Chinese paper mill groups Nine Dragons and Lee & Man returning to normal production

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Lee & Man chairman Wenjun Li
Lee & Man chairman Wenjun Li coordinating supplies to help with coronavirus at a company warehouse

Two of China’s main paper mill groups are understood to be ramping back up to normal production levels following the coronavirus shutdown in China.

Both Nine Dragons Paper and Lee & Man paper mill groups have requested that staff return to work and are actively sourcing recovered paper again, albeit within the constraints of the Chinese quota levels meaning much of the focus is on domestic markets.

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At the end of February, Nine Dragons Paper announced its interim results for its 2020 financial year. It reported that it expected a “swift recovery” from the coronavirus shutdown.

On announcing a year-on-year increase in profit by 0.5% and a half-year-on-half-year increase of 41.3%, Nine Dragons Paper said in a statement: ” The sustained uncertainties on global economic growth and the recent outbreak of COVID19 have posed additional challenges to China’s packaging industry.

“Nevertheless, the group is confident in the Chinese government’s epidemic prevention and control. It has also rendered its full support for the country’s effort in fighting the plague, with a donation of over RMB33 million (£4 million), including RMB30 million in cash and medical supplies (including approximately 30,000 protective clothing and 10,000 N95 masks).

“In addition, with the resilience of China’s economy, the group believe the market will have a swift recovery under both the support and favorable policies of the state.

“Moreover, the signing of the phase one Sino-US trade agreement and the commencement of phase two negotiation will benefit Chinese export and RMB exchange rate. With the Chinese government’s launch of stringent environmental policies such as the ‘Plastic Ban Order’, tariff exemption on importing kraft pulp and recycled pulp from the US, and possible import tariff exemption on US recovered paper, the edges of large-scale paper manufacturing enterprises will further prevail.”

Nine Dragons Paper will step-up its efforts to secure raw materials including exploring expansion opportunities in overseas markets for recycled pulp and strengthening control and quality.

Like Nine Dragons, Lee & Man Paper put in strict restrictions on its staff including every staff member has to wear a face mask, have their temperature measured and whole body disinfected.

It has also made donations of face masks, other essential paper products such as tissues and cash to fight coronavirus in China.

The company issued its financial results for year end 2019 last week with total revenue falling to HK$27.14 billion (£3.02 billion) from HK$32.21 billion (£3.59 billion) in 2018.

Lee & Man Paper chairman Wenjun Li said: “The paper industry in 2019 faced some pressure. [This included] supply-side reforms and Sino-US trade frictions etc.

“The effect of these factors has been the cost of paper making has risen sharply, affecting consumer confidence.

“Lee & Man Paper actively responds to market changes. The group has made efforts to actively integrate upstream resources, develop vertical business models covering pulp and waste paper recycling, and develop towards the integration of the industrial chain to ensure supply of raw materials.

“At the same time, based on our existing business, we continue to expand scale, control costs and increase production capacity, bringing more opportunities for growth.”

Lee & Man Paper chief executive Wenbin Li added: “Looking forward, we will actively optimise the industry chain to achieve diversification of the paper and pulp business.

“On the basis of stabilising the original production scale, actively respond to the opportunities brought by ‘Belt and Road’, we are focusing on Southeast Asian markets, expanding international industries and increase new capacity.

“The Group has confidence in the long-term development of the ‘Belt and Road’ initiative and will continue to explore business opportunities in the countries and cities along the ‘Belt and Road’.”

The Belt and Road initiative is a Chinese Government policy that aims to expand Chinese influence on countries that are linked to it.

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