Marcus Hellberg, the head of tissue at market pulp producer Södra Cell, tells TW about the main trends affecting the tissue industry from a pulp supplier’s point of view.
A TW report.
Although the tissue market as a whole is growing, one of the key challenges within the tissue industry at present is the increasing substitution of softwood pulp by hardwood. Pressure to use hardwood pulp peaked when the price differential reached $200/tonne. Although the difference between softwood and hardwood pulp is now less than $100/tonne, few tend to return to a previous mix once they’ve switched.
It seems only a matter of time before the price differential grows again: little new softwood capacity is in the pipeline but over the two years from November 2012-2014, more than four million tonnes of hardwood pulp capacity is set to ramp up. Three projects in Latin America alone account for the projected increase but at least four more major greenfield projects could come on stream before 2016.
Global economics are exacerbating a tough market, depressing demand for premium products as unemployment levels rise, salaries fall in real terms and consumers make savings by switching to non-branded tissue grades. The eurozone crisis means that our products (priced in a strong Swedish krona) are more expensive for eurozone customers whose flexibility and buying power are suffering.
These factors have meant that an ever-decreasing amount of softwood in a furnish must be of optimum quality in terms of strength and structure. For premium tissue grades, it is extremely difficult to achieve the right quality with 100% hardwood. Customer requirements for softwood in their furnish vary widely.
It’s imperative to ensure that the softwood supplied remains an indispensable part of the mix – it has to perform on an optimum level. Södra is constantly investing in R&D to ensure it comes up with the right products as tissue producers’ needs change. The culmination of that investment is two projects being run in parallel, both aimed at the premium end of the tissue market. One is focusing on improving tensile strength at the end of which customers will have a business model to develop a premium pulp using minimal softwood. This is being achieved by capitalising on the synergies being created by the hardwood textile (dissolving) pulp line being run in parallel with a softwood line at Mörrum.
The second project is a pulp which requires minimal refining (reducing energy costs is still a prime concern for tissue producers) at no expense to performance.
Pulp prices within tissue tend to be more stable than for commodity paper grades. While some do seek spot opportunities, premium producers are more interested in secure and stable supply chains and the spot market is not one of interest to Södra. Some do use China as a vehicle for unsold tonnage, but Södra is interested in the region as a long-term partner, although Europe will always be its main market. Chinese demands are surprisingly high – on brightness and dirt, for example, tissue customers seem to be more stringent than their European counterparts. They’re also excellent businessmen and it’s not a market to enter without local representation.
Tissue is highly demanding when it comes to the environment and requires reliable, transparent partners. Tissue producers are under intense pressure from both their customers and the NGOs on environmental questions. The move to FSC certification for pulp suppliers was largely driven by tissue producers and consumers. For many years, Södra has been actively supporting its owners to certificate their forests. Some 75% of all members are PEFC and some 60% are FSC certified. But suppliers can’t rely on certifications alone, it needs to tell its own story. Södra has a renewable material and a unique company structure (a cooperative of 50,000 forest owners in southern Sweden) but there’s still more to do to communicate this. Customers are asking for a more proactive approach to reach the enduser too.
Tissue mills are also starting to ask questions on water usage now – which is why Södra is undertaking water footprint and water management projects both within the company and with its customers. Again, transparency and cooperation are essential and addon services such as market data and streamlining logistics tools are proving valuable.