China

Posted: 22 May 2007 in Pulpmillwatch.org

Pulpmillwatch

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The largest investments in new pulp production are taking place in the South of China, in the provinces Fujian, Yunnan, Hainan, Guangxi and Guangdong. Industrial tree plantations are also being established in these provinces to feed these pulp mills.

The southern region of China is largely farmland with some areas of natural forests. Hainan, Guangxi and Guangdong are the main fruit producing provinces in China. Since the manufacturing and export boom started in the 1990s, Guangdong has become one of the highest-earning provinces in China. The economic boom has spread to neighbouring provinces.

Yunnan is known as the “kingdom of plants”. Of the 30,000 types of plants found in China, 18,000 are found in Yunnan. Yunnan is also home to 26 indigenous peoples. Forests in China provide 40% of the fuel for rural households. Nearly 60 percent of China’s forests are collectively owned and they play a critical role in the lives of both their owners and the nation, currently providing half the domestic timber supply and most non-timber forest products [1]. China has been called the most forest-dependent civilization in the world.

Nevertheless, China’s pulp and paper industry is expanding rapidly. Since 1990, 50 per cent of the world’s expansion of paper production has been in China. Its pulp industry is changing from one based on agricultural residues of rice and wheat crops, to the use of wood and recycled paper as raw materials. Before 2000, only ten per cent of China’s pulp was produced from wood. Today more than half of China’s pulp comes from wood fibre.

Since the mid-1990s, thousands of small pulp and paper mills have been closed down, largely in an attempt to control pollution. While it is true that China’s small pulp mills were polluting, it would have been possible to upgrade the mills to reduce the pollution, for example by improving chemical recovery, by reducing the amount of silica going into the waste water and by using alternative pulping techniques. In May 2007, the Chinese government announced that it would be ordering the closure of thousands of small-capacity straw pulp mills across the country, with a total capacity of about 3 million tonnes a year.

This restructuring of the pulp industry in China from small-scale mills to massive mills reliant on wood-based pulp and recycled paper has created a bonanza for Northern consulting firms, machinery suppliers and paper companies. China is the “Promised Land as far as pulp and paper equipment suppliers are concerned,” wrote Pulp and Paper International’s Graeme Rodden in December 2003. Large foreign companies such as UPM, Stora Enso and APP are increasingly playing a role in pulp and paper production in China.

The consumption tiger

When talking about the world’s future markets and resources, China always appears as the consumption tiger, due to its huge population and current low level of per capita paper consumption (compared to Europe or North America). Certainly, China’s consumption of wood products is growing at an alarming rate. Today China is the world’s second largest producer and consumer of paper products, surpassed only by the US. By 2005, consumption of paper per person reached 45 kilogrammes with a total consumption of 58 million tonnes, up from 7.9 million tonnes in 1980. Currently, China produces about 50 million tonnes of paper and board a year – a figure which is expected to increase to almost 70 million tonnes by 2010. But much of the paper produced in China today is exported [2], in the form of packaging for exports to North America and Europe.

Lacking raw material

China has a limited supply of wood fibre. In 1998, it declared a ten year logging moratorium after a series of massive floods exacerbated by destructive logging throughout the nation’s forests in the previous decades. China can currently supply only about 28 per cent of the raw material demand of its pulp industry, so imports of pulp are booming. The increasing Chinese demand for wood from other countries adds to the problems of illegal logging and deforestation in Indonesia and Russia and to the unsustainable plantation expansion in countries like Brazil. But instead of taking these problems into account, pulp producers in China are developing large-scale mills before securing a sustainable supply of fibre.

Imports of wood pulp reached 7.2 million tonnes in 2004, mainly coming from Canada, Indonesia, Russia, Brazil and the US. To provide more wood for the growing pulp industry, the Chinese government has ambitious goals to expand the area of industrial tree plantations, with plans to spend a total of US$ 8.65 billion for plantation development between 2002 and 2015, including 5.8 million hectares for the pulp industry [3]. Although much of the financing for plantations comes from the Chinese government, since 1981, the development of plantations has been supported by aid from the Australian government. A proposed World Bank project will finance a further 200,000 hectares of industrial tree plantations in Guangxi. [4]

China has about 1.65 million hectares of eucalyptus plantations. Guangxi province is one of China’s largest growers of eucalyptus, with more than 350,000 hectares of eucalyptus plantations. Several companies are establishing new plantations in Guangxi province, including APP, Oji Paper, Sino Forest Group, Feng Lin, Gao Feng Group and Guangxi Plantation Development Company. [5]

Dennis Neilson, director of New Zealand forestry consulting firm DANA, comments that China’s plantation programme is way behind schedule and growth rates of Poplar were in many cases so poor that the government is now discouraging Poplar planting. Despite the massive tree-planting programme, the area of plantations is not sufficient to meet the demand from the industry’s pulp and paper mills.

The massive increase in demand for wood fibre has led to increased pressure on China’s forests. It is also creating competition between land use for food production and the establishment of industrial tree plantations. This is unlikely to change, according to Risto Pitkänen, writing in Botnia’s customer magazine Echo : “Feeding its enormous population puts so much pressure on land use that China has no real scope for a pulping industry based on plantation forests.” Establishing plantations can be a slow and complex business as most of the suitable land is held by households and communities [6]. Also, the cost of growing wood in China is considerably higher than in key competitor countries such as Indonesia and Brazil. UPM, for example, plans to import pulp from Botnia’s pulp mill in Uruguay to UPM’s paper mill in Changshu, China.
New pulp capacities

In spite of the shortage of wood supply, China seems to be building a massive new pulp or paper mill almost every month. Some of the projects currently planned include the following:

  • Shandong Chenming plans to start construction of a 700,000 tonnes a year pulp mill in Zhanjiang and to establish 200,000 hectares of eucalyptus plantations. So far it has planted 4,000 hectares.
  • In March 2007, Ningbo APP Paper ordered a 250,000 tonnes a year pulp line from Andritz for its pulp mill in Ningbo City, Zhejiang province. The mill will use woodchips from nearby poplar plantations as its raw material.
  • APP China plans to build a 300,000 tonnes a year pulp mill in Qinzhou city, Guangxi province.
  • APP China is also planning to expand its pulp operations in Hainan, by 780,000 tonnes a year.
  • Lee & Man Paper Manufacturing plans to build a 125,000 tonnes a year unbleached bamboo pulp mill in Chongqing.
  • Indonesia’s APRIL is planning to add a new 1 million tonnes a year pulp mill to its operations in Rizhou City, Shandong province.
  • Oji Paper is planning to build a 700,000 tonnes a year pulp mill at its site in Nantong City, Jiangsu province. The pulp mill is part of a US$ 1.9 billion pulp and paper development.
  • Stora Enso is planning to build a 1 million tonnes a year pulp mill in Guangxi province.

Pulp companies expanding in China: UPM, APP, Stora Enso

Several pulp and paper companies have established their own plantation projects in the southern provinces Guangdong, Guangxi and Hainan. Some of the world’s largest pulp producers, including APP, Stora Enso and UPM, have announced that they are planning to develop huge hardwood pulp mills with associated large-scale plantations.

UPM’s paper mill in China relies on pulp imports from Uruguay

When UPM started up its 350,000 tonnes a year paper mill in Changshu, it relied on imported pulp from Indonesia, Finland and Canada. The mill has now expanded to 800,000 tonnes a year and still relies on imported pulp. The Changshu mill will import pulp from Botnia’s pulp mill in Uruguay once it starts up (UPM is a shareholder in the Botnia pulp mill project).

UPM chose to import pulp because of the difficulties of growing industrial tree plantations in China. The company pulled out of a joint venture to build a pulp mill and establish plantations in Guangdong province in November 2004. Christian Cossalter of CIFOR suggests that among the reasons for UPM’s pull out were the limited availability of land for plantations and the difficulty of growing and buying pulpwood at competitive costs in Guangdong province. “The decision to withdraw was made after studies of the local conditions and the availability and cost of wood for a modern large-scale pulp mill were conducted,” writes Cossalter. As it is cheaper to transport pulp over long distances than it is to transport wood, UPM pulled out of the joint venture for a pulp mill in China.

APP’s illegal logging activities in China

APP is attempting to source wood fibre within China. The company is planting eucalyptus on Hainan Island, including protected conservation areas. Greenpeace China notes that since 1997, APP has cleared large areas of forest in Wuzhishan Natural Reserve for eucalyptus plantations. The yield from APP’s plantations is lower than the company anticipated and the total area established is below initial predictions.

In addition to clearing forests in Hainan, Greenpeace has documented how APP has destroyed forests in Yunnan province to feed its pulp mills. In 2002, APP signed an agreement with the Yunnan provincial government and started logging immediately, before receiving permission from central government. The State Forest Administration investigated and found several breaches of China’s Forest Law. In its report, SFA described APP as “problematic”. Greenpeace is demanding that the Chinese authorities immediately stop APP’s planned eucalyptus plantations in Yunnan.

In August 2006, APP signed an agreement to invest more than US$ 90 million in Yunnan Yunjing Forestry and Paper. The deal would have given APP the rights to log in 66,700 hectares of Yunnan’s forest, but in February 2007, the Chinese central government authorities blocked the deal. A State Forestry Administration spokesperson told the media that the state was worried about losing valuable forest assets. [7]

Plantation expansions by Stora Enso

Stora Enso plans to establish 120,000 hectares of plantations in Guangxi province. In 2005, Stora Enso hired UNDP to produce an Environmental and Social Impact Assessment on its proposed plantations project. Although UNDP’s report notes that local communities have serious concerns about the spreading of eucalyptus monocultures it fails to recognise the impacts, and refers to villagers’ criticisms of eucalyptus plantations as “rumours”. The references cited at the end of the report run to nine pages, but include none of the many NGO studies on the social and environmental impacts of tree plantations.

An official of Guangxi Environmental Protection Bureau told China Business Weekly about their concerns about the environmental impacts of this project, including whether the land area of Guangxi is sufficient to support such a large project . Many local environmentalists share the official’s concerns. Without sufficient land, native forests will be cleared to make way for plantations. Already, many cases of forest destruction for plantations were reported in Guangxi in 2005 . [8]


Footnotes

[1] “Conservation Programs/ Forest: Overview”, WWF China website.

[2] Export of paper in the form of packaging does not show up in the statistics for exported paper from China. When electronic goods, say, are packaged in China then the cardboard box appears in China’s consumption statistics. The cardboard box itself is exported, along with the electronic goods.

[3] American Forest and Paper Association, “China’s Subsidization of its Forest Products Industry”, July 2004.

[4] UNDP (2006) “Environmental and Social Impact Analysis Stora Enso Plantation Project in Guangxi, China”, Final Report, 5 February 2006, page 16.

[5] UNDP (2006) “Environmental and Social Impact Analysis Stora Enso Plantation Project in Guangxi, China”, Final Report, 5 February 2006, page 16.

[6] “Conservation Programs/ Forest: Overview”, WWF China website.

[7] “China scraps Indonesia’s Asia Pulp deal”, Bangkok Post , 9 February 2007.

[8] “Stora Enso, the social responsibility of paper giant”, China Business Weekly, 27 April 2006.


Further Reading

World Rainforest Movement
Greenpeace China
CIFOR
Forest Trends

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