Machine makers in paper chase

Western paper machine makers see rosy future in the Chinese market because of the nation's rising consumption. [Provided to China Daily]

European companies set to make hay as demand increases substantially in China

One of ancient China's major contributions to the Western world was its invention of paper thousands of years ago.

Today, Western companies still benefit because of China's booming consumption of the paper product. European paper machine suppliers say they see a rosy future for sales in China as more and more paper mills are shutting down in the West due to the global financial crisis and the growing popularity of digital media.

Major players in the pulp and paper industry, such as Finland-based Metso Paper Inc and Germany-based Voith Paper, estimate continued growth in sales in China over the next three to five years.

"In my opinion, our annual growth in sales in China will be between 5 percent and 8 percent in the next three to five years," says Fan Ze, general manager of Metso Paper's China operations.

Fan also says China is Metso Paper's largest and fastest-growing market in the world. China contributed approximately 860 million euros to Metso Paper's global revenue, which totaled 6 billion euros in 2010.

He says the company anticipates slower annual growth after a recent run of double-digit growth, though he downplayed any slowdown in sales.

"The total sales number in China is very big now. It is difficult to maintain a similar growing rate with such a huge sales number," he says.

Voith Paper is also optimistic about its sales in China.

"I think our annual increase of 8 percent to 10 percent in sales in China is likely to continue in the next three to five years," says Roger Fung, Asia marketing director at Voith Paper.

He says that with China's economy growing and the consumption of paper increasing, there will be more orders for new papermaking machines.

China overtook the United States as the largest paper producer and consumer in the world in 2009.

The nation used around 91.7 million tons of paper and cardboard last year, an increase of 7.1 percent from 2009. Production grew at a similar pace of 7.3 percent to 92.7 million tons last year.

Between 2000 and 2010, the production of China's paper and cardboard increased by 57 million tons while production in the US decreased by 17 million tons to 74.8 million tons.

"Around 70 percent of new paper machines in the world are sold to China. New machines that are bought by Western countries are next to zero," Fan says.

"We've sold seven paper machines in China so far this year. In the United States, my company just sold the first machine in a decade."

Lack of capital is one reason for the sluggish sales of paper machines in Western countries, says Alex Ho, marketing intelligence manager at Voith Paper Asia.

"Paper making industry is a capital intensive industry, a new paper machine can easily cost 1 billion to 1.5 billion yuan (113 million to 170 million euros, $157 million to $236 million)," Ho says.

One of his company's machines, operated by Dongguan-based paper maker Nine Dragons Paper Holdings Ltd, produces 500,000 tons of tissue paper with only eight workers.

With his company's sales boom, Ho believes the market potential in the nation can be huge.

"Chinese people use around 64 kg of paper per capita a year while the average use of paper in the US is 300 kg per person per year. There is a lot of room for growth, especially in smaller cities in China," he says.

In order to cope with the rising demand for new paper machines in China, his company has invested 100 million euros to expand its production facilities in Kunshan, Jiangsu province.

"We moved there in 2009 and we started our expansion in 2010, which will be finished in April next year. You can certainly see the rapid growth," he says.