global specialty pulp outlook · • arauco is converting a paper grade mill in chile • ld...
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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
2019 | Fastmarkets | Global Specialty Pulp Outlook 2
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 3
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 4
Global viscose fiber production
2019 | Fastmarkets | Global Specialty Pulp Outlook 5
0
1
2
3
4
5
6
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 6
Global hi-alpha derivatives output
2019 | Fastmarkets | Global Specialty Pulp Outlook 7
0.0
0.5
1.0
1.5
2.0
2.5
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 8
0
1
2
3
4
5
6
7
8
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 9
Chinese dissolving pulp capacity
2019 | Fastmarkets | Global Specialty Pulp Outlook 10
0
500
1,000
1,500
2,000
2,500
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 11
World dissolving pulp capacity
2019 | Fastmarkets | Global Specialty Pulp Outlook 12
0
2
4
6
8
10
12
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 13
World dissolving pulp operating rates
2019 | Fastmarkets | Global Specialty Pulp Outlook 14
0.60
0.65
0.70
0.75
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 15
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 16
Dissolving pulp prices in China
2019 | Fastmarkets | Global Specialty Pulp Outlook 17
$0
$500
$1,000
$1,500
$2,000
$2,500
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 18
0.0
0.5
1.0
1.5
2.0
2.5
3.0
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
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
2019 | Fastmarkets | Global Specialty Pulp Outlook 19
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
2019 | Fastmarkets | World Pulp Outlook 21
Thousand tonnes per month
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
0
50
100
150
200
250
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.
2019 | Fastmarkets | World Pulp Outlook 22
Emerging markets
91%
Mature markets9%
SHARE OF GLOBAL DEMAND GROWTH, 2019-2023
0
50
100
150
200
250
300
350
400
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
0
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
0
100
200
300
400
500
600
700
800
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
2019 | Fastmarkets | World Pulp Outlook 23
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.
2019 | Fastmarkets | Global Specialty Pulp Outlook 24
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.
2019 | Fastmarkets | World Pulp Outlook 25
-100
-50
0
50
100
150
200
250
300
350
0
100
200
300
400
500
600
700
800
900
1,000
10 11 12 13 14 15 16 17 18 19
Fluff - SBSK (R) Net fluff Net SBSK
Thank you for your attention
2019 | Fastmarkets | Global Specialty Pulp Outlook
Patrick Cavanagh, Economist
Fastmarkets RISI
26
World Dissolving Pulp Monitor
▬ Monthly forecast and commentary
www.risi.com/wdpm
2019 | Fastmarkets | Global Specialty Pulp Outlook 27
Outlook for the Global Dissolving Pulp Market
▬ Available now
▬ Forecast through 2030
https://www.risiinfo.com/product/outlook-for-the-global-dissolving-pulp-market/