Sourcing of China’s Paper Fiber Supply& Recent Trade Trends

Kerstin Canby

Where will the supply come from?

0

100

200

300

400

0 5000 10000 15000 20000 25000 30000 35000 40000

GDP per capita, USD 2000 prices

Consumption 2000, kg per capita

Japan 1980-2000

USA

Denmark

Sweden

Ireland

UK

Finland

CanadaNetherlands

Austria

Belgium

Singapore

Germany

France

Australia

ItalySpain

New Zealand

Rep. of Korea

Malaysia GreecePortugal

ArgentinaMexico

VenezuelaBrazil

Turkey

South Africa

Russia

China

India

China

USA

GDP per capita & paper consumption

UK

China’s Total Papermaking Fiber Resources

0

10

20

30

40

50

60

2002 2003 2004 2005 2006

Mega

tons

0%10%20%30%40%50%60%70%80%90%100%

Local Pul p I mpor t ed Pul pLocal Wast epaper I mpor t ed Wast epaperI mpor t ed Pul pwood* % Vi r gi n Fi ber

Agricultural residues

Wastepaper

Office paper

Used cardboard & cartons

Mixed (cardboard, news, magazines)

Used magazines, newspapers, etc

Low risk forest / plantations

Potentially threatened forests

Low risk forest / plantations

Unknown forest / plantations

Vegetable pulps (short fiber, low strength, poor quality

Bleached chemical wastepaper

Unbleached draft wastepaper

Other wastepaper (mixed)

Mechanical grade wastepaper

Chemi-mechanical pulp

Bleached kraft pulp(sulfate)

Hardwood pulpwood

Traditional small-scale pulp & paper mills

white paper liner

cardboard

corrugating core

Large scale modern paper industry

Packaging & other paper products for domestic use 53%

Export-grade corrugated shipping boxes 22%

Coated mechanical grades (newsprint) xxxxxxx11%

Export-grade printing and communication paper 14%

Resource Origin Fiber Input Type Processing Final Product

Local pulp & wastepaper

53%

Imported secondary

fiber 33%

Imported pulp

13%

Imported pulpwood

1%

Agricultural residues

Wastepaper

Office paper

Used cardboard & cartons

Mixed (cardboard, news, magazines)

Used magazines, newspapers, etc

Low risk forest / plantations

Potentially threatened forests

Low risk forest / plantations

Unknown forest / plantations

Vegetable pulps (short fiber, low strength, poor quality

Bleached chemical wastepaper

Unbleached draft wastepaper

Other wastepaper (mixed)

Mechanical grade wastepaper

Chemi-mechanical pulp

Bleached kraft pulp(sulfate)

Hardwood pulpwood

Traditional small-scale pulp & paper mills

white paper liner

cardboard

corrugating core

Large scale modern paper industry

Packaging & other paper products for domestic use 53%

Export-grade corrugated shipping boxes 22%

Coated mechanical grades (newsprint) xxxxxxx11%

Export-grade printing and communication paper 14%

Resource Origin Fiber Input Type Processing Final Product

Local pulp & wastepaper

53%

Imported secondary

fiber 33%

Imported pulp

13%

Imported pulpwood

1%

Why is imported chemi- mechanical pulp considered low risk?

0100200300400500600700800900

1000

2002 2003 2004 2005 2006

Kilo

tons

Canada New Zealand Sweden IndonesiaEstonia Norway Finland Other

Why is imported bleached kraft pulp considered higher-risk?

01234567

2002 2003 2004 2005 2006

Meg

aton

s

Canada Indonesia Brazil RussiaUnited States Chile Finland Other

Agricultural residues

Wastepaper

Office paper

Used cardboard & cartons

Mixed (cardboard, news, magazines)

Used magazines, newspapers, etc

Low risk forest / plantations

Potentially threatened forests

Low risk forest / plantations

Unknown forest / plantations

Vegetable pulps (short fiber, low strength, poor quality

Bleached chemical wastepaper

Unbleached draft wastepaper

Other wastepaper (mixed)

Mechanical grade wastepaper

Chemi-mechanical pulp

Bleached kraft pulp(sulfate)

Hardwood pulpwood

Traditional small-scale pulp & paper mills

white paper liner

cardboard

corrugating core

Large scale modern paper industry

Packaging & other paper products for domestic use 53%

Export-grade corrugated shipping boxes 22%

Coated mechanical grades (newsprint) xxxxxxx11%

Export-grade printing and communication paper 14%

Resource Origin Fiber Input Type Processing Final Product

Local pulp & wastepaper

53%

Imported secondary

fiber 33%

Imported pulp

13%

Imported pulpwood

1%

Why is imported pulpwood considered higher risk?

0100200300400500600700800900

2002 2003 2004 2005 2006

Bone

-dry

met

ric k

iloto

ns

Australia Vietnam Indonesia ChileMalaysia USA Cambodia Other

Agricultural residues

Wastepaper

Office paper

Used cardboard & cartons

Mixed (cardboard, news, magazines)

Used magazines, newspapers, etc

Low risk forest / plantations

Potentially threatened forests

Low risk forest / plantations

Unknown forest / plantations

Vegetable pulps (short fiber, low strength, poor quality

Bleached chemical wastepaper

Unbleached draft wastepaper

Other wastepaper (mixed)

Mechanical grade wastepaper

Chemi-mechanical pulp

Bleached kraft pulp(sulfate)

Hardwood pulpwood

Traditional small-scale pulp & paper mills

white paper liner

cardboard

corrugating core

Large scale modern paper industry

Packaging & other paper products for domestic use 53%

Export-grade corrugated shipping boxes 22%

Coated mechanical grades (newsprint) xxxxxxx11%

Export-grade printing and communication paper 14%

Resource Origin Fiber Input Type Processing Final Product

Local pulp & wastepaper

53%

Imported secondary

fiber 33%

Imported pulp

13%

Imported pulpwood

1%

63.5%

80%

2007 trends continue….

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -

10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

100.0

Imports of Wood Pulp, Recycled Materials & Wood Chips (1997-2007)

wood pulp Recycled pulp & paperWoodChips

2005 2006 20070

1

2

3

4

5

6

7

8

9

Top 5 Exporters of Pulp to China

Canada Indonesia Chile Russia

Mill

ion

m3

RWE

2007 pulp sourcing

2005 2006 20070.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

Top 5 Exports of Wood Chips to China

Vietnam Indonesia Australia

Mill

ion

m3

RWE

Wood chips small but important to some countries...

Recommendations

• Be aware of where pulp, pulpwood and woodchips are coming from & develop tracking systems to verify origin

• Address the “weakest links” in China’s fiber supply system: the uncertified pulp and pulpwood coming from Russia and Indonesia– ensure certified harvested from sustainably

managed forest operations & can be tracked through to the mill

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

20

40

60

80

100

120

140

160

180Total Forest Product Imports

Timber Product Imports Pulp and Paper Imports

Mill

ion

m3

RWE

2007 import rise

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

10

20

30

40

50

60

China's Timber Product Imports by Category

Other Veneer Particleboard PlywoodFiberboard Wood chips Sawn wood Logs

Mill

ion

m3

RWE

Taking out p & p, logs dominate

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

China Log Imports

OthersMyanmarSoloman IslandsGabonNew ZealandMalaysiaPNGRussia

M3

RWE

Russian logs dominate….

Russian Exports to China, w/o logs

2005 2006 20070

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

chempulp lumber paper and paperboard sleeper/crosstiemech-chem woodpulp

RWE

(mill

ions

m3/

year

)Small increase in other Russian wood products…

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

2000000

4000000

6000000

8000000

10000000

12000000

14000000

China's Log Imports (without Russia)

OthersMyanmarSoloman IslandsGabonNew ZealandMalaysiaPNGM

3 RW

ERise of PNG, Solomons, NZ, Gabon

2005 2006 20070

2

4

6

8

10

12

Indonesian Exports to China

pulp paper woodchipslumber plywood veneer

mill

ion

m3

RWE

Indonesian imports down

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070.0

500000.0

1000000.0

1500000.0

2000000.0

2500000.0

3000000.0

3500000.0

China's African Forest Product Imports

Gabon Equatorial Guinea Cameroon Mozambique Congo-Brazzaville South Africa

Swaziland Liberia Other

Mill

ion

m3

RWE

African imports up (but only 4-5% of total imports)

1996 1997 1998 1999 2000 2001 2002 2003 2004 20050

10

20

30

40

50

60

70

80

90

100

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Exports Domestic Consumption Export Share (right axis)Source: RISI

Mill

ion

cubi

c met

ers R

WE

Expo

rts'

Sha

re o

f Con

sum

ption

Where is it going?

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

10000000

20000000

30000000

40000000

50000000

60000000

China's Exports by Product Type

Plywood Furniture Fiberboard Floorings & Moldings Other Veneer

Wood chips Sawn wood Joinery Pulp and Paper

mill

ion

m3

RWE

Where is it going?

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 -

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Destination of China's Timber Product Exports

United States Others EU Japan Hong Kong Korea, South Taiwan

mill

ion

m3

RWE

Where is it going?

Exports to US by Product

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 20070

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

pallet Other VeneerKitchen Utensils Sawnwood OrnamentsFrames Builders' Joinery Other wood worksFlooring & moldings Fibreboard Paper

Volu

me

RWE

(m3/

year

)Exports by Destination 2007Exports to the United States

Jan-Apr 2008 Plywood and Furnitur

39448 39479 39508 395390.00

100.00

200.00

300.00

400.00

500.00

600.00

Furniture Plywood

Mill

ion

US$

Exports by Destination 2007Furniture & plywood Exports to US 1st Q 2008

Exports by Destination 2007

USA22%

EU18%

Middle East12%

Hong Kong9%

Japan8%

South Korea5%

Taiwan3%

Canada2%

Australia2%

India2%

Malaysia1%

Russia1%

Others15%

Importance of Middle East