global specialty pulp outlook · • arauco is converting a paper grade mill in chile • ld...

2019 | Fastmarkets | Global Specialty Pulp Outlook 1

Patrick Cavanagh

Economist

Global Specialty Pulp OutlookOctober 2019

Dissolving pulp demand still

growing at a strong pace

Production of hi-alpha products is also growing

▪ Mainly in the cellulosic ethers sector

▪ Cellulose acetate limited by drop in cigarette consumption

▪ North America accounts for more than half of global hi-alpha

pulp capacity


Viscose fibers lead the development

▪ Even though total textile fiber usage has weakened

▪ Share gains for viscose fibers, mainly against cotton

▪ North America has very little VSF capacity, while China

accounts for 66% of global output

World textile fiber demand


0

20

40

60

80

100

120

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion tonnes

Synthetic Cotton Cellulosic

Global viscose fiber production rose 6% in 2018

Annual growth has averaged 5% for the past five years• Despite decelerating economic growth in some areas, demand has remained steady

• Production is centered in Asia, particularly in China

• Operating rates plunged to 85% last year

• From 91% in 2016 and 90% in 2017

Production expected to increase before cooling• An expected increase of 7% in 2019 before decelerating in 2020

• Less opportunity to export as economies slow

• Continued wave of VSF capacity expansion will weigh on operating rates


Global viscose fiber production


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1

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3

4

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7

8

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion tonnes

Americas Europe Other Asia China

Production of hi-alpha products is also growing

But on a much smaller scale than viscose fibers• Cellulose acetate limited by declining cigarette usage and filter sizes

• Cellulosic ethers growing along with economy

• Products such as nitrocellulose and food casings also rising

Hi-alpha pulp consumption even lower• Due to furnish share being well below one-to-one

• For both major products, acetate and ethers


Global hi-alpha derivatives output


0.0

0.5

1.0

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3.0

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion tonnes

Americas Europe Other Asia China

Global dissolving pulp demand


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1

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7

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9

10

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion tonnes

Americas Europe Other World China

China is also a major factor on the supply side of dissolving pulp

China is the largest producer of dissolving pulp• With total capacity of 2.4 million tonnes in 2018

• At 20 producing companies

• Accounting for 26% of world capacity

However, capacity has stagnated since 2012• Declining competitiveness of cotton linter producers

• Offset by increasing wood-based capacity

• Shift to paper grade at swing mills over the last two years

• High cost of imported wood fiber


Chinese dissolving pulp capacity


0

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05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion tonnes

Wood Cotton Bamboo

More dissolving pulp capacity is coming in China

Led by the recently started Chenming greenfield mill• Swing mill, producing paper grade and viscose pulp

• Asia Symbol’s Rizhao mill can now produce viscose pulp

• Potential to supply fiber to rapidly expanding VSF capacity

Chinese dissolving pulp capacity expected to rise by 200,000 tonnes in 2019-2020• Could be much more, depending on production decisions by Chenming and Asia Symbol

Despite this, imported dissolving pulp accounted for nearly

60% of Chinese demand in 2018

• China will remain dependent on imported fiber


World dissolving pulp capacity


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05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Mill

ion tonnes

Americas China Europe Other World Other Asia

Significant additions to capacity are also scheduled outside of China

In Latin America• Arauco is converting a paper grade mill in Chile

• LD Celulose is pursuing a greenfield DP mill in Minas Gerais State, Brazil

• Bracell has announced plans for a brownfield project on site of the former Lwarcel

mill in São Paulo State, Brazil

Elsewhere• APRIL is shifting more paper grade capacity to viscose pulp in Indonesia

• Sun Paper started a greenfield BHK/DP swing mill in Laos

• Sappi is upgrading its mills in South Africa and the USA

• Stora Enso is converting a paper grade line in Finland

• Ence is building a new BHK/DP swing line in Spain

Potential for more than 3.5 million tonnes of new supply


World dissolving pulp operating rates


0.60

0.65

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0.80

0.85

0.90

0.95

1.00

1.05

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Hi-alpha Viscose

Viscose pulp prices are the lowest since the global financial crisis

After reaching high levels in 2017-2018• Supported by a strong paper grade market and increasing output of VSF

• Now downward pressure from falling paper grade prices, new capacity and

relatively low VSF prices have pushed inflation adjusted prices to near record lows

• Cotton linter prices have also been relatively low

Hi-alpha pulp prices are beginning to erode• Following an extended period of flat prices

• Good growth in cellulosic ethers segment

• Limited by continuing problems in cellulose acetate


Viscose pulp pricing will be subject to competing influences through 2020

Major factor will be paper grade pricing• Which will affect amount of swing capacity in viscose

• Continuing good demand growth will be a positive

• Significant capacity expansion will be a limiting factor

• As will comparatively weak VSF pricing

Impacts on hi-alpha pulp prices• Variations in viscose pulp prices

• Further growth in cellulosic ethers segment

• Upgrading of viscose pulp capacity


Dissolving pulp prices in China


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05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

US

dolla

rs p

er

ton

ne

Viscose Hi-alpha

Dissolving pulp profitabilityPrice/variable cost, delivery to Shanghai


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Viscose Hi-alpha

Higher prices depressed demand

for fluff pulp in 2018, but the

outlook remains mostly positive

Global trends remain supportive of growth

▪ Aging populations worldwide bode well for fluff

▪ Average income levels are expected to rise

▪ Absorbent hygiene usage rates remain relatively low in

emerging markets

▪ Lower fluff prices will help curb substitution


Paper grade strength pushed fluff prices higher

▪ Prices for fluff rose through much of 2018, despite paper

grade remaining flat for much of the year

▪ Swing capacity remains a factor

▪ Shipments of fluff to key markets declined as prices rose

▪ Coincided with lower demand and tariffs in China

Global fluff pulp demand in 2018

2019 | Fastmarkets | World Pulp Outlook 20

6.3 MILLION TONNES

Asia Pacific34%

Europe25%

North America18%

Latin America15%

Middle East and Africa

8%

Demand for US imports stalled in China as prices increased throughout 2018


Thousand tonnes per month

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

0

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300

Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19

US BSK imports Fluff list price (R)

Demographics remain supportive of future growth

EMERGING MARKETS TO DRIVE

GLOBAL GROWTH

• The emerging markets are home to billions

of potential consumers, but low per-capita

incomes and market penetration rates will

constrain growth rates for fluff demand.

• The outlook for mature market

demographics is mixed, with baby

populations trending down and elderly

populations steadily increasing.

• Rising incomes in emerging markets will

drive up usage rates for absorbent

hygiene products, and therefore demand

for fluff.

• The volume of fluff used in absorbent

hygiene products will continue to trend

down, but losses will be more than offset

by new consumers entering the market.


Emerging markets

91%

Mature markets9%

SHARE OF GLOBAL DEMAND GROWTH, 2019-2023

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100

150

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94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Mill

ions

POPULATION OF BABIES, 0-2.5 YEARS OLD

Mature Emerging

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500

1,000

1,500

2,000

2,500

94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Mill

ions

POPULATION OF WOMEN, 12-51 YEARS OLD

Mature Emerging

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900

94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Mill

ions

POPULATION OF ADULTS, 65+ YEARS OLD

Mature Emerging

Global fluff pulp supply in 2018


United States85%

Brazil5%

Sweden4%

Argentina3%

Finland2%

China1%

International Paper37%

Georgia Pacific29%

Domtar11%

Stora Enso4%

Klabin4%

Resolute4%

Arauco3%WestRock

3%

Rayonier2%

UPM1%

Suzano1%

Fujian1%

SCA0%

7.1 MILLION TONNES

New fluff pulp capacity announcements

A new player to enter the fluff market• Ence has announced plans to produce fluff utilizing eucalyptus fiber, only the

second producer worldwide to do so with hardwood fiber.

• The conversion will take place at an existing paper grade pulp line at Ence’s

Navia mill in Spain, which will allow for the flexibility to produce up to 80,000

tonnes per year of hardwood fluff.

• Production is expected to start in 2020, with fluff gradually entering the mix

over four years and reaching 80,000 tonnes in 2023.

Domtar announces a new conversion project• At the Ashdown mill in Arkansas, Domtar will cease production of uncoated

woodfree paper on one paper machine and convert it to produce market pulp.

• By next year, the machine is expected to be producing fluff/SBSK at a rate of

70,000 tonnes per year.


Spread between fluff & SBSK normalizes

ON A NET BASIS, THE

SPREAD REMAINED

NEGATIVE FOR A RECORD

20 MONTHS STRAIGHT

• Prices for fluff are being pulled

downward by paper grade prices,

large inventories and lackluster

demand in China.

• The average spread has declined

steadily over the past decade,

suggesting that production costs for

the two grades have converged.

• Fluff prices have fallen in 2019, but

at a slower rate than paper grade

pulp pricing.


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Fluff - SBSK (R) Net fluff Net SBSK

Thank you for your attention

2019 | Fastmarkets | Global Specialty Pulp Outlook

Patrick Cavanagh, Economist

[email protected]

Fastmarkets RISI

26

World Dissolving Pulp Monitor

▬ Monthly forecast and commentary

www.risi.com/wdpm


Outlook for the Global Dissolving Pulp Market

▬ Available now

▬ Forecast through 2030

https://www.risiinfo.com/product/outlook-for-the-global-dissolving-pulp-market/

https://www.risiinfo.com/product/outlook-for-the-global-dissolving-pulp-market/

global specialty pulp outlook · • arauco is converting a paper grade mill in chile • ld...

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