ACCA Meeting

ACCA 15 th General Meeting at Chinese Taipei

1 st December 2006

Mr Lin Kuo-Hung (CTCCA) as Chairman of Meeting per se welcomed all participants to Chinese Taipei and wished everyone an enjoyable stay here, and the Meeting a fruitful completion.

Country Report

Chinese Taipei - Mr Lin Kuo-Hung (CTCCA) reported that from January to October 2006, the Chinese Taipei corrugated business strung by 0.11% to 1,576 million sq metres compared to last year's corresponding period. This is largely due to the general industry migration away from the country. With this limited growth, members of the industry have to work together to maintain market stability and to look for expansion overseas. Mr Lin went on to reiterate what he had observed during his recent visits to Europe while meeting with ICCA and FEFCO. Also, during his visit to Japan , he observed how Japan corrugated industry constant renewal of technology and automation to reduce waste and increase productivity, and how responsive is the industry to product pricing. For instance, one latest corrugated plant in Japan was built at a cost of US$200 million which is fully automated, and the whole plant sealed and air-conditioned. Chinese Taipei corrugated industry may have to follow similar footstep.

Hong Kong - Mr Lai Yau Fai reported there had not been any significant change since he last updated of the market. However, China where most of the Hong Kong corrugated industry derived their businesses is making new government economic policies due to pressure from its overseas trading partners over its excessive trade surpluses. In response, China is restructuring all its industries to move away from those of low-end type. It divided industries into basically 3 categories of those to be encouraged, controlled and discouraged.

In September 2006, China drawn up about 800 of discouraged or prohibited items in its trade list, whereby they no longer enjoy free duty and free VAT, and paper was among the list. This effectively worked out to a substantial paper price increase of about 17%, which when passed on had resulted in the paper related industry almost coming to a halt. With customer objection through the various relevant associations and the overall negative impact to the economy, the Chinese government re-issue a new prohibited trade list 3 months later with the paper item taken off. Though the corrugated industry was almost back to normal, there was however a 2% paper price increase arising from affected paper mills in China . The corrugated industry is still concern because directionally the Chinese government is scrutinising industries that are highly pollutive and high-energy consuming such as production of paper, furniture, coal and metal. Overall, the paper packaging business dropped slightly in October. Market is still very competitive with many companies close to just breaking even, and profiting only in waste paper selling.

Indonesia - Mr David Chan (PICCI) reported that paper price increased by 10% breaking the US$300 pmt barrier for the corrugated medium paper. There was a paper shortage for the last 6 month, but supply and demand is almost balanced now at 2.1 million tons. While the corrugated market had been strong since the beginning of 2Q'06, there is sign that it is starting to weaken in November. There are 4 new plants being installed with a total capacity of 17,000 mt per month. It is expected that paper shortage would continue going forward should the market picked up again in 2007.

Malaysia - Mr Ong Boon Hua (MACCMA) reported that the corrugated industry remains fragmented and weak on bargaining power as the paper mills determine prices. Even though the anti-dumping petition of the paper mills had not been announced (postponed till December), material cost had increased about 5%. Despite such cost increase, strong competition among paper packaging players had resulted in product price reduction, with the result that four corrugated plants had either closed down or sold off. No more in line with the country GDP growth currently at about 5% pa, the corrugated industry growth is only 1% to 2% derived mainly from the biomedical and petroleum and not the general manufacturing industry.

Singapore - Mr Stanley Koo (CBMA) stated that the country GDP growth for 3Q'06 was 7.2%. This gave overall GDP growth for the first 3 quarters of this year at about 8%. Corrugated industry achieved an average of 2.5% for this same period. It is expected that the industry growth for the whole of 2006 to reach about 1.5%, in contrast to what ICCA data had forecasted a negative growth rate. Industry members are cooperating well to maintain business. But with paper price increasing, CBMA may consider making an attempt to increase product prices next year March.

Thailand ---Mr Nat Pinitpongskul (TCG) separated his report into 2 parts. On the macro economy, the Thai currency had grown stronger vis-a-vis US$, and this adversely affected its export business compare with neighbouring countries. Recent oil price fluctuation had the effect of a net increase in raw material cost to the corrugated industry. Inflation rate so far this year had increased by 5.2%, while interest rate went up by 7.5 to 8% compare with 6.5 to 7.5% last year. GDP this year is forecasted to reach 4.7% as compare 4.2% last year, and to increase at 5% for 2007. The effect of this set of the macro economy had resulted in some changes to the Thai Government plans such as the cancellation of the ` Bangkok Fashion City '. The banning of alcohol advertising through all media will adversely affect the sales of alcohol. On the agricultural front, the promotion on building the country to be the `Kitchen To The World' will continue.

However, there is confusion of this plan currently due to the shuffle of the new government. On the second part of the country corrugated demand, there is a trend towards more sophisticated higher quality die-cutting packaging. Also, the increasing demand for high quality graphic printing has resulted in shifting from B flute to E flute. With increase in automatic packaging, there is also the trend to change from double wall to single wall packaging. Next year, the corrugated industry will be even more competitive with new capacity being installed, estimated an addition of about several hundred thousand tons per annum.