The Ministry of Industry and Information Technology (MIIT) gave the update on July 11, following the May announcement of its initial intention to close 7.45 million tonnes/yr.
"The figure includes pulp, paper machines as well as washing, selecting and rinsing equipment," explains Zhao Wei, the secretary general of China Paper Association. "The move is very good in the long run for the modernization of the paper industry in China.
The ministry listed details of all machines to be taken out of action, and the names of the 599 pulp and paper companies operating the units. MIIT also stressed that all the listed machines must be closed by the end of this year.
The detailed capacity closure plan is a step toward implementing the new guidelines issued earlier this year by the National Development and Reform Committee, which is part of China's State Council.
The rulings follow on from a previous modernization program carried out in 2005-2009 that eliminated around 6.5 million tonnes/yr of pulp and paper capacity.
The policies are aimed at reducing pollution, increasing efficiency and reining in China's overcapacity problem.
The guidelines specify that chemical wood pulp lines with a capacity less than 51,000 tonnes/yr, non-wood pulp lines below 34,000 tonnes/yr, and recycled fiber-based pulp lines below 10,000 tonnes/yr must be shut down.
The same conditions apply to printing and writing paper machines less than 1.76 m wide and with a speed slower than 120 m/min, and cartonboard, linerboard and fluting machines less than 2 m wide and slower than 80 m/min.
"We expect China is going to shut more outdated capacity this year than expected, due to the government's strict restrictions on pollution discharge, energy consumption and energy efficiency." says Cao Zhen Lei, general secretary of the China Paper Industry Technical Association.
China launched a new Discharge Standard for Water Pollutants for the Pulp and Paper Industry in May 2009, with an aim to tighten restrictions on water, COD and other waste discharge of both existing mills and new mills, and to shut non-compliant businesses.
This, in turn, was designed to benefit the sustainable growth of the industry and those companies with good environmental track records.
The standard for new mills in 2009 was stricter than existing mills. In addition, the standard was further tightened in July this year. Both existing mills and also new mills are under the same standard (see chart below).
In some areas, the standard is even stricter to protect local vulnerable environmental conditions.
"Local governments were not following the NDRC's guidelines strictly when they were launched, as small mills contribute to local finances. However, now the central government is emphasizing energy-saving and emissions-reduction and local governments are getting serious about shutting down old and outdated paper mills," says Cao.
"Now local government has a COD discharge quota. Small mills have to be shut to free some quota for modern startups," adds Cao.
Local governments in the country identified the outdated equipment for closure in their own jurisdictions and submitted the list to the central government, which has become part of the MIIT closure plan.
Media reports show that the city government of Fuyang in China's eastern province of Zhejiang ordered the closure of 57 outdated paper and board machines in the area by the end of October. The mandatory shutdowns will amount to a total capacity loss of almost 800,000 tonnes/yr, mostly of low-quality cartonboard.
The city is the hub for low-priced cartonboard in the country, currently running more than 300 paper and board mills with a total capacity of more than 3 million tonnes/yr.
The machines targeted for closure were found discharging effluent illegally. All of them are less than 2 m wide, with a capacity of 20,000 tonnes/yr.
Table 1 - Discharge standard for water pollutants for pulp and paper industry
|Pulp mills||Integrated mills||Paper and board mills|
|Water discharge tonne per tonne||50||40||20|
|BOD discharge (mg/L)||20||20||20|
|COD discharge (mg/L)||100||90||80|
Markets have the say
In addition to environmental restrictions, Cao believes that plunging prices of paper and board this year have also contributed to shutdowns of small and outdated mills. "Small mills have to shut down if they are not making any money," says Cao.
For big players in the market, to idle outdated machines means a great opportunity for equipment modernization.
Among the listed companies to be shut down by MIIT, two major paper producers in China, Shandong Chenming Paper Holdings and Sun Paper, are being required to retire some old, small fiber lines and paper machines.
Shandong Chenming is to close paper machines with a combined capacity of 15,000 tonnes/yr at its flagship mill in Shouguang city, Shandong province. At its mill in Qiqihar city, Heilongjiang province, the company will shut down six PMs with a total capacity of 32,500 tonnes/yr.
As for Sun Paper, two PMs producing 100,000 tonnes/yr of grayback coated duplex board at its Yanzhou mill in Shandong province will be retired, along with their integrated pulp lines.
Sun Paper submitted the closure plan for the two machines to the Chinese government, which then included it on a list targeting the shutdown of outdated pulp and paper equipment nationwide.
Sun Paper will leave the grayback coated duplex board market with the closure of the two machines. The spokesman explained that the decision was made due to declining profitability of the grade in the domestic market.
"We have decided to retire the two machines in order to clear space at its mill for the housing of a new board machine," says Ying Guang Dong, general engineer of Sun Paper.
The plan to build the new unit, a 400,000-tonne/yr cartonboard machine dubbed PM 26, was jointly drawn up last year by Sun Paper and the US giant International Paper (IP) . The unit is being designed to produce mainly high quality cartonboard, such as liquid packaging board, food-grade cartonboard and cigarette packaging board.
"We haven't got further plans to shut down old capacity, and it will all depend on market conditions," adds Ying.
As for smaller players, to shut down old equipment is a way for a company to produce new products adapted to market needs. Sichuan Yibin Paper has decided to permanently shut down its sole mill in Yibin city, in China's southwestern province of Sichuan.
But the company will not exit the pulp and paper industry. It has chosen a site, about 30 km away from the existing mill, to build a new facility. The future mill will operate a new 100,000-tonne/yr P&W paper machine, a new 100,000-tonne/yr food packaging board unit, and two pulp lines that will feed the paper machines.
A 95,000-tonne/yr bamboo pulp line will be integrated with the P&W unit, and a 68,000-tonne/yr mechanical pulp line is to be integrated with the
Despite being a major newsprint producer in the southwest, Sichuan Yibin will withdraw from the sector after the closure of the existing mill due to sluggish demand, said a contact from the firm.
However, the rulings by NDRC will encourage new pulp projects above a certain scale, to address China's fiber shortage. The country is heavily dependent on imports of both pulp and recovered paper.
To support the shutdown campaign, the Ministry of Finance has also announced a three-year incentive program. Starting in 2011, the central government will allocate special funds for the shutdown of small and old machines.
Incentives are to be offered to facilitate the development of chemical wood pulp projects with a capacity of more than 300,000 tonnes/yr, as well as chemi-mechanical and non-wood pulp lines (such as bamboo) of more than 100,000 tonnes/yr. Plans for paper and board machines at integrated sites with pulp lines mentioned above are also encouraged.
However, to combat overcapacity, the NDRC guidelines will discourage any further coated fine paper and newsprint startups.
China is now working on the plan for the paper industry for the years 2011-2015, which is called the 12th five year plan. Details of the plan were expected to be released in late 2011.
The plan will provide the objectives for innovation, technology reform, merger and acquisition as well as energy saving and emission reduction, to help further the development of the paper industry in China.
According to Cao Pufang, standing vice chairman of China Paper Association's recent speech at China International Papermaking Technology Meeting early this year, key targets of the 12th five year plan will include:
- Increasing local supply of raw material
- Increasing innovation and improve technology level
- To optimize the configuration of resources
- To promote clean production and to protect ecological environment
- To enhance merger and acquisition in the industry
- To adjust the product mix and to improve the quality of paper product.
"No doubt, in the next five years, China will continue to shut down old and outdated capacity to modernize the industry," says Zhao.
"China's paper production is on the way for modernization. In the next five years, we will see natural elimination under strict environmental guidelines and market pressure," says Cao.