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Papermakers look to ride Asian shipping boom

Japan's Oji and China's Nine Dragons invest in new capacity

Japan's Oji Holdings is expanding cardboard box factories in Malaysia in response to the region's growing shipping demand.

TOKYO -- As the rise of e-commerce and economic expansion in emerging markets fuels surging demand for shipping boxes, papermakers in Japan, China and elsewhere are shifting gears to focus on the industry's new growth driver.

The paper market is undergoing a structural shift as digitization erodes demand for printer paper and newsprint, once industry mainstays. Analysts at Japan's Mizuho Bank and elsewhere forecast global demand for these materials falling to 105.69 million tons in 2022, down 14% from 2016 levels.

Meanwhile, containerboard demand is expected to climb 17% over the same period to 275.34 million tons. The world's largest papermaker, International Paper of the U.S., has cut its printer paper capacity by half to around 4.8 million tons over the last decade while roughly doubling industrial packaging capacity to about 15 million tons.

"As economies grow and the movement of goods increases, demand inevitably rises" for cardboard, Mizuho Bank's Junya Kako said.

This trend is particularly noticeable in China, where cardboard demand is projected to rise 22% to 72 million tons by 2022 -- accounting for a quarter of the global total -- driven largely by an e-commerce market that has been expanding by more than 10% a year. Over 30 billion parcels are delivered there annually, thanks partly to promotions such as Alibaba Group Holding's Singles Day sale in November. And as exports of products like Apple's iPhone increase, so too does production of boxes to put them in.

Global No. 2 papermaker Nine Dragons Paper Holdings is racing to meet this demand. The Chinese company will add capacity at five domestic plants, boosting its total by 20% to more than 17 million tons in two years.

In other emerging markets, manufacturers have a growing need for boxes to ship goods such as home appliances, food and daily necessities from production facilities to retailers. Demand is brisk for both domestic shipments and exports to neighboring countries, according to Japan's Oji Holdings.

Oji plans to expand cardboard box production in Southeast Asia -- mainly Malaysia and Vietnam -- as well as India, aiming to lift output by about 20% in five years. The company looks to produce and sell 4.8 billion sq. meters of material, equivalent to about 3 million tons, in fiscal 2022. "We'll also consider expanding into Indonesia and the Philippines," said an official in Oji's overseas operations.

Japanese packaging maker Rengo plans to spend 5 billion yen ($45 million) to acquire a cardboard manufacturing unit of compatriot Toppan Printing.

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