According to the report of local media, Nine Dragons Paper Holding recently comes to a 12.5 billion RMB investment agreement with the government of Jianli county, Hubei province.
It is suggested that the investment project will be completed in two phases with a total integrated capacity of 850kt/a of wood pulp and 1,950kt/a of paper board. The phase I project consists of 550kt/a of wood pulp and 750kt/a of high-end packaging paper capacity with an investment of 4.6 billion RMB, and Nine Dragons Paper states that it will ‘strive to complete the phase I project within two years’. The company also states that the project will supplement the missing section in its industry chain structure and complete the feedstock structure adjustment. In the meantime, the project will also boost the local economy and provide support to the local poverty lifting and social development efforts. It is suggested that the newly added packaging paper unit will most likely be producing ivory board after the production initiates in accordance with the designated goal of ‘supplementing the missing section’.
Currently, duplex board is increasingly being substituted by ivory board due to low wood pulp price and constant elimination of duplex board capacity in previous manufacturing centers such as Fuyan in Anhui province. Sales of ultra-high bulk ivory board grow steadily as a replacement for duplex board, and low-priced ivory board brands such as Swan and Jinbei are also popular amongst distributors.
By the end of 2019, the designed capacity of Nine Dragons Paper reached 17,300kt/a including cardboard, high-strength corrugated paper, grey-back duplex board, cultural paper, fine specialty paper and pulp. The main source of income of Nine Dragons Paper is its packaging paper business. According to the company’s financial report, the revenue for paper board, corrugated paper and duplex board sales accounts for 86.3% of the total.
In recent years, the paper industry develops steadily in Hubei, and it has become a magnet for pulp and paper investments. According to the local paper association, in 2019, Hubei’s paper and paper board output reached 5,224kt, up 30.93% Y-O-Y, and the total industrial output value was 24.10 billion RMB, up 16.56% Y-O-Y.
Most of the paper producers in Hubei are located in cities along the Yangtze river such as Wuhan, Yichang, Xiaogan and Jingzhou. As Nine Dragons Paper ventures into Hubei, the local packaging paper market competition is expected to escalate. Currently, three major paper producers have a capacity of over 1,000kt/a including Hubei Gold Phoenix Paper, Hubei Longchen Greentech and Shanying Paper Industry.
The county of Jianli locates in the conjunction of the Wuhan metropolitan area and the ‘Changsha-Zhuzhou-Xiangtan’ city cluster of the nearby Hunan province. It has a unique competitive advantage mix including the port and transportation of the Yangtze river, rich forest and timber resources, special administration policies of the portside Bailuo industry park including tax cut or exemption as well as swift project assessment and approval by the government.
