Tissue Market Called Dynamic: Fastmarkets RISI NA Conference

Esko Uutela, FastmarketRISI’s well-known tissue principal, gave an update on the global situation at the recent FrastmarketsRISI North American forest products outlook conference. He called the market “dynamic” with 38.8 million metric tons being consumed in 2018.

North America is still the biggest market but China is closing the gap quickly. China has been the biggest producer of tissue since 2015.

As many now, the sector has shown steady growth although Uutela called 2018 a “disappointment” with only 2.6 percent growth compared with a 4 percent average over the past few years.

In North America, the market has been strong recently. The away-from-home (AfH) sector has been especially buoyant recently because of a strong economy, low gas prices and a changing lifestyle among younger generations.

In 2018, the US imported more than one million metric tons of tissue. The average annual growth rate of imported tissue into the US between 2009 and 2018 was 5.4 percent. However, Uutela pointed out that the US:China trade war will have an effect as the 25 percent tariff on Chinese tissue will make the product uncompetitive in the US. He estimates a 15 percent drop in imports from China (equivalent to 330,000 metric tons).

In the US, private label napkins are approaching European market share levels (60 percent). This is because the big brands are not so dominant in the napkin sector and do not promote their napkins like they do other products.

Uutela said at home private label products will grow gradually, attaining 36 percent market share by 2027. A lot will depend on how much the brands invest in promotional measures to retain market share.

Currently, the Big 3 hold 66 percent of capacity. With its purchase of Orchids Papers, Cascades rose to the No. 4 spot with 8.6 percent flowed by Essity at 6.9 percent.

There has been and will be a lot of new investment in the US. Why’ Facilities in the US tend to be older compared with other regions.

The rise of the private label has attracted many companies to invest in new tissue machines. Regionally, market growth is concentrated in the US South and players with little or no capacity there have decided to build mills in the region to gain market share. He cited Irving, Clearwater, Resolute and Sofidel among others.

Between 2018 and 2021, more than 450,000 metric tons of new capacity has been or will be added.

In Latin America, the market is 4.3 million metric tons. There are a lot of variations in growth rates around the continent but Uutela said a change to a more positive trend is expected. Most of the growth will come in Brazil and Mexico.

There should be more than 650,000 metric tons of capacity coming online by 2021. Capacity utilization rates have been historically low in the region and will probably stay that way.

In Western Europe, growth rates will be less than 1 percent annually. Capacity utilization rate will also stay low, 86 percent at best in 2019.

There will be lots of new capacity coming online in China but closures and project delays are expected. More than 90 percent of tissue now made in China comes off new machines so the capacity for closure is diminishing.

In conclusion, Uutela said that tissue demand should grow globally by about 3 percent in 2019 and through 2021. Volume growth is about 1 million metric tons per year. There is too much new capacity announced so some major closures could help.

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