Features

The anti-dumping duty levied by Europe on coated fine paper from China is bound to create ripples in other markets around the world.

While the EU justifies its stand by saying that Chinese manufacturers are receiving state subsidies and the dumping of CFP "is destroying European industry and Asian forests", creating vast overcapacity and underpriced exports.

PrintWeek MEA questioned paper distributor, Mepco Gulf's managing director, Faadi Baakhlini, 'Will the antidumping levied by Europe affect paper distributors and traders in the Middle East?'

"Yes of course, the Chinese now have their backs to the wall and will look to dump their goods elsewhere," he said. "It is not only Europe but also USA that has taken steps against Chinese products. There is huge capacity in China for its own local market as well as exports. The anti dumping is affecting their exports to countries with huge capacities. Ten years ago, when APP started the Indonesia plant, no one had heard of it as paper mainly came from the West, now we have Chinese products flooding the market."

The Chinese are known to follow their own policies while doing business, say resellers. They do not usually appoint exclusive distributors, taking away price differentials.

"The Chinese have the habit of not appointing exclusive distributors," emphasises Baakhlini. "They sell to anyone and everyone, taking away profit margins, we do not have any competitive edge over others in the market, so while we may get volumes we are not able to get our margins.

"Personally, I would not place all my bets on the Chinese because of various reasons. Firstly, their currency is extremely devalued, and while they are appreciating it 1% year by year, it needs a 20% appreciation, which will kill their exports. Secondly, they are dependent on others for their supplies of pulp, which leads to vagaries in business, another earthquake or any natural disaster will affect the supplies of raw materials."

Fellow distributor, Paper Master and its managing director Anwar Jessa agrees, "There should be price differentials that would enable the distributor to make his margin. However, the Chinese are known to sell their products to everyone, even when we have been told that we are one of the two distributors appointed, we realise that the manufacturers' goods are available everywhere.

"However, the quality of Chinese paper has come up to acceptable levels, and also there are not as many currency fluctuations as seen with the Euro. People are not bothered about the origin of paper, only about reasonable quality and a workable price."

Most paper distributors in the region have increased their stocks of Chinese paper in tune with the market demands.

Says Baakhlini, "It is not a question of my preferences, I will have to increase my stocks of Chinese paper. A decade ago European paper ruled and now Chinese paper has flooded the market. This holds true for most distributors and importers of paper. In the past 3 years our business with China has increased from 15% to about 45% while Europe has declined by 25 to 30%. Another recent trend that I observe is that competitors are buying out each other to reduce capacity in the market."

Jessa agrees saying, "When we started out 4 years ago, our stock was almost entirely made up of European paper, while now the ratio is 30-40% European paper while the majority is Chinese paper."

Though USA and EU have levied duties to protect their own industry from dying a slow and painful death, the same is unlikely to be the case in the Middle East, which does not have any local manufacturing industry to protect.

"I do not think the UAE government would levy any such charges, because anti dumping is levied by countries whose local industry is affected, and since the UAE has no paper manufacturing industry so there would be no justification for the UAE government in imposing any duties," says Baakhlini.

While UAE, Qatar and Bahrain are much smaller markets with smaller population and demand, Jessa opines that it would make more sense for the Chinese to dump into either Saudi Arabia or Africa.

"In the case of Paper Master, 60% of our turn-over comes from Africa, which has seen a good year in 2010, while the local part of our business is still lukewarm and demand is low. The UAE has a much smaller requirement of paper, considering the size of the population, so in my opinion the Chinese would find it more worthwhile to dump into Africa, which is a much larger market, like Ethiopia for example, which has a population of 80 million people," concludes Jessa.