GLOBAL INDUSTRY TRENDS corporate attitudes towards financial performance, capacity decisions and, therefore market behaviour, supplier relationships, and the other drivers of the pulp and paper industry participants’ performance. WORLD PULP&PAPER 12 LOTS OF BUYING LEVERAGE A similar phenomenon exists in finished paper products, especially packaging grades. Suppose China needed to import linerboard in order, for example, to make up for temporary shortages of OCC. Most of the imports would likely come from the U.S. which makes more kraftliner than it needs. However, just 2% of China’s demand would cause an 8% increase in the U.S. operating rate – an impossible increase under normal conditions. Small perturbations in China can have big effects on other countries, even the large ones. We see this now with high prices of UKP and even CB. So another interesting issue is the ongoing question of what is happening in China’s internal paper industry. ADDICTED TO RECYCLED FIBRE China’s reliance on recycled fibre means that it uses the major portion of all the recycled fibre collected worldwide (Figure 5). That fact connects all the world’s RCF consumers to China. Fluctuations in China’s demand drives the global price of major raw materials like OCC and mixed papers and, therefore, the costs and fortunes of many producers elsewhere. We have seen this in the upward spikes of OCC and the destruction of mixed white paper prices when China decided to severely restrict imports of contaminated single-stream recovered papers. The fortunes of producers of testliner and recycled grades of tissue and communication papers are now tied to the behavior of Chinese RCF importers. All that buying leverage makes China particularly important in the OCC market. LOTS OF CAPITAL The last decade’s growth of China’s paper industry has created some large companies which have thrown off significant amounts of cash. Together with a financial system that is eager to lend, there are Chinese entities today with an appetite and capacity for M&A. The appetite more and more includes targets outside China which offer several benefits: geographic diversification, technology, sources of supply, lower risk, and available candidates. Another one of the ways in which China’s paper industry buying power will affect the global paper industry is its ability to acquire foreign entities and even build greenfield plants. We have seen the beginnings of this trend in Shanying’s acquisition of Nordic and Sun Paper’s attempt at a greenfield mill in the U.S. It will be interesting to follow this trend and see how it affects global trade flows, Together with a financial system that is eager to lend, there are Chinese entities today with an appetite and capacity for M&A. Figure 5. China imports 50% of all RCP collected worldwide. ABOUT FISHER INTERNATIONAL, INC. Fisher International supports the pulp and paper industry with business intelligence and strategy consulting. Fisher International’s powerful proprietary databases, models, analytics, and expert consultants are indispensable resources to the industry’s producers, suppliers, investors, and buyers worldwide. FisherSolve™ is the pulp and paper industry’s premier database and analytics resource and is a product of Fisher International, Inc. For more information visit: www.fisheri.com