Tissue capacity and demand growing apace in emerging economies, particularly in China, while fine paper demand decline continues in mature markets, PPPC's Bona tells Hawkins Wright/BWPA audience in London
November 13, 2012
(Industry Intelligence Inc.)
– The following report is from a speech presented on Nov. 8 at the thirteenth annual British Wood Pulp Assn./Hawkins Wright Symposium during London Pulp Week. The five speakers specifically addressed the global economy, trends in fine paper and tissue, the outlook for market pulp, Chinese pulp and paper trends, and the future of the print medium. Industry Intelligence has posted reports today on each of the five presentations.
Speaking on trends in fine paper and tissue, Emanuele Bona, vice president, Europe, of the Pulp and Paper Products Council (PPPC) underscored the explosion in the growth of the tissue sector and the rapid decline of the printing and writing sector. He said tissue and woodfree (WF) papers are growing strongly while mechanical papers are driving down demand.
Though tissue demand has reached its peak in the mature markets of North America, Western Europe, Japan, and Oceania, the rest of the world (ROW) now accounts for almost half of world demand, where growth was 6.7% from August 2005 to August 2011, said Bona, adding that every 10 years there is an additional 10 million tonnes of consumption. Overall demand in the first three quarters of this year grew by 3.2%.
A number of large new tissue machines (30,000-, 40,000-, 50,000 tonnes/year) were installed worldwide in 2011 and are forecast for 2012 and 2013, with China accounting for 60% of them, said Bona, noting that the overall numbers translate to a capacity growth of 3.1%, 4.0%, and 5.8% for the respective years.
Bona said the global numbers of new machines each year (China’s are in parentheses) are: 2011—31 (18); 2012 forecast—61 (38); 2013 forecast—42 (27); and uncertain—24 (12).
China’s pace of tissue capacity growth for 2012-2013 is double what it was in the past, and about double the growth in demand, said Bona. In response, China started increasing its exports in 2011 and the pace has grown rapidly.
In the first three quarters of 2012, China exported 95,000 tonnes of rolls and 322,000 tonnes of converted products, Bona said, adding that shipping tissue is not economic. Two-thirds was exported to neighboring countries, but the “biggest surprise” was that 25% went to North America, he said.
But China’s tissue overcapacity is a short-term problem and in the long term, it will be able to absorb the capacity, given the country’s increasing and the expansion of its middle class, Bona added.
Looking at the printing and writing sector, and as anyone who has been following the statistics knows, the global growth outlook is anything but strong. Bona said demand peaked in 2007 and declined by 11 million tonnes, or by 10%, from that year to 2011, due to global economic, structural, and cyclical issues. Most of the demand decline has been in mechanical paper grades, but woodfree paper grades are expected to grow some, Bona said.
Chinese printing and writing paper demand will grow, but the growth will be below trend, by about 5%/year compared to 7.4%/year in the past, said Bono, adding that most of the consumption is in woodfree papers.
Chinese capacity of printing and writing paper has followed a path similar to that of tissue, growing by about 2.5 million tonnes/year in recent years.
The sector is oversupplied in China by 3 million tonnes, so the running rates are low and stocks at the mills are very high, Bona noted. With capacity outpacing demand, China is exporting product, marking a “significant” 15% increase in the first three quarters of 2012 compared to the year-ago period. North America and Europe are major destinations, with respective year-to-date increases of 50% and 140%, despite anti-dumping provisions.
Demand in the mature North American printing and writing paper market has declined by 8.8 million tonnes (28%) from 2004 through 2011 and the quarterly decline is accelerating, Bona said. “The trend is clearly going down,” he said. From 2007-2011, the woodfree paper sector declined 6.2% and the mechanical paper sector declined 9.0%. Since 2000, the woodfree paper sector has lost one third of total demand, Bona said, adding, “It’s not a very nice situation.”
The pace of decline in North America is forecast to slow temporarily, but will still be negative, with 2011-2014 expected to show a drop of 3.4% for the woodfree paper side and of 4.2% for mechanical paper.
The forecast for Western Europe’s shipments from 2011-2014 are for woodfree paper to be down 2.7% and mechanical paper down 3.8%. Western Europe’s situation is “more negative than North America,” Bona said.
Demand in Western Europe for printing and writing papers peaked in 2007 and has dropped 5.4 million tonnes (19%) since then, with a 5.7% decline for woodfree paper. “It is not changing,” Bona said. “The monthly decline started before the recession.” So far in 2012, total shipments have dropped by 1.2 million tonnes
Though Western Europe is the largest exporting region in the world, its share is declining (down 1.5% in the first nine months of 2012). China is displacing it, Bona said.
As for the rest of the world, the demand picture is mixed, overall “very positive” but concentrated in Latin America and the rest of Asia, not in the other regions. The year-to-date demand was up 1.0%. The 2011-2014 demand and shipments forecast for is for growth of 1.8%, totaling 1,660,000 tonnes.