Global Specialty Pulp Outlook October 2019 Patrick Cavanagh - - PowerPoint PPT Presentation

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Global Specialty Pulp Outlook October 2019 Patrick Cavanagh - - PowerPoint PPT Presentation

Feb 05, 2023 225 likes •503 views

Global Specialty Pulp Outlook October 2019 Patrick Cavanagh Economist 1 2019 | Fastmarkets | Global Specialty Pulp Outlook Viscose fibers lead the development Even though total textile fiber usage has weakened Share gains for

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2019 | Fastmarkets | Global Specialty Pulp Outlook 1

Patrick Cavanagh

Economist

Global Specialty Pulp Outlook

October 2019

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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

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World textile fiber demand

2019 | Fastmarkets | Global Specialty Pulp Outlook 3

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 Million tonnes Synthetic Cotton Cellulosic

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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

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Global viscose fiber production

2019 | Fastmarkets | Global Specialty Pulp Outlook 5

1 2 3 4 5 6 7 8 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Million tonnes Americas Europe Other Asia China

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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

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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 Million tonnes Americas Europe Other Asia China

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SLIDE 8

Global dissolving pulp demand

2019 | Fastmarkets | Global Specialty Pulp Outlook 8

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 Million tonnes Americas Europe Other World China

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SLIDE 9

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

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Chinese dissolving pulp capacity

2019 | Fastmarkets | Global Specialty Pulp Outlook 10

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 Million tonnes Wood Cotton Bamboo

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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

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World dissolving pulp capacity

2019 | Fastmarkets | Global Specialty Pulp Outlook 12

2 4 6 8 10 12 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Million tonnes Americas China Europe Other World Other Asia

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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

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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

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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

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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

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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 dollars per tonne Viscose Hi-alpha

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Dissolving pulp profitability

Price/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

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Higher prices depressed demand for fluff pulp in 2018, but the

  • utlook 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

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Global fluff pulp demand in 2018

2019 | Fastmarkets | World Pulp Outlook 20

6.3 MILLION TONNES

Asia Pacific 34% Europe 25% North America 18% Latin America 15% Middle East and Africa 8%

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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 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)

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Demographics remain supportive of future growth

EMERGING MARKETS TO DRIVE GLOBAL GROWTH

  • The emerging markets are home to billions
  • f 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 markets 9%

SHARE OF GLOBAL DEMAND GROWTH, 2019-2023

50 100 150 200 250 300 350 400 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Millions

POPULATION OF BABIES, 0-2.5 YEARS OLD

Mature Emerging

500 1,000 1,500 2,000 2,500 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Millions

POPULATION OF WOMEN, 12-51 YEARS OLD

Mature Emerging

100 200 300 400 500 600 700 800 900 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22

Millions

POPULATION OF ADULTS, 65+ YEARS OLD

Mature Emerging

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Global fluff pulp supply in 2018

2019 | Fastmarkets | World Pulp Outlook 23

United States 85% Brazil 5% Sweden 4% Argentina 3% Finland 2% China 1% International Paper 37% Georgia Pacific 29% Domtar 11% Stora Enso 4% Klabin 4% Resolute 4% Arauco 3% WestRock 3% Rayonier 2% UPM 1% Suzano 1% Fujian 1% SCA 0%

7.1 MILLION TONNES

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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
  • ver 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

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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

50 100 150 200 250 300 350 100 200 300 400 500 600 700 800 900 1,000 10 11 12 13 14 15 16 17 18 19 Fluff - SBSK (R) Net fluff Net SBSK

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Thank you for your attention

2019 | Fastmarkets | Global Specialty Pulp Outlook

Patrick Cavanagh, Economist pcavanagh@fastmarkets.com

Fastmarkets RISI

26

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SLIDE 27

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/