global fluff pulp outlook - fastmarkets risi · 2018-10-09 · global fluff pulp outlook patrick...

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Global Fluff Pulp Outlook

Patrick Cavanagh

RISI North American ConferenceSan Francisco, USAOctober 2018

Economist, Pulp

2

• Fluff pulp basics• Demand Steady growth trends for both mature and emerging markets

• Supply Recent capacity expansions and closures Little announced capacity expansion, but new supply will be needed

• Prices Fluff pulp prices have increased steadily, even as operating rates have declined

Presentation Overview


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What Is Fluff Pulp?• Specialty wood pulp, that is NOT used to make paper or paperboard

• Fluff pulp is used primarily in absorbent hygiene products Baby diapers, feminine hygiene, adult incontinence and nonwovens/wipes Demand for fluff pulp is growing steadily at 3‐4% per year

• Most of the fluff pulp in the world is produced in the US South (84%) Worldwide, fluff is produced at 24 pulp mills, operated by 13 companies, located in six countries 99% of fluff pulp is made using softwood fibers, utilizing the kraft process Bleached softwood kraft fluff accounted for 23% of global market BSK capacity in 2017

• Many fluff pulp mills can also make paper grade pulp (BSK “swing” mills) Fluff pulp costs more to produce and is usually priced higher than paper grade pulp Sometimes it makes more sense economically to produce paper grade (similar price, lower cost)


Demand Fundamentals• Demand is driven by growth in GDP per capita and by growth in the population

segments of potential absorbent hygiene product users Babies, women and senior adults are the main potential consumer groups Mature markets are relatively saturated, growth is largely driven by demographics Emerging markets are constrained by income, economic growth is correlated with fluff demand

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Percen

t Cha

nge

Real GDP pe

r Cap

ita

Mature EmergingMature % Chg. Emerging % Chg.

Mature42%

Emerging58%

6.3 Million Tonnes


Source: UN, RISI

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Population of Babies, 0‐2.5 Years Old

Emerging Mature

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95 97 99 01 03 05 07 09 11 13 15 17 19 21

Million

Population of Women, 12‐51 Years Old

Emerging Mature

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95 97 99 01 03 05 07 09 11 13 15 17 19 21

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Population of Adults, 65+ Years Old

Emerging Mature

Share of Demand, 2017


Global Demand by End Use, 2017

Disposable Diapers37%

Adult Incontinence

29%

Feminine Hygiene21%

Airlaid/Other13%

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Eastern EuropeMiddle East and AfricaOther AsiaLatin AmericaChinaMature Markets*

* Canada, Japan, Oceania, USA and Western Europe.

Demand by Region

Fluff Consumption vs. IncomeKilograms per Potential Consumer and GDP per Capita, 1992‐2022


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s Fluff Pulp pe

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Real per Capita GDP, 2005 US Dollars

USA CanadaNordic Western EuropeJapan OceaniaChina Other AsiaBrazil Other Latin AmericaEastern Europe Middle EastAfrica


Supply‐Side Developments• Traditionally, fluff pulp supply has been centered in the US South softwood fiber region

Several recent capacity projects have been started up in Brazil and Sweden, including eucalyptus, NBSK Currently there is only one publicly announced capacity project, not expected until 2025 New supply will be needed to keep operating rates within historical norms, likely from the US South

80%82%84%86%88%90%92%94%96%98%100%

01,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000

000102030405060708091011121314151617

Thou

sand

Ton

nes

Fluff Production

Operating Rate (R)Company Mill Country Capacity

Thousand TonnesDate

Suzano Suzano Brazil 100 2015 Q4

Klabin Ortigueira Brazil 400 2016 Q2

International Paper Riegelwood United States 360 2016 Q2

Domtar Ashdown United States 515 2016 Q3

Domtar Plymouth United States ‐80 2018 Q1

Stora Enso Skutskär Sweden 160 2018 Q2

Klabin Ortigueira Brazil 400 2025


Fluff Producer Market Share, 2017 Capacity by Region

International Paper36%

Georgia Pacific29%

Domtar10%

Klabin4%

Resolute4%

Stora Enso4%

WestRock3%

Arauco3%

Five Remaining

7%

6.9 Million Tonnes 0

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North America

Western Europe

Latin America

Fluff “Cash” Cost Curve, Fourth Quarter 2017Machine level costs, not including delivery, I, SG&A or logistics


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Cash Costs, U

S Dollars per Ton

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Cummulative Capacity, Thousand Tonnes

South America North America Europe Asia

Tightness in Paper Grade Creates Negative Spread to FluffFluff and SBSK Net Prices, US Dollars per Tonne, Delivered to the USA


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Fluff‐SBSK (R) Fluff SBSK Average Spread (R)


Unexpected Downtime : Hurricane Florence• On September 14th, Hurricane Florence made landfall in a key fluff producing region

Four pulp mills producing fluff in the Carolinas were shuttered, accounting for 19% of global supply The effective list price for fluff increased $25/tonne in September Full impact remains unclear

Company Mill DaysDown

Capacity / Day(000s tonnes)

Downtime(000s tonnes)

International Paper Riegelwood 17 0.9 15

International Paper Georgetown 8 0.9 7

International Paper New Bern 9 0.9 8

Domtar Plymouth 5 0.9 4

TOTAL 35

13

• Fluff pulp demand will continue to grow steadily at 3‐4% per year Mature market demand will grow modestly as aging populations contribute to demand for AI products and outweigh slowing birth rates

Emerging markets will account for 89% of demand growth over the next five years, driven by rapid economic growth and consumer market penetration

• New fluff capacity will be needed to keep the market balanced “Swing” capacity and conversion projects will likely fill the gap

• Strong global demand for paper grade pulp will work to tighten the fluff pulp market further as producers swing production to paper grade pulp

• Higher fluff pulp prices may motivate buyers to seek viable alternatives Northern softwood, eucalyptus, SAP

Forecast Summary


Outlook for the World Fluff Pulp Market (2018)www.risi.com/fluffpulp18

• Five‐year forecasts for prices, demand, supply and costs

• Historical data and analysis for all regions of the world

• Fluff conversion risk assessment for paper machines in the US South

Thank you!For more information:

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global fluff pulp outlook - fastmarkets risi · 2018-10-09 · global fluff pulp outlook patrick...

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