CHINA TISSUE PAPER INDUSTRY 2023: How post-Covid China geared up again – with 68 new machines put into operation at 35 companies in 15 provinces

Persistent problems of excessive production capacity resulted in intensified price competition, decreased profitability and dramatically increased export figures showing volume year- on-year up 42.47% to 804,200tpy, and value at $1.762bn, a 26.80% growth. Here, the China National Household Paper Industry Association (CNHPIA) discusses how the market reacted – and what the future could hold.

In 2023, China’s tissue paper industry resumed normal operations and development after the Covid-19 pandemic. However, whilst the new capacity is less than that of 2022, the issue of temporary overcapacity in the industry persisted, leading to intense market competition. Wood pulp prices experienced significant fluctuations, putting cost pressures on tissue paper manufacturers. Faced with challenges and difficulties, industry players actively sought breakthroughs through by introducing advanced technologies and equipment, product development, and marketing innovations.

Part 1: Project operations

In 2023, the total new capacity was more than 1.7m tpy. This new capacity is less than that of 2022. A total of 35 companies in 15 provinces launched new capacity and a total of 68 tissue machines were put into operation. Domestic tissue machines dominated the new capacity, with 54 domestically produced machines mainly concentrated in large and medium-sized enterprises and 14 imported machines.

In 2023, among the 12 major companies in the tissue paper industry – including Hengan, Vinda, C&S and others – there were significant additions to the production capacity through newly launched projects. Hengan, for example, introduced 160,000tpy of new capacity into the market, Taison Group 200,000tpy, Lee & Man 255,000tpy, Asia Symbol 225,000tpy, Vinda 35,000tpy.

Additionally, in 2023 several industry-leading companies including Hengan, Gold Hongye, C&S and Libang announced new projects. This new capacity was about 3m tpy in total.

Part 2: Revenues of industry enterprises

In 2023, the revenue of companies in the tissue paper industry showed some recovery, but the gross profit margins declined.

From the operating data in quarterly performance reports released by Hengan, Vinda, and C&S, all three companies experienced varying degrees of increase in sales revenue during the reporting period. However, their profit margins declined to different extents.

For Hengan, in the first half of 2023, sales revenue from the group’s tissue paper (including wet wipes) business surged by approximately 22.7% to approximately RMB7,170m, accounting for approximately 58.7% of the group’s overall revenue. Gross profit margin fell to approximately 17.7%. For Vinda, in the first three quarters of 2023 total revenue increased by 5.4% (10.6% on a constant currency translation) to HK$14,810m, of which HK$12,276m came from tissue paper (including wet wipes) business. Overall gross profit margin fell to approximately 25.8%. For C&S Paper, in the first three quarters of 2023 operating revenue (mainly tissue paper) was 6.823bn yuan, up 11.60% year-on-year. Net profit attributable to shareholders of listed companies was RMB 165m, down 39.74% year-on-year.

Additionally, during 2023 CNHPIA also conducted research on the operational situation of some small and medium-sized enterprises. It was found that after the Covid-19 pandemic, these companies were able to resume normal production and operations. Furthermore, due to a general decrease in pulp prices in the first half of the year, these enterprises in the industry experienced some relief in raw material costs, leading to an improvement in their capacity utilisation compared to 2022. Taking the Baoding region as an example reveals that the overall start-up rate of paper enterprises in the region has been relatively high since 2023.

Part 3: Raw material and product prices

According to our research data, the spot prices of wood pulp in the domestic market showed an overall downward trend in 2023 compared to 2022. Prices reached their lowest point in May 2023, and gradually increased afterward. However, the average pulp price for the entire year was lower than that of 2022. It provided some relief and helped reduce cost pressures for tissue paper companies to some extent.

Prices of bamboo pulp and bagasse pulp in the domestic market tend to follow the fluctuations of wood pulp spot prices. Since 2023, the prices of domestically produced non-wood pulps have shown an overall downward trend. The price of bamboo pulp reached its lowest point at 4,900 yuan/ton in April and May, while the price of bagasse pulp hit its annual low of 3,850 yuan/ton in August. Since then, there was a slight rebound in prices.

In 2023, raw paper prices followed the fluctuations of pulp prices. For example, the average price of bleached wood pulp parent tissue rolls in Hebei province reached its annual low of 6,650 yuan/ton in May and June, 2023, and then began to rise.

Part 4: Industry product upgrades and innovation

These mainly focused on two aspects: applying new technologies and equipment to develop differentiated products and enhancing the performance of these products.

For instance, leading companies introduced improved products with better bulk and softness.

For example, Hengan’s Mind Act Upon Mind, Gold Hongye’s Breeze, Yusen’s Rain Forest, and Vanov’s BABO. These new products provide a softer, more comfortable touch and enhanced water absorption and wiping performance.  The second aspect focused on innovative packaging formats to enhance convenience and promote environmental sustainability.

Portable packaging includes multi-functional wall-hanging tissues, with brands such as Mind Act Upon Mind, Breeze, Libang, Rain Forest, Botare.

Another aspect of innovative packaging formats is the creation of environmentally-friendly products. For example, the CNPPRI developed alternative paper-based packaging materials to replace plastic packaging for individually wrapped sanitary napkins and soft-pack facial tissues, which have been applied. Breeze pioneered the Chinese tissue industry’s first “Zero Plastic” tissue, which replaces plastic with paper in its product packaging.

Part 5: New technology and new equipment in the industry

First, in the field of tissue machines, the updates of new technologies mainly focus on two aspects. Domestic companies introduced the latest TAD and TAD-like tissue machines, bringing new changes to the domestic market. This included:

• Hengan introduced two Toscotec-supplied TAD tissue machines, becoming the first domestic tissue paper company to import TAD machines. The first machine went into production in 2023, and the second machine is planned to start production in 2024. Hengan also introduced two Valmet-supplied Advantage QRT (TAD-like) tissue machines, both of which started operations in 2023 and mainly produce high-quality facial tissues and kitchen towels.
• Vinda successfully put into operation four Valmet hybrid (TAD-like) tissue machines in 2021, followed by a fourth in 2023.
• In 2023, Guangxi Lopie Paper put into operation a Baotuo-supplied TAD tissue machine.

Secondly, low-carbon technology for equipment continues to develop. Andritz introduced the PrimeDry Hood E electric heating hood for tissue machines. Additionally, new technologies in processing equipment are constantly being introduced, including:

• Baosuo launched the fully automatic facial tissue production line.
• Zhidesheng provides diversified embossing solutions through various embossing groups.
• One Paper introduced a fully automatic facial tissue folding machine.

During the 13th Five-Year Plan period, the domestic production and technological level of key core equipment in the tissue paper industry has significantly improved. The China Technical Association of the Paper Industry (CTAPI) organised expert evaluations and identified five innovative technological achievements in the field of tissue paper, including:

• BC1800 Crescent high-speed tissue machine, supplied by Baotuo Paper Machinery;
• Steel Yankee dryer, manufactured by Liyang Jiangnan Dryer Manufacturing;
• Dryer coating technology, manufactured by Dongguan Shedian Nano Spraying Technology;
• Large-scale high-speed glue-less point-to-point double-sided embosser developed, supplied by Guangdong Zhidesheng Technology;
• Full-width folding machine produced, supplied by Chanli Machinery.

Part 6: Imports and exports of the industry

Regarding the import and export data of the tissue paper industry from China’s customs records;

In the first three quarters of 2023, the export volume and export value of tissue paper significantly increased year-on-year, and the situation was favourable, both showing double digit growth. The total export volume reached approximately 804,200 tons, showing a substantial increase of 42.47% year-on-year. The total export value amounted to $1.762bn, representing a growth of 26.80% year-on-year. The import volume of tissue paper was about 24,300 tons, which remained relatively stable compared to the same period last year. Imported tissue paper mainly consists of parent tissue rolls.

Part 7: Publication and implementation of relevant standards

1. 1. The newly revised national standard for 2023 is “kitchen towel”, which is a revision of GB/T 26174-2010, issued on 6 August 2023 and implemented on 1 September 2024.
2. In 2023, the National Development and Reform Commission and other departments issued a notification regarding “Industrial Key Energy Efficiency Benchmarks and Baselines”. This notification includes parent tissue roll for toilet tissue and tissues in the scope of energy-saving and carbon reduction upgrades in industrial key sectors, imposing higher requirements on industry production.
3. The “Products with Craftsmanship — Tissue Paper”, drafted by the China National Pulp and Paper Research Institute (CNPPRI), was selected as one of the 100 demonstration projects for the application of group standards by the Ministry of Industry and Information Technology in 2023. Furthermore, in 2023, Tmall adopted the specifications and dimensions requirements for draw-out facial tissue from the group standard as reference size standards for facial tissue products entering the platform.

On 27 October 2023, the China Technical Association of Paper Industry (CTAPI) released a draft of the “Carbon Footprint Accounting Method and Reporting Guidelines for Pulp, Paper, Paperboard, and Paper Products” standard for public consultation. The standard relates to tissue paper.

Part 8: The Belt and Road Initiative promotes industry development

The year 2023 marks the tenth anniversary of the Belt and Road Initiative (BRI). Over the past decade, the tissue paper industry has benefited greatly from the opportunities presented by the BRI. There are some notable examples:

Companies such as Hengan, Vinda, Xiamen Yanjan, Sunda, and Haoyue in the tissue paper and hygiene product industry invested in building factories in countries along the BRI routes, achieving significant development. Elsewhere, APP China collaborated with numerous Indonesian enterprises in various projects under the BRI.

Renowned domestic paper machine manufacturers such as Baotuo, Xinhe, Hicredit, Qingliang, Hualin, Goldsun, Bingzhi, Dazheng, Fangyuan Zhonghe, Weituo, Changda, and others exported a total of 41 Crescent and Vacuum cylinder tissue machines with a combined production capacity of approximately 682,500tpy to Asia, Africa, and Europe, with most being to countries along the BRI.

On 10 August 2023, the first pulp sea-rail intermodal freight train departed from Qingdao to Qinhuangdao and Baoding. China Bank (Brazil) successfully processed a RMB letter of credit discount business for a Brazilian pulp company (Eldorado) at the end of September 2023.

Part 9: Industry enterprises actively engaged in brand enhancement and channel innovation

CNPPRI actively built the brand cultivation service platform for the tissue paper and hygiene products industry and carried out relevant work to evaluate “Products with Craftsmanship” in the industry. In 2023, 21 brand products including the tissue paper brands like Mind Act Upon Mind, Virjoy, Libang, Botare, Rain Forest, KIMBOS, and SIJN were made into the Products with Craftsmanship list. This compared to 17 brands in 2022. Enterprises continue to explore new marketing methods;

• The Gold Hongye Paper Group partnered with JD and Tmall to hold a strategic cooperation conference.
• Mind Act Upon Mind designated May 20th as its brand day and used TV commercials as the main medium to communicate with consumers from the perspective of their brand spokesperson, Xiao Zhan, putting forward the expression that love is close to life.
• Vinda partnered with JD Super Brand Day to promote their new product and launched a TV commercial featuring their newest brand ambassador, Zhao Liying.
• Rain Forest participated in JD’s “Spring Dawn Plan”.
• Libang cooperated with Dongfang Selection.
• Jinboshi, Libang, and Rain Forest attended the Consumer Goods Industry “Increase Variety, Improve Quality and Innovate Brand” Strategy Promotion Conference, showcasing their products.

Part 10: The 30th anniversary of CNHPIA

In 2023, the CNHPIA celebrated its 30th anniversary. Over the past three decades, the committee has played a crucial role as a bridge and link between the government and the industry. It has gained wide recognition and appreciation within the industry.

Part 11: Challenges and recommendations facing the industry

Ongoing industry-phased overcapacity issues and increased price competition reduced industry profitability levels. The industry is facing a persistent problem of excessive production capacity at its current stage, leading to intensified price competition and a decrease in profitability. In recent years, China’s tissue paper industry has witnessed continuous growth in production capacity, resulting in a prominent issue of temporary overcapacity and intense competition among homogeneous products. By 2023, the total industry capacity is expected to exceed 21m tpy, while the combined capacity from projects publicly announced for 2024 and beyond has already surpassed 12m tpy. The market experiences fierce price competition, with some product prices failing to accurately reflect fluctuations in raw material costs. As a result, it becomes challenging to improve overall profitability levels within the industry.

Furthermore, the concentration of equipment in the industry is expected to increase. As a result of continuous improvements in individual production and processing capacities of equipment in the industry, combined with the impact of temporary overcapacity, orders for tissue machines and processing equipment manufacturers decreased in 2023. Additionally, factors such as reduced demand from overseas markets led to a decline in export orders for equipment. This intensifies competition among equipment companies. Consequently, the concentration within the industry is expected to further increase.

Industry enterprises should actively transform towards green development by innovating and developing differentiated products, especially environmentally friendly and low-carbon products, to avoid homogeneous competition. They should also introduce more energy-efficient, carbon-reducing, and intelligent equipment. Furthermore, they can achieve industry consolidation and collective growth through capacity collaboration and supply chain partnerships among companies. The industry enterprises should adhere to rational competition and jointly promote sustainable development of the industry.