China invests to meet booming paper demand

China’s enormous hunger for paper, including packaging and label papers, is driving the country to raise domestic production. Danielle Jerschefske reports

Paper was invented in China during the Han Dynasty in 105 AD and in 740 AD the first newspaper was printed there. Through trade and war the skill made its way through the Middle East and into Europe where Johann Guttenberg invented the printing press in 1453. Now the material is everywhere.

Current global consumption of paper stands at 345 million tons, up from 300 million tons at the end of last year. In China, a country that is experiencing rapid growth in all areas – the label sector alone is growing at eight to 10 percent per annum – it is difficult to meet the demand for paper from domestic resources alone.

The nation’s domestic consumption of paper has risen 121 percent since 2000 and national demand probably surpassed 100 million tons in 2010. With the economy growing at 10 percent per year, it has been hard for the domestic Chinese forestry industry to keep up with demand, and pulp imports increased by over 43 percent between 2008-2009. By 2015 the country’s timber consumption is expected to reach 340 million square meters, over twice China’s annual production.

The Chinese government reacted with its Forest Industry Development Plan (2010-2012), which aims to increase domestic production of wood fiber by 12 percent each year, supporting, through subsidies and favorable state loans, the development of integrated plantation-pulp-paper systems. One of the companies which has benefited is Asia Pulp and Paper (APP) China.

APP is a subsidiary of the Sinar Mas Group conglomerate headquartered in Singapore, founded in Indonesia in 1972 by one of Indonesia’s wealthiest men, Eka Tjipta Widjaja. In 1978 it was producing a mere 12,000 tons of paper a year.

The company first entered the Chinese market in 1992 and now manages 20 pulp and paper mills as subsidiaries or joint ventures. The company employs over 38,900 people and has total assets of RMB 96.3 billion (14.8 billion dollars) and annual sales over RMB 37.9 billion (5.8 billion dollars) in 2010. APP China’s vision is to become the world’s premier fully integrated ‘green-cycle forestry’, pulp and paper company.

APP China Forestry (ACF) was established in 1995 on the island of Hainan, a vacation destination considered to be the Hawaii of China. It manages more than 303,000 hectares (one hectare = 2.3 acres) of plantations in eight Chinese provinces all certified to ISO 14001 standards. But these plantations are not always laid out in the fashion that one would imagine. Rather than planting groomed rows and rows of harvestable trees, the ACF plantations are often scattered throughout the landscape, integrated into the local communities amongst local farming land suitable for various crops like pineapple and peppers.

With advanced scientific research and development, ACF has decreased the Eucalyptus plantation cycle to six years on the first planting rotation, and has developed nurturing techniques to grow harvestable trees in as few as four years in a subsequent rotation using coppicing, a traditional form of forest management whereby new trees are grown from the remaining trunk of a cut down tree. In total, ACF has the capacity to produce five million tons of wood annually.

The Hainan Central Nursery is where the magic happens. Scientists closely monitor the development of cross pollinated tissues and seeds, led by Dr Wending Huang, deputy CEO of APP China Forestry, who holds a degree from China’s Nanjing Forestry University and a PhD in forestry ecology from the University of Helsinki. Employees can be seen analyzing the tissue cultures, growing them into cuttings ready to go for planting in the nursery’s 70 hectares of land. This location is capable of producing 100 million cuttings each year, and a smaller ACF nursery, Guangxi Central Nursery, can produce 90 million cuttings annually on 65 hectares.  ACF cultivates mostly Eucalyptus trees and also Acacia, Pinus and Poplar.

The company explains that the lands the government approves for timber growth are typically undesirable for other agricultural use, like sandy areas and low rainfall regions. The firm must then go through a multi-step process of engaging the landowners, producing a land audit and submitting a request for approval (that can be rejected). If the government agrees to the proposal, and believes that the locals will also benefit, a land tenure contract is signed between the government and ACF.

All land in China is owned by the State, or what it calls rural collectives, and plantations are managed either by renting land from the collectives in a profit sharing scheme, or through a joint venture with the landowners.

The organization and planning for the development of these plantations is highly complex. SAP software creates profiles of each planting zone to ensure proper raw materials management, planting, harvesting, road construction and maintenance, and to assist the company in better understanding the terrain so the best saplings with the right resistance are planted in the most beneficial areas.

This software has allowed ACF to establish its own chain of custody system to ensure only its bio-engineered trees are harvested and delivered to the mills. Tracking systems map out best delivery routes. Pre-harvest inventory measurements are taken and trees are stacked and locked on trucks for verifiable delivery. Once delivered to the mill, the weight is crosschecked with site records and the delivery mileage is verified.

ACF regularly performs internal and external audits of its systems, such as runoff and land mineral measurements, to ensure conformance to national environment regulations, which, contrary to popular belief, are comparable to European standards.

This plantation-based fiber supply is critical to the sustainable evolution of China’s domestic paper market. Yet the amount of fiber currently produced by ACF does not meet the capacity requirements of APP’s large pulping facilities. And this well-managed timber resource comes at a higher cost than international averages.

Hainan Jinhai Pulp and Paper plant

The vast Hainan Jinhai Pulp and Paper plant, located in the Yangpu Economic Development Zone, is a key part of APP China’s integrated pulp and paper production strategy. This facility is also located on Hainan Island off the southwest tip of China, spreading a whopping 400 hectares, or 8,000 acres. Six thousand employees run the nation’s largest pulp line and a paper line which produce 1.2 million tons of pulp and 900,000 tons of paper each year. The first phase of development saw APP invest 10.5 billion RMB in 2005 to build a bleached eucalyptus kraft pulp line with an annual capacity of one million tons. The line requires both short fiber wood – like the hard wood Eucalyptus and Acacia trees found domestically – and long fibers only found outside the country, which means making the plant remains dependent on oversees pulp producers in Canada and Brazil to make quality fine paper.

Last September, the company commissioned a 13.6 billion RMB Voith fine paper machine with an annual production capacity of 1.6 million tons. The behemoth is the largest in the world, 428.18 meters long (half a kilometer), 10.96 m wide and housed in a building 660m long. It takes 20 minutes to walk from one end to the other and took 140 German engineers 14 months to install.

The machine runs non-stop apart from four to five days maintenance a year. Operational speeds hit 1800 m/min.

Gold East Paper

APP China’s Gold East Paper mill was founded in May 1997 with a 2.12 billion dollar investment. It is the single largest coated paper mill in the world with an annual production volume of two million tons. Here APP China produces art paper, wine label material and paper for cigarette packaging. It is the biggest supplier for soft pack cigarettes in China, a very large market that has superbly decorated cartons.

Paper lines one and two are Voith machines that run at 1,500 m/min. Line three, again a Voith, is capable of in-line coating and can run at 1,800 /min, claimed to be the fastest in the world. It produces 3,300 tons of paper a day. Management has implemented strict Lean 6 Sigma guidelines throughout the facility, using SAP’s ERP software to manage production. The plant is ISO 14001 certified. Gold East Paper believes in employee development and training. It works hard to find the right people and claims to pay twice the salary of other local factories. It is a strong supporter of the Nanjing Forestry University and allots a significant percentage of revenue into R&D each year, partnering with printers and ink suppliers to bring the highest quality material to market.

Sustainable Investment in China

The paper industry has long been targeted by environmental activists for its ‘destructive’ use of resources and toxic emissions from the pulp and paper production process. By the close of 2010, APP China had invested more than five and a hlaf billion RMB in environmental protection measures. In June 2008, the company launched its Paper Contract with China (PCwC) manifesto which laid out a sustainable development policy. Key indicators include monitoring water consumption per ton of pulp/paper; wastewater discharge per ton of pulp/paper; and CO2 emissions per ton of pulp/paper, all of which are reported to be well below the EU Environmental Protection Guidelines for the Pulp and Paper Industry (IPCC 2001).  In 2011, for the third consecutive year, APP China was awarded the ‘China CSR Good Enterprise Award’ at the China Corporate Social Responsibility Annual Conference. 

The Jinhai facility has invested 2.7 billion RMB in environmental protection measures including a recovery plant that stops black liquor – the substance remaining after the cellulose fibers are extracted from the pulpwood – from being released into local water supplies, unlike many of the thousands of smaller Chinese paper mills. Recovered energy from the boiler is used to fuel the entire plant.

The advanced pulping system keeps water usage to a minimum and recycles its processed water in a closed loop. Alkaline and acidic emissions are processed in the same system, keeping released pollutants below national guideline limits.

Solid waste is kept to a minimum and residual bark, wood dust and sludge are incinerated. In 2009 304,609 tons of sludge were diverted from landfill. ‘Green liquor’ waste is sent  for use in cement manufacture.

Gold East Paper and APP’s other key mills have invested in wastewater treatment systems so water can be released harmlessly into the environment. The purity of the water can be seen first hand at the facilities’ ‘harmonious’ gardens where thousands of coy fish and ducks thrive. This water is also used to irrigate small farms on some of the mills’ lands to produce vegetables which feed employees living on-site.

Gold East Paper was recognized with an Environmentally Friendly Enterprise company award from the Chinese government’s Ministry of Environmental Protection in 2004, along with UPM Kymmene, the parent company of UPM Raflatac in Jiangsu Province. Less than 40 companies nationwide were given this honor.

Green wars

Outside of China, APP has fought a long running battle with Greenpeace over what the environmental group claims is use of packaging materials sourced illegally from Indonesian rainforests. In 2011 Greenpeace persuaded global brands Lego, Hasbro, Mattel and Disney to stop sourcing their packaging material from APP after third party research found mixed tropical wood fibers in APP sourced pulp materials.

Although APP disputes Greenpeace’s interpretation of the data, claiming it is impossible to link the fibers to any one country, Lego and Mattel have announced they will cease business with any company that supplies materials using APP pulp. Lego says that whenever possible it will use recycled content or materials certified by FSC, the sustainable forestry body. FSC dissociated itself from APP back in 2007.

On the other hand, the European Commission recently ruled that a number of APP’s key products meet the criteria required for the EU Ecolabel.

Pictured: GEP Environmental Park

This article was published in L&L 6, 2011