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Cardboard producer Rengo's mill in Yashio, Saitama Prefecture -- not far from Tokyo
Commodities

Record exports offset hard times at home for Japan's papermakers

How long can they lean on China and Southeast Asia in the digital age?

TOKYO -- Japan's paper and paperboard exports reached a new high in 2016 and continue to surge. For suppliers hit by dwindling domestic demand, the Chinese and Southeast Asian markets are exploding at just the right time.

Annual exports grew 17.5% on the year to 1.37 million tons, blowing past the previous record of 1.33 million tons logged in 2002, according to the Japan Paper Association. This past February, paper and paperboard exports jumped 17.7% on the year, to a record 134,000 tons, beating the 126,000 tons shipped in July 2002.

Exports of corrugated board, a raw material for cardboard boxes, soared 68.8% on the year in February, for the fourth straight record monthly increase.

China's cardboard supplies are tight. Demand for boxes is rising due to the growth of online shopping, but output is declining as smaller cardboard makers struggle to cope with Beijing's tighter environmental regulations. Some are being forced to suspend production.

The supply-demand situation has also boosted prices of corrugated board, benefiting Japanese exporters.

Cardboard demand is said to move roughly in tandem with gross domestic product. Exports to expanding Southeast Asian economies, such as Thailand and Vietnam, are also on the rise.

Last year, exports accounted for 5.2% of the paper produced in Japan, up 0.8 of a percentage point from 2015.

By item, exports of corrugated board jumped 30.4% on the year, while the figure for wrapping paper used by department stores climbed 16.1%. Both numbers set records.

Exports of copy paper and other business-use products increased 24.9%. Japanese suppliers also shipped more coated printing paper -- used for flyers and catalogs -- as well as uncoated printing paper for books.

Cautious optimism

An executive of a major papermaker warned that Asian demand may peak sooner due to the spread of digitization, but at least for now, market conditions in China and Southeast Asia are similar to Japan's boom years.

When it comes to the papermakers' operations at home, those good old days seem like a distant memory. The JPA estimates that domestic demand for paper and paperboard will decline 1% on the year in 2017, to 26.4 million tons. That would mark the seventh straight annual drop.

There are several factors at work. One is the shift from paper to digital documents and media. Packaging is also being simplified. Under the circumstances, papermakers are turning to overseas markets to maintain their equipment utilization rates and shore up their bottom lines.

Some players are wary of a slowdown in export growth over the medium to long term, due to the difficulty of finding buyers abroad. Still, many industry insiders expect exports will continue to increase for the time being. Fumio Manoshiro, the chairman of the JPA and president of Nippon Paper Industries, expressed optimism for continued growth at a news conference at the beginning of the year.

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