Growing Tissue Hunger Fuels "Goldrush" in China

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During the past year or two, main tissue players in China have launched a strong investment push, leaving those on the second rung of the ladder with a challenge, Piagge says. If they do not invest, they risk being left behind as they cease to be competitive. "The smallest producers really will struggle. They simply cannot compete in terms of quality and their processes, usually based on straw, bagasse, or bamboo, put them on the wrong side of the Chinese Government's drive to clean up the industry. Some 400 - 500 paper mills of all descriptions are in the sights of the legislators, and the process of closing them down has already begun. As such, not all new machines in China are ‘new" capacity, but replace old, redundant lines," Piagge explains.

Another change to watch for is the location of new tissue projects, Piagge continues. Of course, unlike Europe, there is considerable potential for greenfield projects in this country, but they have tended to cluster around the main conurbations on the coast. In an attempt to slow down the recent tendency of the Chinese to migrate to coastal cities where the standard of living is higher, new mill projects are actively being encouraged inland in areas such as Chongqing and Sichuan. As these new mills bring quality tissue to new areas, so the market for tissue in China will gain even more momentum, according to Piagga.

"There is an important practical consideration, of course, which is access to fiber," Piagge continues. "The fast, wide new machines being installed in China are fed on virgin fiber. The infrastructure for sourcing good quality recycled fiber does not yet exist in China, and suitable stock preparation equipment to process it has not been installed either. None of the big projects in the past two years has involved deinking. This situation clearly favors coastal mills, as the virgin fiber all has to be imported. The transport infrastructure is improving, however, which will strengthen the competitive case for inland mills, and reduce the fiber division that has existed, whereby coastal mills have produced high quality tissue from virgin fiber, while inland mills have only produced an inferior product from straw, bamboo, or bagasse," he explains.

There is another differentiating factor between different regions of China which is here to stay, at least for the foreseeable future, Piagge says. A ready supply of gas is not available throughout China. Guangdong for example, has virtually none. Most tissue machines in the 30 to 50 metric tpd category in China tend to rely on coal to generate steam. If mills on sites without access to gas have plans to step up to higher production levels, they will have to consider their technology very carefully. "Coal is simply not able to produce steam at as high a rate as gas, so the magic 2,000 m/min is really out of the question. We believe, however, that speeds close to 1,700 m/min are realistic, and with world-class runnability, this can still put a mill in a strong position, by significantly reducing the production costs. Our message is that with the right technology, (we would of course advocate our energy-saving steel yankee), you can still be competitive with coal."

As it stands, the country already needs several new tissue lines each year to keep up with the rising demand. Of course, even a small annual percentage demand increase in China equates to a great deal of tissue. It will come as no great surprise that around half of the world's new tissue machines last year were installed in China, Piagge points out.

The fact that the response to demand potential in China has been met with investment in state-of-the-art tissue lines means that the evolution of quality has been rapid. Buyers used to a rather basic tissue have, within a very short period of time, come to expect a quality of virgin-fiber tissue that is a match for what is sold in Europe, and often better. "The gradual improvement in quality that other parts of the world experienced has just not happened here, and there really is little room for anything but very high standard tissue from new installations," Piagge explains.