South Korea’s steady development presents potential for its tissue sector

One thing was made strikingly obvious on travelling from Seoul to visit tissue producers Samjung Pulp and Daewang for this issue’s Country Report. South Korea – one of the “Next 11” countries noted for having the potential to become one of the world’s largest economies in the 21st Century – is on the move. Construction was everywhere, whether it was for housing or business, and it was evident that this is a country in the midst of huge and ongoing development. Worldwide, South Korea’s image is of an advanced manufacturing economy, not least its reputation in electronics – Samsung produces around a fifth of the country’s total exports and its car makers are also global players. The country is an Asian tiger, with its famed ultra-fast internet connection and a GDP that ranks 14th in the world.

However, it is at a crossroads. Despite being a developed country its economy is still growing at a pace similar to that of Brazil. The end of the Korean war is still remembered by the older generation and the thorny issue of its belligerent northern neighbour, a communist and potential nuclear power, remains. Confidence at home has been shaken by inflation rising in 2011 and the first signs of contraction caused by the world financial crisis are now showing. Its inclusion in the “Next 11” marks its openness of trade yet imports fell by almost 6% in July. Exports – a key opportunity for its tissue producers – had been increasing by some 10% but have dropped by 4%. As an export orientated economy, South Korea has been hurt by weakening conditions in key markets and especially China, as well as the meltdown in Europe. As such it is not surprising that business confidence is at a four year low, with many manufacturers cutting back on production or at best not venturing into new product territory.

This less developed side of the South Korean economy is largely reflected in its tissue industry. Tissue use is not widespread, with the share of the market given to toilet paper at 80% – a figure that is more on a par with developing markets. This reflects how growth in many parts of the South Korean economy seems to be characterised by the phrase “cautious expansion”. Its business model is far from that of its superpower neighbour to the west: as China sweeps away old tissue machinery for large scale production, South Korea is seeing modest sized machine additions to existing facilities. T&T machine production rates tend to be quite small, ranking fourth in the Asia Pacific Region (APR), third in the number of operating machines and with average trim width at the lower end of the APR range. But South Korea has largely enjoyed and continues to experience a steady-paced growth. Daewang, the tissue producer I visited in Gunsan city, exemplifies the approach. Kim Chang Gyu, its 88 year old chairman, looks to future steady expansion to take on global giants with debt-free expenditure.

There are also signs that tissue demand is steadily widening. Samjung Pulp and Daewang are both slowly branching out into new areas in the tissue market, while major supermarkets now have their own private label retail tissue with a preference for larger volumes at lower prices. In uncertain times, this model of steady development, low debt and product innovation could be the best way forward for the industry.

Technical Theme

In this issue’s chemicals technical theme, Nalco explains how its TULIP™ Yankee coating technology can deliver the desired sheet softness while saving drying energy, and also how to reduce the negatives associated with low moisture creping. Additionally, Kemira discusses improving wet and dry strength performance efficiency by using novel functional promoters and dry strength resins.

Tissue World Asia show preview

In this issue we preview Tissue World Asia, held between 14-16 November in Shanghai. The show targets the Asian tissue business and is TW parent UBM Asia’s fifth ever conference and exhibition in Asia. It promises to deliver all the information you need to keep ahead of the game, from machinery equipment, through to supplies and services for tissue making and converting.

There will also be a top class range of conferences from Asia’s key tissue manufacturers and traders, with a combined market and technical conference taking place all day Thursday and Friday morning, 15 and 16 November. The conference will be kicked off with two presentations looking at the Chinese tissue market, both from a Chinese perspective as well as an international point of view.

Discover this year’s movers and shakers exhibiting at the show in this issue’s TW Asia show preview.