THE PHILIPPINES –T&T business growth paced to local market needs

By Bill Burns, senior consultant, Fisher International

The Philippines currently produces a modest 20-25 thousand MT/Yr of Towel and Tissue (T&T) paper. That makes the Philippines the smallest T&T producing nation in the Southeast Asia Geographic Zone*. Much of this capacity is coming from smaller mills with machines sized for the local market. One could expect that future expansion will follow the same pattern, namely, the installation of narrow basic machine technology or redeployment of retired machines from other, more rapidly expanding areas.

A nation of 100+ million and growing, the Philippines managed to maintained good GDP growth through the height of the global recession. Philippine GDP grew 7.6% in 2010, spurred by consumer demand, a rebound in exports and investments, and election-related spending, before cooling to 3.7% in 2011. The economy weathered the 2008-09 global recession better than its regional peers due to minimal exposure to troubled international securities, lower dependence on exports, and relatively resilient domestic consumption. Nevertheless, challenges remain real and significant for the Philippines. There has been a history of political unrest and ongoing disputes over boundary waters with China. The country is also geographically challenged being in a major typhoon belt and having a land mass dominated by mountains with numerous active volcanos.

Geographically, Philippine T&T mills are located in the extensive coastal planes region within a 50-mile radius of the capital, Manila (Map 1). The country ranks fifth among the five T&T producers in the Southeast Asia Zone (Figure 1) and last in the number of operating machines (Figure 2). T&T machines in Southeast Asia vary from narrow two-metre machines to six-metres. The machines in the Philippines are on the low-end of the trim range for the region, with the average being in the 2.0 metre range (Figure 3). On average, mill production in the Philippines is lower than that of the remaining mills in Southeast Asia with averages at less than 10,000 MT/Yr while technical age of the machines is higher than average at 30 years (Figure 4). Fibre mix in the Philippine mills is heavily weighted to recycled pulp as is the case with other smaller producing countries in the Southeast Asia Zone (Figure 5). A strong base in recycled Fibre aids the Philippine cost position, with a slight cost advantage compared to the largest producing country (Figure 6).

T&T machine production rates in the Philippines tend to be modest with all of the machines producing less than 10,000 MT/ Yr (Figure 7). Narrow trims and slower speeds account for the less robust production rates. Machines average less than three metres in trim width (Figure 8) and less than 1,000 mpm in speed (Figure 9). On the international scale, Philippine machines tend to have below average capacity and average ages (Figure 10).

The source for market data and analysis in this article is FisherSolve™. Data tables behind Figures 1 – 10 can be obtained from Fisher International. E-mail requests to [email protected]

*The following countries comprise paper producers in the Southeast Asia Geographic Zone: Indonesia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand, Vietnam. T&T producers in the same region are Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.

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FisherSolve™ is the pulp and paper industry’s premier database and analysis tool. Complete and accurate, FisherSolve is unique in describing the assets and operations of every mill in the world (making 50 TPD or more), modeling the mass-energy balance of each, analyzing their production costs, predicting their economic viability, and providing a wealth of information necessary for strategic planning and implementation. FisherSolve is a product of Fisher International, Inc. For more information visit: www.fisheri.com or email [email protected] USA: +1-203-854-5390