper-based product manufacturers are trying to reduce the impact of higher import prices on export prices. This includes including domestic material in their releases.

China’s paper suppliers are facing higher pulp costs, which is forcing them to increase export prices. However, there are several ways to limit these increases.

Paper product companies are making more imports of paperboard and finished roll instead of pulp. China imported 1.47 million tonnes of paperboard and spent roll from other countries between January and May 2010. This 22 percent increase in annual purchases is a result of the economic boom. However, the procurement of paper pulp fell 16 percent to 4.75 million tons during this same time.

Because prices for paperboard and finished rolls tend to be less volatile, this strategy is used. Because they are used in fewer applications, the global demand for these products is less than for pulp. Newsprint orders have also fallen due to a decline in traditional print media consumption in different countries.

Suppliers are also taking advantage of increasing domestic pulp, finished roll, and paperboard output and incorporating more of these materials into their products. The domestic paper pulp production increased 25 percent in the first five months of 2010 to 9.3 million tons. At the same time, local paperboard and finished rolls yield increased by 18%.

Ningbo Tianjiu Printing Co. Ltd uses locally-made paper for notebooks. It is $100 cheaper per ton than imported papers. For more expensive items like desk calendars and catalogs, however, it is better to use durable and shinier imported forms.

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Price increases are minimal.

Raw materials make up more than 60% of the unit cost for products like paper cups. Suppliers are quick to adjust the export price after fluctuations in raw material costs.

Current paper pulp prices are higher than at the beginning of 2010 by 1,000 to 2000 yuan ($149-$297 per ton)—Foshan Yunying paper co. Ltd has seen its prices for paper tableware products go up by 0.01 to 0.001 yuan ($0.00015-$0.00149) per unit.

Yiwu Buyi Stationery manufacturer’s prices for paperboard products went up from 4,000 Yuan ($595) per tonne in late 2009 to about 6,000 Yuan ($892) per tonne this year.

Some finished product suppliers have begun to emphasize high-value products, in addition to raising export prices. Wenzhou Wanshida Printing Industry Co. Ltd ships printed paper products like stationery, notebooks, and gift bags. The company is now concentrating on gift bags as it yields more significant profits.

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

Equipment upgrades are also a popular investment by companies. To improve and stabilize the quality of its printing, Ningbo Tianjiu bought advanced machines from Japan or Germany. Imported machines are more precise than locally manufactured units and may occasionally print out-of-line patterns.

Higher prices for paper pulp

The paper pulp prices started to rise in Q2 2009. They have been steadily rising since then, going from $350 per ton to $1,000 per ton. In mid-2009, the industry’s benchmark grade for pulp was $640 per tonne. It climbed to $1,020 in July 2010 and reached $1,020 in July 2010. Although prices have fallen to $990 per tonne, they remain 19 percent higher each year.

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The main reason for the price rise is due to a shortage of paper pulp. Some pulp mills were forced to close due to the global financial downturn in late 2008 and 2009. Global pulp production was further affected by the February 2010 earthquake in Chile. Chile is a major supplier of paper pulp. Chile contributed an estimated 8 percent of the world’s pulp yield and 10 percent of China’s supply.

The situation is worsening due to a growing demand for paper pulp, which has been a result of a more robust global economy. Except for China, no other paper pulp supplier in the world is expected to increase production this year.

Aimee Ocampo, the managing editor of Global Sources, wrote this article initially for the company. Global Sources is a major business-to-business media firm and a key facilitator of trade with China suppliers and manufacturers. We provide essential sourcing information to volume purchasers through our magazines and trade shows, as well as industry research.

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