Nine Dragons Paper Holdings has halted its plans to build a large containerboard mill. China’s largest producer of containerboard is delaying construction of the 1.6 million metric tons per year capacity mill, which was planned for 2009, says Citi Investment Research paper analyst Chip Dillon.

Both Nine Dragons and Lee & Man Paper “appear to be capital constrained after years of building capacity at a breakneck pace,” Dillon writes in a client note. “These producers have access to little indigenous virgin fiber and are dependent on old corrugated containers, supplies of which should continue to tighten over time (until virgin-based capacity is planned in softwood tree regions).”