North American Tissue Market Outlook - TAPPI · 2019. 10. 9. · 2019 | Fastmarkets RISI | North...

North American Tissue Market OutlookWith Overview to Global Developments

TissueCon 2019 Conference Orlando, FL, USA

October 2019 Esko UutelaPrincipal, Tissue, Fastmarkets RISI

1. Recent global trends1. Recent global trends2. North American outlook3. Latin American outlook4. Global outlook5. Concluding remarks

2019 | Fastmarkets RISI| North American Tissue Market Outlook


Recent global trends


Market is dynamic• China is larger than Western

Europe in market size and approaching the size of North America.

• Latin America, Asia Far East and Eastern Europe are becoming increasingly important regions as well.

• China has been the largest producer country since 2015 and passed the US to become the largest consumer country in 2018.

World tissue consumption by region, 2018 (preliminary)

N. America 24.5%

China22.4%

W. Europe17.5%

L. America11.1%

Asia Far East6.2%

E. Europe5.6%

Japan5.1%

N&M East4.1%

Africa2.3%

Oceania1.2%

Growth in the global tissue market

• Relatively stable growth until the Great Recession in 2009. Strong growth was seen in 2015-2017, but 2018 was weak as growth slowed in China and Western Europe.

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2019 | Fastmarkets RISI | North American Tissue Market Outlook 5

Tissue market growth by region, 2017 and 2018

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• 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)

2019 | Fastmarkets RISI| North American Tissue Market Outlook 7

• China accounted for 43% of growth, followed by North America (12%) and Latin America (11%).

2019 | Fastmarkets RISI | North American Tissue Market Outlook

North American outlook

The North American tissue market has been strong recently

• The AfH sector in particular benefitted from the strong economy, low gasoline prices and changing lifestyle of younger generations.

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Average growth accelerated from 1.5% to 1.95% per year

US tissue import growth, 2009-2018

• Canada continues to be the main US import source for tissue, but China has taken second place ahead of Mexico and Indonesia.

• However, imports tariffs will restrict imports from China; the first five months of 2019 show decreases in the volume of Chinese tissue imported by the USA.

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Average growth rate, 2009-2018: 5.4% per year

Canada China Mexico Indonesia Italy South Korea Germany All others


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 major decrease in tissue exports to Canada since then, and this tariff has since been removed.

• China has raised import taxes to 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 of little consequence as US tissue exports to China were not more than about 9,000 tonnes in 2018.


Trade wars will likely change supply patterns

• The trade war between China and the USA escalated in September 2018 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 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 imports from China by main category, 2010-2018

• The main categories are likely to suffer; however, the "other tissue" category may grow further as there is no duty on that customs code.

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Parent rolls Bathroom tissue Facial/hankies Towels Napkins Other tissue


Changes in the retail sector

• There are some important changes in the US retail sector, which mean new challenges for tissue product suppliers.

• One of the most important recent developments is the entry of the German hard discounter Lidl into the US market, with about 70 outlets opened (mid-2019) 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 activity 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.


Estimated retailer label shares in North America, 2006-2018

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USA Canada• Retailer label developments havebeen different in the USA andCanada: growing in the USA anddeclining in Canada.• In the USA, Walmart has pavedthe way for more retailer labelsand other retailers have followed.• In Canada, brand owners havesupported marketing of theirbrands with massive promotiionalactivities and retailers have hadlimited interest in developingretailer brands recently.

Retailer label shares by product group in North America, 2010-2018• Napkins record the highest

retailer label share, while the dominance of leading brands in facial tissue seems to continue with relatively little movement toward retailer labels. This is related to the structure of this segment, specifically the big players have less interest in napkins and are not pushing their brands in the same way as they are with other products.

• Household towels have the second highest retailer label share of 34% while in bathroom tissue they are in a very keen competition with the leading brands. 0

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Toilet tissue Towels Facial Napkins Total

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Retailer label share, % of total


Forecast of retailer label share in the US AH tissue business, 2016-2027

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% of AH Tissue Volume

• Retailer label share willgrowgradually from about 30% in 2019 to more than 36% by 2027

• However, a lot depends howmuch brand owners invest in promotional measures to defendtheir market shares

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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Growth of 3.6% per year

Growth of 2.4% per year

2019 | Fastmarkets RISI | North American Tissue Outlook 18

Minor growth of 0.2% per year

Expected tissue market growth by sector and market in North America, 2017-2027

• The AfH sector is expected to account for 48-49% of the total market growth and its share will climb to 35% of total tissue consumption .

• Toweling products are expected to have more volume growth than toilet tissue outlook as in toilet paper ligthweighting will continue and population growth will remain as the main driving force while in toweling product penetration can still grow.

• Napkins and facial tissue will also show some growth albeit clearly lower volumes. -50

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Major tissue capacity changes in North America, 2018-2021


2018• Georgia-Pacific, Augusta, GA, USA -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

• 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) 64,000 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• Georgia-Pacific Corp., Palatka, FL, USA (TAD PM) 72,000 t/a• Sofidel America, Inola, OK, USA 60,000 t/a

119,000 t/a2020-2021

• First Quality Tissue, Lock Haven, PA, USA 64,000 t/a• Sofidel America, Inola, OK, USA 60,000 t/a• Georgia-Pacific, Naheola, AL, USA (replacement) 8,000 t/a• Kruger Tissue, Brompton, Sherbrook, QC, Canada (TAD PM) 70,000 t/a

202,000 t/a20

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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2019 | Fastmarkets RISI | North American Tissue Outlook 21

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

*Based on committed projects only.


Latin American outlook

Main Latin American tissue markets, 2018

• The five largest markets accounted for 77% of total consumption in 2018.

Brazil31%

Mexico28%

Argentina8%

Chile5%

Colombia5%

Peru5%

Venezuela3%

Guatemala2%

Ecuador2%

Costa Rica2% All others

9%

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

Expected volume growth of Latin American tissue demand by main country, 2017-2027

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• Brazil is expected to recover strongly and Mexico is also back on a growth track.

• Colombia is expected to be the number three growth market, followed by Peru and Chile.

Major capacity changes in the Latin American tissue industry, 2018-20192018• 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 Nicaragua (Grupo Vual), Los Cardales, Pilar, Argentina 23,000 t/a• PAINSA – Papelera Internacional (Kruger), Rio Hondo, Zacapa, Guatemala 30,000 t/a• Cia Canoinhas de Papel, Canoinhas, SC, Brazil 30,000 t/a• Copelme, Santa Cruz de la Sierra, Bolivia 27,000 t/a• Papelera Vinto, Vinto Chica, Cochabamba, Bolivia 25,000 t/a• GCP – Grupo Corporativo Papelera, Tepetlaoxtoc, Mexico 34,000 t/a

244,000 t/a202019

• Essity, unrevealed location, Mexico (TAD PM from Toscotec) 27,000 t/a• Blue Tissue SAPI, Apizaco, Mexico 30,000 t/a• Celulosa Campana, Lima, Buenos Aires, Argentina 30,000 t/a• Confidential, Bolivia 25,000 t/a• Papelera Nicaragua (Grupo Vual), Los Cardales, Pilar, Argentina 23,000 t/a• Papelera San Andrés de Giles, San Andrés de Giles, Argentina 34,000 t/a• Softys Argentina (CMPC), Zárate, Buenos Aires, Argentina 54,000 t/a

223,000 t/a2019 | Fastmarkets RISI | North American Tissue Market Outlook

Major capacity changes in the Latin American tissue industry, 2020 and later


2020• Papelera Vinto, unrevealed location, Ecuador 18,000 t/a• Convertipap, Atlantagatepec, Tlaxcala, Mexico 33,000 t/a• Confidential, Colombia (?) 33,000 t/a• Papel San Francisco, Mexicali, Mexico 30,000 t/a• Kimberly-Clark do Brasil, Mogi das Cruzes, Brazil 60,000 t/a

174,000 t/a

Potential projects• Anin Group, Tres Lagoas, Mato Grosso do Sul, Brazil 30,000 t/a• Santapel – Santa Catarina Papel, Tangará, Santa Catarina, Brazil 23,000 t/a• Caribbean Paper Producers, Kingston area, Jamaica 54,000 t/a• BAP Industries, unrevealed location, Nicaragua 30,000 t/a ?

137,000 t/a

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 near-term improvement.

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* Based on committed projects only.


Global outlook

Anticipated growth in the global tissue market

• Tissue consumption has been benefitting from improving global hygienic standards, but trade wars and other uncertainties about future economic growth shadows the outlook.

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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 and more than 700,000 tonnes in 2018.

• But currently more than 90% of Chinese tissue is made on modern machines, so closures will likely decline.

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* Source: CNHPIA, forecast by Fastmarkets RISI.

World tissue capacity change,* 2005-2021

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• Announced tissue capacity expansion clearly exceeds organic market growth.

• In some years, such as 2019, the amount of new capacity coming on stream is double the consumption growth.

• Closures have helped and will continue to do so in the future, but investment activity is overheated.


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

• The tissue sector is attracting too many investments.

• Major capacity closures could improve outlook, but only marginally.

• Global overcapacity is the name of the game!

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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.

• North American market outlook is surprisingly good, despite many recent and ongoing investment projects. A lot depends on how much net imports will be affected by the trade issues

• Europe had a quiet phase due to the recession, but is picking up. Investments are increasing 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. Chinese exports to the USA are now in decline and current import tariffs of 25%, if in place for a significant time, could radically cut the volume.


Thank you

OUTLOOK FOR WORLD TISSUE BUSINESSwww.risi.com/owtb

WORLD TISSUE BUSINESS MONITORwww.risi.com/wtbm

US TISSUE MONTHLY DATAwww.risi.com/ustmd

For more information:

Esko UutelaPrincipal, Tissue, Fastmarkets RISIEmail: [email protected]

2019 | Fastmarkets | Global Tissue Market Outlook

North American Tissue Market Outlook - TAPPI · 2019. 10. 9. · 2019 | Fastmarkets RISI | North...

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