Asia pulp is one of the largest producers of pulp with a production capacity that rivals North America. They produce around 43 million tons per year, which accounts for about 30% of world pulp production. This high production rests on two pillars: manufacturing (which includes the processing and conversion to Pulp) and forest management. Manufacturing is done with a focus on maximizing efficiency to be as cost-efficient as possible, meaning energy intensity is lower than average as well as producing less solid waste in comparison to other regions like North America. Asia pulp and paper, is doing well due to the following reasons;
1. It is the most efficient industrial production.
Climate change will create a shifting demand for paper. The need for specialty papers that are lower in quality, but higher in strength will increase in the years to come. In addition, there will be greater demand for packaging and envelopes as consumers buy more goods online and less through catalogs or shopping malls.
2. There is a lack of a regional supplier or competitor that can stop its growth
It has a few competitors that they must beware of. The biggest threat to Asia pulp and paper is New Zealand as they are the second largest producer of wood pulp in the world with an output of around 10 million tons per year. New Zealand has been cutting down forests to increase this output but there will be an issue in the long term due to the limited amount of forests there are left on the island nation.
3. The market is growing by 2% per year.
This quote explains the dominance of the industries in China. The Chinese Government heavily invests in the production of wood pulp to increase their productivity. This is because it is a very important industry for China’s economy. In order for the Chinese government to maintain its economy, they need to ensure that these investments are profitable.
4. The demand for paper is increasing.
In the past decade, there has been a huge increase in the demand for paper as people begin to use more and more of it. The use of e-books has decreased the amount of paper being used by 2% but it is expecting a drastic rise in demand within the next five to ten years. This is because China’s population is growing rapidly so there will be a larger number of people reading and buying products that use paper. Therefore, this industry should see rapid growth in the next few years, which will lead to an exponential increase in profit margins.
5. It is a very centralized market.
The companies that control the supply of wood pulp in Asia are all controlled by only one organization, (APP). This limits the number of firms that can produce pulp and paper, which gives APP unprecedented control over the market. Therefore, they will be able to charge higher prices due to the lack of competition, which will bring in greater amounts of revenue for their business.
6. The regulatory environment isn’t very strict in this industry.
There are not many restrictions on this industry due to the fact that it is incredibly vital for them to have a stable market and government policies need to protect it from political uncertainty. Therefore, there are not many regulations in the industry that hinder productivity and profit margins.
