global tissue outlook - fastmarkets risi · world tissue consumption by region, 2018 market is...

Global Tissue Outlook

Global tissue business continues to expand but

demand growth cannot absorb new capacity,

Europe in moderate growth phase

2020 | Fastmarkets | Global Tissue Outlook

European Conference 2020

Lisbon, Portugal

March 2020

Esko Uutela

Principal, Tissue

2020 | Fastmarkets | Global Tissue Outlook 2

1. Recent global trends

2. North American outlook

3. Latin American outlook

4. Western and Eastern European outlook

5. Asian outlook

6. Global outlook

7. Concluding remarks

Recent global trends


World tissue consumption by region, 2018

MARKET IS DYNAMIC BUT

GROWTH SLOWING RECENTLY

• China has passed Western

Europe in market size, while Asia

Far East and Eastern Europe are

now larger than Japan.

• China has been the largest

producer country since 2015.

N. America 24.5%

China22.4%

W. Europe17.6%

L. America11.0%

Asia Far East6.2%

E. Europe5.6%

Japan5.1%

N&M East4.1%

Africa2.3%

Oceania1.2%

Global consumption: 38.7 million tonnes (2018)


Growth in the global tissue market

• Relatively stable growth

until the Great

Recession in 2009

• Recent years have been

strong

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Volume growth Relative growth


Tissue market growth by region, 2017 and 2018

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NA WE EE LA NME JPN CHI AFE OCE AFR

Growth rate, % from previous year

2017 2018

• The main change in 2018 was

that growth in China was only

half of that recorded in 2017,

Japan contracted and Western

European growth slowed

further. Meanwhile, Eastern

Europe, Asia Far East and

Africa showed more positive

developments.


Volume growth of tissue consumption, 2008-2018

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Total global growth: 10.8 million tonnes (1.08 million tonnes per year)


• China accounted for

43% of growth

• North America and Latin

America share second

place

North American outlook


The North American tissue market has been strong recently

• The AfH sector in particular

benefitted from the strong

economy and low gasoline

prices in 2015-2016.

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Average growth accelerated from 1.5% to 1.85% per year

North American tissue consumption per capita, 2006-2018

PER CAPITA CONSUMPTION

AROUND 26 KG

• Canada lags about 3.5 kg

behind US figure

• Strong AfH consumption the

main reason for the US

having the highest per capita

tissue consumption globally


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Canada US

10

Trade wars changing supply patterns

• The trade war between China and the US escalated in September 2018

when the US announced a 10% tariff on US$200 billion worth of

Chinese imports, including all the main categories of tissue with the

exception of 48.18.90. This is a major issue as China is the second-

largest import source of tissue after Canada. In 2018, tissue imports

from China were about 330,000 tonnes, which corresponds to the

capacity of five large tissue machines. The 10% tariff has been partly

offset by the weakening of the Chinese exchange rate.

• However, recently the tariffs on China were raised to 25% and may

remain at this level if no new agreement in the trade war can be

reached. This would certainly cut tissue imports from China, and

alternative sources cannot fully replace the whole quantity. Chinese

tissue with a 25% tariff is not competitive in the US market.


US tissue import growth, 2009-2019

• Canada continues to be the main US import

source for tissue, but China has taken

second place ahead of Mexico and

Indonesia.

• However, tariffs have restricted imports from

China; in 2019 total imports declined by

more than 24,000 tonnes and imports from

China fell by about 32,000 tonnes.

• Imports from Canada and Mexico decreased

as well, while imports from Indonesia grew

by 32,000 tonnes, replacing the lost tonnage

from China, and imports from alternative

sources, such as Turkey and Vietnam,

increased substantially.

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Average growth rate, 2009-2019: 4.6% per year

Canada China Mexico Indonesia

Italy Turkey Vietnam All others


US tissue imports from China by main category, 2010-2019

• The main categories have

suffered from the tariff, parent roll

imports from China have almost

disappeared and bathroom tissue

imports have declined

substantially.

• However, imports in the "other

tissue" category have grown

strongly and now account for 58%

of all tissue deliveries from China

to the US as there is no duty on

that customs code.

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Thousand t

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Parent rolls Bathroom tissue Facial/hankies

Towels Napkins Other tissue


Expected growth in US tissue consumption by business sector

• At-Home retailer labels will

show the strongest growth,

while At-Home branded volume

growth will remain moderate.

• AfH growth will rise above

average At-Home growth.

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AH brands Retailer labels AfH

Mill

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Market volume

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Growth of 3.6% per year

Growth of 2.4% per year

14

Minor growth of 0.2% per year


Major tissue capacity changes in North America, 2019-2022

2019• Soundview Paper, Elmwood Park, NJ, USA (closure after two fires) -110,000 t/a

• Clearwater Paper, Shelby, NC, USA (NTT PM) 64,000 t/a

• Irving Consumer Products, Macon, GA, USA (TAD PM) 75,000 t/a

• Cascades Tissue Group, Scarborough and Whitby, ON, Canada (mill closures) -61,000 t/a

• Soundview Paper, Elmwood Park, NJ, USA (restart of PM11) 60,000 t/a

• Georgia-Pacific Corp., Crossett, AR, USA (closure of the oldest PM) -30,000 t/a

-2,000 t/a

2020• Soundview Paper, Elmwood Park, NJ, USA (restart of PM10) 49,000 t/a

• Sofidel America, Inola, OK, USA 60,000 t/a

• Georgia-Pacific Corp., Palatka, FL, USA (TAD PM) 72,000 t/a

• First Quality Tissue, Lock Haven, PA, USA 64,000 t/a

• Kimberly-Clark, Mobile, Alabama (PM7 replacement, NTT PM?) 18,000 t/a

• Sofidel America, Inola, OK, USA 60,000 t/a

• Georgia-Pacific, Naheola, AL, USA (replacement of PM3 and PM4 with a new PM) 8,000 t/a

331,000 t/a

2021-2022• Kruger Tissue, Brompton, Sherbrook, QC, Canada (TAD PM) 70,000 t/a

• Irving Consumer Products, Macon, GA, USA (TAD PM) 75,000 t/a

145,000 t/a


Net capacity change* and tissue operating rate in North America

• The outlook is surprisingly

good despite the number of

projects, but a lot depends on

how much tariffs on imports

from China change the net

trade balance.

• We assume a conservative

decline in net imports in this

forecast (trend change).

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Capacity u

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Capacity change Capacity utilization

16

A lot of new capacity coming on stream that will affect 2020-2022; utilization

rate will head south but only slightly if no further closures occur

*Based on committed projects only.


Latin American outlook


Main Latin American tissue markets, 2018

• The five largest markets

accounted for 78% of total

consumption in 2018

Brazil31%

Mexico28%

Argentina8%

Chile5%

Colombia5%

Peru5%

Venezuela3%

Guatemala2%

Ecuador2%

Costa Rica2%

All others9%

Total market size: 4.3 million tonnes


Latin American tissue market shows varying annual growth, change to a more positive trend expected

• Economic turbulence and

political instability caused

problems and disappointing

growth in 2014-2016, mainly

due to the Brazilian recession.

• According to our preliminary

information, 2017 was more

positive but weakness returned

in 2018.

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Average growth 4.4%/a


Net capacity change* and tissue capacity utilization in Latin America

• Project delays and stronger

demand could help a lot,

but the current outlook

suggests only gradual

improvement.

• And more projects are likely

to emerge for 2021-2023

and prevent capacity

utilization from improving as

much as expected based

on committed projects only.60

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* Based on committed projects only.


Western and Eastern European outlook


European tissue consumption, 2003-2018

• Total European tissue

consumption was nearly 9.0

million tonnes in 2018, of which

about three-quarters was in

Western Europe and one-quarter

was in Eastern Europe.

• Growth in Eastern Europe has

increased and the region has

doubled its share of total

European tissue consumption.


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W. Europe E. Europe

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European growth rates of tissue consumption, 2003-2018

Western European tissue market

growth was badly affected by the

2009 Great Recession and recovery

took long time, especially in

Southern Europe. In Eastern

Europe, Russia recorded very

strong growth before the political

turmoil with Ukraine that resulted in

sanctions by Western trade partners

and restricted economic growth.

However, in the past couple of years

growth in Russian tissue

consumption has been recovering.


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2003-2008 2008-2013 2013-2018

Avera

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row

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er

year,

perc

ent

W. Europe E. Europe

Political tension

has cut Eastern

European growth

23

Development of European tissue consumption per capita, 2006-2018

• Western European average tissue

consumption is now 16.0 kg per

capita, but since 2006 it has not

grown more than 1.2 kg, which

signals that the market is

maturing.

• In Eastern Europe, per capita

consumption averages 6.7 kg,

indicating that there is still major

growth potential, particularly in

large countries such as Russia,

Ukraine and Romania.


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Kg p

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capita

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Per capita consumption of tissue in Western Europe, 2018


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Kilo

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capita

• Sweden leads the ranking of

per capita consumption of

tissue with 19.4 kg, but

Austria and Belgium follow

only slightly behind. Southern

European countries, with the

exception of Malta, consume

less than 15 kg per capita and

are at the end of the list.

25

Average share of retailer labels in Western European consumer tissue, 2010-2018


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2010 2011 2012 2013 2014 2015 2016 2017 2018

Perc

ent

of to

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Volume share Value share

• On average, retailer labels

account for about 66% of total

consumer tissue volume in

Western Europe.

• The volume share of retailer

labels has grown by an average

of 0.3 percentage points per year

since 2010.

• The gap between volume share

and value share has declined

somewhat, indicating that prices

of retailer labels are now closer

to prices of company brands than

in the past.

26

Average retailer label volume shares in Western Europe by country, 2018


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Perc

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• Germany has the highest volume share of

retailer labels with 85%, but Spain and

Greece also have shares of above 80%.

• Finland and Italy have the lowest shares,

which reflects strong tissue supplier

positions with their brands and also

characteristics of retailing, although they

are very different

• Italy is rather fragmented, which favors

company brands

• Finland is very concentrated with few

players who do not need to differentiate with

the help of strong private label programs. Note: Data were not available for Denmark for 2018.

27

Growth Rate of Western European Tissue Consumption, 2016-2022

• We expect relatively slow

growth to continue for this and

the next few years, with some

annual variation which has not

been closely correlating with

economic growth recently.

• High pulp prices have obliged

companies to optimize their

raw material use, and volumes

have probably suffered from

lightweighting – no statistics

for this exist. 0.0

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Forecast

Capacity shares of the main Western European tissue suppliers, mid-2019


Essity27.8%

Sofidel Group12.4%

WEPA Group9.7%

K-C7.8%

Metsä Tissue6.2%

ICT5.0%

Lucart Group4.0%

Cartiere Carrara2.7%

The Navigator Company

1.7%

Renova1.5%

All others21.2%

Total tissue capacity: 7.4 million tonnes (mid-2019)

• Essity is the by far largest tissue

supplier in Western Europe due to

its acquisitions of P&G’s and GP’s

tissue assets in the past.

• Despite some closures as part of its

rationalization program, it has more

than doubled the share of the

second largest company, Sofidel.

• The three largest account for about

half of total capacity, the top five for

64% and the top ten for 79%.

29

Major capacity changes (>10,000 t/a) in the Western European tissue industry, 2018-2021


2018

• Cartiera d Pietramelara (Paperdi), Pietramelara, Italy 30,000 t/a

• Lucart Tissue & Soaps, Aranguren, Bilbao, Spain (restart) 50,000 t/a

• Essity, Skelmersdale, UK (TAD PM rebuild and restart) 28,000 t/a

• Goma-Camps, Ejeo de Caballeros, Spain 34,000 t/a

• Essity, Allo and La Riba, Spain -76,000 t/a

• The Navigator Company, Cacia, Aveiro, Portugal 70,000 t/a

• Sofidel Spain, Bunuel, Spain 70,000 t/a

• ICT Iberica, El Burgo del Ebro, Zaragoza, Spain 70,000 t/a

• Lucart, Porcari, Italy (New tissue PM/ replacement) 20,000 t/a

316,000 t/a

2019

• Klippans Bruk, Klippan, Sweden 30,000 t/a

• Kartogroup Espana (Cominter Group), Castellón, Valencia 22,000 t/a

• Cartiera della Basilica (Eurovast), Botticino, Italy 10,000 t/a

52,000 t/a

2020-2021

• Fourstones Group, Sapphire, Leslie, Scotland, UK 28,000 t/a

• Global Hygiène, Charavines, France 30,000 t/a

• Cartiera Confalone, Montoro, Avellino, Italy 22,000 t/a

• Cartiera di Ferrania (Carrara Group), Cairo Montenotte, Savona, Italy 40,000 t/a

• Confidential 65,000 t/a

185,000 t/a

30

Net capacity change* and tissue capacity utilization in Western Europe until 2022

• Capacity closures have

helped the industry, but new

projects thereafter cut the

trend.

• Low demand growth lowered

capacity utilization in 2018-

2019, and new projects in

2019-2021 will keep the

outlook moderate in the next

couple of years.

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Per capita consumption of tissue in Eastern Europe, 2018


• Slovenia is top in the ranking of

per capita consumption of tissue

in Eastern Europe with 17.1 kg,

which above the Western

European average, followed by

Poland, Hungary, Croatia and the

Czech Republic. Russia is rather

far from the top with 4.3 kg, and

Moldova is at the bottom of the

ranking with only about 1.5 kg

tissue consumption per person.

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Growth rate of Eastern European tissue consumption, 2016-2022

• The demand outlook for tissue

market growth is rather

optimistic for the next few

years, but we expect slowing

growth in the most advanced

countries, including the

second-largest market,

Poland.

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Forecast

Major capacity changes (>5,000 t/a) in the Eastern European tissue industry, 2018-2022


2018

• Velvet Care, Klucze, Poland 70,000 t/a

• Vajda Papir, Dunaföldvar, Hungary 32,000 t/a

• Drenik ND, Belgrade, Serbia 30,000 t/a

• Hayat Kimya Group, Alabuga, Tatarstan, Russia 70,000 t/a

202,000 t/a

2019

• Metsä Tissue, Krapkowice, Poland -25,000 t/a

• Filar, Sadlno, Poland 25,000 t/a

• Arkhbum Tissue Group, Vorsino, Kaluga, Russia 70,000 t/a

70,000 t/a

2020

• Rollpap, Opatovice nad Labem, Czech Republic 7,000 t/a

• MG Tec Industry, Dej, Cluj, Romania 30,000 t/a

37,000 t/a

2021-2022

• Drenik Hungary, Szolnok, Hungary 30,000 t/a

• MG Tec Industry, Dej, Cluj, Romania 30,000 t/a

60,000 t/a34

Net capacity change* and tissue capacity utilization in Eastern Europe until 2022

• New investments from late

2014 onward and slower

demand growth caused

capacity utilization to decline.

• Minor improvement with

recovery in 2016-2017, but

new expansions pushing

capacity utilization down again

in 2018-2019.

• Small improvement thereafter,

but new projects are likely to

emerge, making the outlook

more negative.

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35

Asian outlook


Recent growth rates of Chinese tissue consumption

• The Chinese tissue

market has been in a

very robust growth

phase, but in 2018

growth was suddenly cut

to half compared to the

previous year.

7.07.8 8.0

6.96.2

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Average growth: 7.8% per year


Chinese tissue export growth, 2011-2019

• Chinese tissue exports exploded in 2011-2014

and were shipped to nearly every corner of the

world, with Asia Far East, North America and

Japan the largest buyers, followed by Oceania.

• Growth waned in 2015, but resumed in 2016-

2018 to more than 900,000 tonnes, but growth

stabilized in 2018.

• Now that US tariffs on Chinese tissue have been

raised to 25%, we expected that growth in

exports will stop and turn into a decline.

• However, Chinese tissue export growth

continued to increase in 2019 (6.3% growth)

• Exports to North America declined but increased to

Japan and other Asian Far East countries, more

than replacing the lost US volume.

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Tis

sue e

xport

s,

thousand t

onnes

Asia Far East North America Japan

Oceania Middle East Western Europe

Africa Latin America Eastern Europe


Average growth rate, 2011-2019: 9.0%/a

Chinese investments exploding, but closures and project delays expected

• There is a real investment peak with

too much capacity being built, but

currently also a wave of capacity

closures in the industry—as much as

1.2 million tonnes in 2017 and 1.1

million tonnes in 2018!

• We estimate that in 2019 closures

continued, but will gradually decline

as the old capacity will be largely

closed by 2022. Of course, in a

competitive market, bankruptcies can

increase closures, and some rather

big companies have been hit by

economic problems.

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-1,000

0

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3,000

4,000

2015 2016 2017 2018 2019 2020 2021 2022

Thousand t

onnes p

er

year

Capacity change*

New projects Closures Net capacity change

Forecast


* PM start-up/learning curves not considered.

39

Net capacity change* and capacity utilization in the Chinese tissue industry

• The ongoing structural change

in the Chinese tissue industry

has been very radical and

quick, and it is expected to

continue in the next couple of

years. New capacity will

replace major parts of the

older capacity, and older

technologies will have no

chance to survive. This will

help balance the situation to

some extent, but it will not

totally solve the overcapacity

problem.

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* Based on committed projects only, learning curves considered.

40

Global outlook


Anticipated growth in the global tissue market

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Volume growth Relative growth


• Tissue consumption has been

benefitting from improving

global hygienic standards, but

trade wars and other

uncertainties about future

economic growth shadow the

outlook.

42

Net capacity change* and capacity utilization in the global tissue industry

• The tissue sector is attracting

too many investments.

• Major capacity closures and

delays in project schedules

could improve outlook, but

only marginally.

• Global overcapacity is obvious

and new investments will

continue; the global tissue

markets are becoming

extremely competitive.

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Perc

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Capacity change (L) Capacity utilization (R)



43


Concluding remarks

• Despite its weak consumption growth in 2018, China will continue to be the main driving

force of global tissue industry expansion, although overcapacity is a threat in nearly

every region. Project delays will be common.

• North American developments are characterized by steady and encouraging growth, but

also ongoing battles between brands and private labels.

• The North American outlook is surprisingly good, despite many recent and ongoing

investment projects. A lot depends on how much net imports will be affected by trade issues.

• Europe had a quiet phase due to the recession but is now picking up. Investments are increasing

in Southern and Eastern Europe. But we expect only moderate growth in Western Europe.

• In China, it is difficult to say how serious the effects of the current viral outbreak will be on the economy

and consumption of consumer goods. Less traveling, lodging and outdoor eating will certainly hurt the

sprouting Chinese AfH tissue business.

• The tissue business is becoming increasingly dynamic and global. Cost-competitiveness based on low-

cost hardwood pulp and energy through integration seems to be a major benefit.

• Import duties could change the current trends of ongoing internationalization in the global tissue business.

Chinese exports to the US are now in decline and current import tariffs of 25%, if in place for a significant

period of time, could cut the volume, although the effect in 2019 was weaker than expected.

44

Thank you

OUTLOOK FOR WORLD TISSUE BUSINESS

www.risi.com/OWTB

WORLD TISSUE BUSINESS MONITOR

www.risi.com/WTBM

US TISSUE MONTHLY DATA

www.risi.com/USTM

For more information:

Esko UutelaPrincipal, Tissue, Fastmarkets RISI

Email: [email protected]


http://www.risi.com/OWTB

http://www.risi.com/WTBM

http://www.risi.com/USTM

global tissue outlook - fastmarkets risi · world tissue consumption by region, 2018 market is...

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