In 2017, roughly 20% of China's imported needle pulp came from the United States, and the United States ranked Canada's second largest supplier of bleached needle leaf pulp. In view of the current shortage of wood resources in China, the possibility of restricting wood chips and wood pulp imports is low.
In March 23, 2018, the Ministry of Commerce issued a list of discontinued products for the 232 measures for the import of steel and aluminum products in the United States and solicited public opinion. The 7 categories of products involved in the list were both strong domestic self-sufficiency, strong substitutes or non necessities. Therefore, we judged that the trade war had a relatively low impact on China's wood pulp imports.
What's the impact on China's papermaking?
Wood pulp system: China is now a big country in wood pulp and paper export. In 2017, China's export of double paper paper was 920 thousand tons, accounting for 12% of total output, 1 million 230 thousand tons of copper paper export, 26.8% of total output, 530 thousand tons of white cardboard export, accounting for 8% of total output. But the United States has taken anti-dumping policies on Chinese culture paper, and the raw materials have been shipped from Europe and America, so the products have no competitiveness in the local market. China's pulp and paper export is mainly in the Middle East and Southeast Asia. Therefore, from the marginal perspective, the current trade war has little effect on China's pulp and paper export.
Box, corrugated paper and packaging: we think that packaging and box corrugated paper are the most worrying parts for investors, because they are directly related to exports. In 2017, the total retail sales of consumer goods were 36 trillion and 600 billion yuan, and the total export of China was 15 trillion and 330 billion yuan in 2017. Considering the domestic consumption, the circulation of industrial products also needed corrugated paper. Therefore, we assume that the proportion of domestic consumption and overseas export of corrugated paper is equal to the proportion of the internal sales volume and the export amount, roughly 30%. In 2017, China's exports to the US accounted for about 20% of the total export volume. As a result, the proportion of American export board corrugated paper is roughly 6%, while the United States has a large scale tariff of about $60 billion in China, which accounts for roughly 14% of China's export to the United States. Therefore, the actual impact on the total volume of Chinese box board corrugated paper is only 0.84%. Let's assume that China's export to other countries is zero and the domestic consumption growth is zero. Therefore, we think that China and the United States trade war has little influence on the corrugated paper industry and paper packaging in China, but it will bring some negative effects on the marginal. By increasing the foreign trade orientation of other countries and raising domestic consumption, the negative effect of the Sino US trade frictions can be completely offset.