Massive paper and board production downtime hits China as energy usage limits

By: Shawn Wang, Fastmarkets Forest Products News Editor

Many paper and board (P&B) mills in China are slowing production due to a power supply crunch and government-mandated curbs on energy use.

In August, the Chinese central government censured Jiangsu and eight other provinces for failing to lower their energy intensity (measured by energy consumption per unit of GDP) in H1 this year.

The targeted provinces now must come up with energy-saving measures to make up for it over the rest of the year. Jiangsu – the second largest provincial economy – is taking the request to an unprecedented scale.

Jiangsu factories slow production and output by tens of thousands of tonnes
Hundreds of Jiangsu factories in various sectors – including chemicals and paper – have been ordered to either slow or halt production as early as the second week of September.

APP China said it has been taking alternating downtime on the PMs at its 2 million tonne per year coated and uncoated fine paper mill in Zhenjiang city since September 19.

The move was reported to last until the end of September and will cut the site’s coated fine paper output by 27,000 tonnes. The company is also curbing coated ivory board supply at its 2.2 million tonne per year Dafeng mill in Yancheng city. The company said the two BMs there took alternating downtime between September 8 and September 18, leading to a production loss of as much as 52,000 tonnes.

Both BMs are staying shut from September 19 to September 29, which will further reduce the mill’s coated ivory board production by 65,000 tonnes.
APP China said the cuts are partly the result of the government-led energy conservation campaign, but are also a countermeasure to the ongoing oversupply of coated ivory board and coated fine paper on the Chinese market.

Oji Holdings shut down its pulp and paper complex in Nantong city on September 19. The outage at the site, which has 700,000 tonnes per year of bleached hardwood kraft pulp capacity, 400,000 tonnes per year of fine paper and 120,000 tonnes pear year of tissue paper, was reported to last until the end of September.

Jiangsu Jinghuan Longheng Paper and Jiangsu Fuxing Paper, which each has 300,000 tonnes per year of coated duplex board capacity in the city of Yancheng, have been out of operation since early September. It is unclear when they will restart.

In Changshu city, Lee & Man Paper Manufacturing’s 1.33 million tonne per year recycled containerboard mill and UPM’s 1.26 million tonne per year fine paper and specialty paper mill are also reported to have recently slowed production to curtail energy consumption.

So has Long Chen Paper’s 900,000 tonne per year recycled containerboard mill in Wuxi.

Other P&B producers across China also announce cuts to output Elsewhere in China, major P&B producers have also rolled out massive downtime plans.

Shandong Chenming Paper Holdings has informed its clients that it is going to cut coated ivory board supply from its mills in Nanchang, Jiangxi province; Shouguang, Shandong province; and Zhanjiang, Guangdong province by a total of 50,000 tonnes in October. The company boasts a total of 2.05 million tonnes per year of coated ivory board capacity at the three facilities.

Sun Paper has announced that it is taking alternating downtime on its four virgin cartonboard machines, which have a total capacity of 1.4 million tonnes per year, in Yanzhou, Shandong province, for a week starting September 20.

Both companies claimed that the production curbs are in response to energy control policies, but the focus on coated ivory board supply suggested an intention to trim supply of the grade following record-setting price falls in Q2.

Fujian reports downtime due to Covid-19
Meanwhile, Shanying International Holdings has been taking downtime on two BMs at its Changtai mill in Zhangzhou city, Fujian province.
The two units, which have a total recycled linerboard capacity of 600,000 tonnes per year, are taking 6-10 days of downtime from September 21 to September 30, cutting the mill’s board output by nearly 15,000 tonnes.

The halt has been ascribed to a recent Covid-19 outbreak in Fujian.

Guangdong slows operations in response to power crunch
The company is also taking nine days of downtime between September 15 to October 1 at its 100,000 tonne per year kraft paper mill in Zhaoqing city, Guangdong province. Its output will be trimmed by approximately 2,600 tonnes.

A company source told PPI Asia that the arrangement is largely a result of power restrictions in Guangdong.

Last week some local power grid companies in Guangdong told their industrial clients they should stop production during peak hours, between 8 am and midnight, or even for the entire day, for two to three days a week, depending on the power demand situation in different areas.

The Zhaoqing mill, which like most small and medium P&B facilities is totally reliant on external electricity and steam sources, is one such client.
Big P&B mills with their own thermal co-generation plants have been largely exempted from the curtailments so far, but they have been burdened with skyrocketing coal costs.

China’s National Bureau of Statistics reported that by the end of August, thermal coal prices jumped by about 45% from recent lows in February.
“Surging coal prices have driven up the cost of energy from mills’ own generators. Therefore, they are keen to purchase more electricity from external power suppliers, as it is much cheaper. The shift has then strained the grid,” said a contact from Shanying International.

Supply is still strong
Despite the widespread cuts, there has been no sign of P&B shortages in China.

Earlier in September, Nine Dragons Paper (Holdings), Lee & Man Paper Manufacturing and Dongguan Jinzhou Paper had each announced large-scale downtime plans for their PMs in Dongguan, Guangdong, amid weaker-than-usual demand and soft board pricing.