risi global tissue outlook · 2018-10-11 · goods imported to the usa, including all the main...

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RISI Global Tissue OutlookEscalating Market Pulp Prices and Trade Wars Major Headaches for Tissue Companies

Esko UutelaPrincipal, Tissue

RISI North American ConferenceSan Francisco, California, USAOctober 2018

2

• Recent Global Trends• North American Outlook• Latin American Outlook• Western and Eastern European Outlook• Asian Outlook• Global Outlook• Concluding Remarks

Agenda

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Recent Global Trends

World Tissue Consumption by RegionMarket is dynamic: China has passed Western Europe in market size, while Asia Far East is—and Eastern Europe soon will be—larger than Japan. China has been the largest producer country since 2015.

N. America 25.0%

China21.3%

W. Europe18.3%

L. America11.1%

Asia Far East6.0%

Japan5.5%

E.Europe5.5%

N&M East4.0%

Africa2.1%

Oceania1.2%

Global Consumption: 36.4 Million Tonnes (2016)

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Growth in the Global Tissue MarketRelatively stable growth until the Great Recession in 2009, recent years have been strong

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Volume Growth of Tissue Consumption, 2006‐2016China accounted for 41% of growth, North and Latin America share second place

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Total Global Growth: 10.5 Million Tonnes (1.05 Million Tonnes per Year)


Long‐Term Growth Trends in the Global Tissue MarketInternational trade in tissue shows a higher growth rate than tissue consumption, a clear sign of business globalization; parent roll trade has accelerated in recent years

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Tissue Consumption Total Tissue Trade Parent Roll Trade

Growth Rate, Percentage pe

r Year



North American Outlook

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Growth Rate, Percent per Yea

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The North American Tissue Market Has Been Strong RecentlyThe AfH sector in particular benefitted from the strong economy and low gasoline prices in 2015‐2016

Average growth accelerated from 1.5% to 1.8% per year


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Canada China Mexico Indonesia Italy South Korea Germany All Others

US Tissue Imports Growth, 2009‐2017Canada continues to be the main US import source for tissue, but China has taken the second position ahead of Mexico and Indonesia – but imports tariffs will likely restrict imports from China

Average growth rate, 2009‐2017: +4.9% per year


Trade Wars Will Likely Change Supply Patterns • Canada imposed a 10% duty on imports of certain goods from the USA, including tissue, effective July 1, 2018, as a protest to US taxes for steel and aluminum. However, the US trade statistics do not show any decrease, but rather an increase, in tissue exports to Canada in July, but longer‐term effects cannot be excluded.

• China has raised import taxes of 20% for all tissue products imported from the USA except for the category 48.18.90 (hospital and diverse tissues), whose rate is 5%. However, this is a rather unimportant issue as US tissue exports to China were not more than about 5,000 tonnes in 2017.


Trade Wars Will Likely Change Supply Patterns • The trade war between China and the USA escalated in September when the USA announced a 10% tariff on US$200 billion worth of Chinese goods imported to the USA, including all the main categories of tissue with the exception of the 48.18.90. This is a major issue as China is the second‐largest import source of tissue after Canada. In the first half of 2018, tissue imports from China were at an annualized level of about 320,000 tonnes, which corresponds to the capacity of five large tissue machines! The 10% tariff may be at least partly offset if the Chinese exchange rates weakens.

• From January 1, 2019, the tariffs on China should go up to 25%. This will certainly cut tissue imports from China, and alternative sources may not be able to replace the whole quantity.


US Tissue Imports from China by Main Category, 2017


Parent Rolls5.4%

Bathroom Tissue18.0%

Facial Tissue5.6%

Towels9.9%

Napkins18.5%

Other Tissue42.6%

Total Imports: 324.000 Tonnes

US Tissue Imports from China by Main Category, 2010‐2017Main categories likely to suffer, other tissue category may even grow as no duty

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2010 2011 2012 2013 2014 2015 2016 2017

Parent Rolls Bathroom Tissue Facial/Hankies Towels Napkins Other Tissue

Thousand Tonnes

Changes in the Retail Sector • There are some important changes in the US retail sector, which mean new

challenges to tissue product suppliers.• One of the most important recent developments is the entry of the German hard

discounter Lidl in the US market, with more than 50 outlets opened and more coming, although the target of 100 outlets within one year was not reached.

• Competing retailers, including the two largest US chains, Walmart and Kroger, are carefully watching Lidl’s doings and pricing strategy, and have reacted by lowering their prices of certain daily goods closer to Lidl’s (and Aldi’s). This is good for consumers, but retailer and supplier margins are under pressure. Lidl’s main focus is on private labels which are expected to gain market share.

• Online sales are growing and this is changing the traditional retail sector logistics and thinking—and some players, such as Amazon, have also entered the brick‐and‐mortar business.


Expected Growth in At‐Home Private Label Share in the USAPrivate label share expected to reach 36% by 2026

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Expected Growth in US Tissue Consumption by Business SectorAt‐Home retailer labels will show the strongest growth, while At‐Home branded volume growth will remain moderate and AfH growth will rise above average At‐Home growth

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Market Volume

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2015 2016 2017 2018 2019

Growth of 5.9% per year

Minor growth of 0.4% per year

Growth of 2.3% per year


Major Tissue Capacity Changes in North America, 2018‐2021

2018• Georgia‐Pacific, Augusta, Georgia ‐31,000 t/a• Sofidel America, Circleville, OH, USA (2 x NTT) 140,000 t/a• Kimberly‐Clark, Fullerton, CA, USA ‐60,000 t/a• First Quality Tissue, Anderson, SC, USA (TAD PM) 64,000 t/a

113,000 t/a2019• Clearwater Paper, Shelby, NC, USA (NTT PM) 64,000 t/a• First Quality Tissue, Lock Haven, PA, USA 64,000 t/a• Irving Consumer Products, Macon, GA, USA (TAD PM) 64,000 t/a• Georgia‐Pacific Corp., Palatka, FL, USA (TAD PM) 72,000 t/a

264,000 t/a2020‐2021• Sofidel America, Inola, OK, USA 120,000 t/a• Kruger Tissue, Brompton, Sherbrook, QC, Canada (TAD PM) 70,000 t/a

190,000 t/a


Net Capacity Change* and Tissue Operating Rate in North AmericaThe outlook is surprisingly good despite many 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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Capa

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Capacity Change Capacity Utilization

* Based on committed projects only.

A lot of new capacity coming on stream that will affect 2019‐2020; utilization rate will head south but only slightly if no further closures occur.


US Tissue Parent Roll PricesUS Dollars per Short Ton at Works, Monthly Mean

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Virgin Pulp, High Quality Virgin Pulp, Low Quality RCF‐Based, High QualityRCF‐Based, Low Quality Avg. Net Price, BKP*


Price Margin Between Tissue Parent Rolls* and Market Pulp Price Mix**

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* High‐quality pulp‐based rolls.** Price mix 50% NBHKP amd 50% NBSKP.



Latin American Outlook

Main Latin American Tissue Markets, 2016The five largest markets accounted for 77% of total consumption

Brazil31%

Mexico28%Argentina

8%

Chile6%

Colombia5%

Peru4%

Venezuela3%

Guatemala2%

Ecuador2% Costa Rica

2%All

Others9%

Total Market Size: 4.0 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; 2017 appears to have been more positive


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Expected Volume Growth of Latin American Tissue Demand by Main Country, 2016‐2020Brazil is projected to recover in 2017‐2019

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Major Capacity Changes (>10,000 t/a) in the Latin American Tissue Industry

2018• Carta Fabril, Carta Goiás, Anápolis, GS, Brazil 70,000 t/a• Papeles Industriales (Essity), Lampa, Santiago, Chile ‐30,000 t/a• Mili, Tres Barras, SC, Brazil 35,000 t/a• Papelera Vinto, Cochabamba, Bolivia 25,000 t/a• GCP, Tepetlaoxtoc, Est. de Mexico, Mexico 34,000 t/a• Copelme, Santa Cruz de la Sierra, Bolivia 27,000 t/a• PAINSA (Kruger), Rio Hondo, Zacapa, Guatemala 30,000 t/a• Papelera San Andres de Giles, San Andres de Giles, Argentina 35,000 t/a• Papelera Nicaragua (Grupo Vual), Los Cardales, Pilar, Argentina 23,000 t/a

249,000 t/a

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Major Capacity Changes (>10,000 t/a) in the Latin American Tissue Industry

2019• Essity Mexico (ex‐SCA), Ciudad Sahagun, Hidalgo, Mexico (TAD PM) 30,000 t/a• Blue Tissue SAPI, Toluca, Est. de Mexico, Mexico 30,000 t/a• Celulosa Campana, Lima, Buenos Aires, Argentina 30,000 t/a• Confidential, Bolivia 25,000 t/a• Papelera Vinto, Ecuador 18,000 t/a• Papelera Nicaragua, (Grupo Vual), Los Cardales, Pilar, Argentina 23,000 t/a• Papelera del Plata (CMPC), Zarate, Buenos Aires, Argentina 54,000 t/a

210,000 t/aPotential Projects• Caribbean Paper Producers, Kingston area, Jamaica 54,000 t/a• BAP Industries, Nicaragua 30,000 t/a ??

84,000 t/a

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Net Capacity Change* and Tissue Capacity Utilization in Latin America Project delays and stronger demand could help a lot, but the current outlook does not suggest any major improvement

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Western and Eastern European Outlook

Western European Tissue Market Showed Positive Recovery in 2015, but Disappointed in 2016Major variations in growth from year to year

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r

Recession over, but no consistent return to past

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Eastern European Tissue Market Growth Negatively Affected by Political TensionThe Russia‐Ukraine conflict has taken its toll on the tissue sector, but 2016 was surprisingly strong, mainly thanks to Poland

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Growth in 2013‐2015 weak and far from the

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Growth Rate of Western European Tissue Consumption, 2014‐2020We expect relatively slow growth to continue for the next few years

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Growth Rate of Eastern European Tissue Consumption, 2014‐2020The outlook is rather optimistic for tissue market growth in the next few years

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Major Capacity Changes (>10,000 t/a) in the Western European Tissue Industry, 2018‐2019

2018• Cartiera die Pietramelara (Paperdi), Pietramelara, Italy 35,000 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, Italy 34,000 t/a• Essity, Allo and La Riba, Spain ‐76,000 t/a• Cartiera della Basilica (Eurovast), Botticino, Italy 10,000 t/a• The Navigator Company, Cacia, Aveiro, Portugal 70,000 t/a• Ibertissue (Sofidel), Bunuel, Spain 70,000 t/a• ICT Iberica, El Burgo del Ebro, Zaragoza, Spain 70,000 t/a• Lucart, Porcari, Italy 20,000 t/a

311,000 t/a2019• Klippans Bruk, Klippan, Sweden 30,000 t/a

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Net Capacity Change* and Tissue Capacity Utilization in Western Europe until 2021Capacity closures have helped the industry, but new projects thereafter cut the trend; outlook is stable for 2018 but not promising for 2019

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Major Capacity Changes (>5,000 t/a) in the Eastern European Tissue Industry, 2018‐2019

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

142,000 t/a2019• Higi Papersoft (Drenik), Szolnok, Hungary 30,000 t/a• Arkhbum Tissue Group, Vorsino, Kaluga, Russia 70,000 t/a

100,000 t/a

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Net Capacity Change* and Tissue Capacity Utilization in Eastern Europe until 2021New investments from late 2014 onward and slower demand growth caused capacity utilization to decline, which will continue in 2018‐2019

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Asian Outlook

Main Asian Tissue Markets, 2016China dominant, Asia Far East now larger than Japan

China58%

Asia Far East16%

Japan15%

N&M East11%

Total Market Size: 13.4 Million Tonnes


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Recent Growth Rates of Chinese Tissue Consumption The Chinese tissue market has been in a very strong growth phase and is now showing more robust growth than the economy

Average growth: 8.0% per year Recently, growth has been slowing, with the exception of 2015


Chinese Tissue Export Growth, 2010‐2017Chinese 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 2016‐2017 to more than 900,000 tonnes. With the US tariffs on Chinese tissue, the growth in exports will likely stop and turn into decline.

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Western Europe Africa Latin America Eastern Europe

Average growth rate, 2011‐2017: 10.8%/a


Volume Growth of Asian Tissue Markets by Sub‐Region, 2016‐2020In the next few years, China will account for about 74% of the volume growth; the Middle East and Asia are expected to record similar growth

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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 1.3 million tonnes in 2017!

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Net Capacity Change* and Capacity Utilization in the Chinese Tissue IndustryOvercapacity is obvious, although project delays may help

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Net Capacity Change* and Capacity Utilization in the Asian Tissue IndustryOvercapacity is obvious, although project delays may help

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Global Outlook

Anticipated Growth in the Global Tissue MarketTissue consumption benefitting from improving global economic growth, but there are also uncertainties ahead

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* Based on committed projects only

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N. America W. EuropeE. Europe L. AmericaNear & Middle East JapanChina Asia Far EastOceania Africa

Net Capacity Change* and Capacity Utilization in the Global Tissue IndustryMajor capacity closures could improve outlook, but only marginally. Global overcapacity is the name of the game!



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Concluding Remarks• 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. • Europe had a quiet phase due to the recession, but is picking up, as are investments in

Southern and Eastern Europe.• In Latin America, Brazil is recovering, Venezuela is a catastrophe, and Mexico is back on

a growth track again.• 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 continuing internationalization in the global tissue business, China's exports to the USA are likely to decline in 2019.

• Tissue prices are under heavy cost pressure.


Outlook for World Tissue Businesswww.risi.com/OWTB

World Tissue Business Monitorwww.risi.com/WTBM

US Tissue Monthly Datawww.risi.com/USTM


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