Slow growth, population decline, viability risk with relatively narrow and slow machinery suggest a risk to status … but long-term. Report by Bruce Janda, Senior Consultant, ResourceWise.
Italy continues to lead Europe in tissue production and exports, whilst also being a major manufacturer and exporter of tissue-making equipment and technology. This includes complete tissue machines and converting lines. As the third-largest tissue market in the European Union, Italy’s overall tissue expenditure totalled over $1.66bn in 2021. Lucca is recognised as the only official “Paper District” in Europe, hosting over 140 paper mills and converters and accounting for 24% of European tissue production.
Italy’s current economic fundamentals only partially support Italy’s domestic tissue demand growth. Gross domestic product per capita has grown significantly since the end of the Great Recession, despite a minor setback during the Covid-19 pandemic. The blue line in Figure 1 shows the growth of GDP per capita, expressed as purchasing power parity (PPP). This metric is adjusted for local consumer prices and income to provide a relative idea of the discretionary purchasing power available to Italian consumers. This indicates that the average Italian consumer has a greater spending capacity. However, the population has been slowly declining since around 2015, as illustrated by the yellow bars in Figure 1. The population is estimated to have decreased by -0.8% in 2024, and the net consumer demand effect of the aging population has yet to be established.
Figure 2 illustrates inflation and unemployment trends for Italian consumers. The blue line shows that inflation peaked at 8.2% in 2022 and is now normalising. The yellow bars indicate that unemployment has gradually decreased to around 7%. Taken together, figures 1 and 2 would generally support consumer demand growth but the effect of the smaller and older population has yet to be seen.
Italy imports relatively little tissue compared to its production capacity and export performance. Over the 18-year period shown in Figure 3, Italy’s tissue import levels have remained largely stable. Most imports come from Italy’s neighbouring countries such as France, Spain, Germany, Switzerland, Poland, and Sweden.
The trend in tissue exports illustrated in Figure 4 tells a different story. Over time, export volumes have steadily increased. Notably, the scale of Figure 4 exceeds that of Figure 3 by more than 12 times. While many of the same neighbouring countries are involved in trade, export quantities far surpass import levels. The Italian tissue industry remains strongly committed to exports, which continue to drive future capacity growth.
Over the past 20 years, the number of tissue machines in Italy has remained stable, with a net increase of six machines from recorded changes and projects, as shown in Figure 5. New machines typically have higher capacity than those replaced, resulting in an annual total capacity growth rate of nearly 1%. This growth rate represents more exports and less total domestic consumption as the population decreases.
Figure 6 shows that Italy is the leading tissue producer in Europe. Italy’s close neighbours, Germany, Poland, France, Spain, and Sweden are also top producers and represent most of Italy’s tissue trading partners.
Italy exports more than just tissue. It is home to companies that manufacture tissue paper machines and tissue converting lines. This contributes positively to the tissue industry in Italy. Figure 7 examines the current fleet of Italian tissue machines by the machine builder. Eight brands of tissue machines are in operation in Italy, with two sourced from other European suppliers. Notably, approximately 70% of these machines were sourced from Italy. The Italian tissue industry is strongly geared toward Italian equipment, with converting equipment likely having an even higher percentage of Italian origin. With its expertise in tissue machinery and innovation, Italy continues to have a global impact on the industry.
Italian tissue sites mainly rely on non-integrated baled pulp, as illustrated in Figure 8. Fewer than a quarter of the sites incorporate any recycled pulp. This positions Italy as a significant importer of virgin baled pulp, exposing it to the risks of pulp market price fluctuations.
The types of pulp used by Italian tissue makers are further explored in Figure 9, which illustrates the average fibre sources utilised in converted tissue product formats. Eucalyptus hardwood and various southern softwood pulps account for most of the produced formats. Consumer bath, towel, napkin, and facial formats primarily use eucalyptus for its softness, enhancing tissue quality and performance to meet consumer expectations for top-tier tissue grades in export markets and the higher prices associated with these premium grades or brands. The use of recycled fibre is limited in most products, except for tissue wrap stock. Commercial tissue products utilise a significantly higher proportion of eucalyptus than anticipated for commercially priced commodity grades. This also suggests that these grades are high-performance products used in higher-end applications.
A comparison set including Spain, France, Italy, Poland, Turkey, Germany, and Indonesia was selected for a technical analysis of nearby tissue trading partners. This encompasses Italy’s close tissue trade partners and enables a comparison with a growing export powerhouse in Asia. Figure 10 illustrates this comparison by plotting the average technical age of each country’s machines on the X-axis against the average tissue machine line speed on the Y-axis. The size of each bubble represents the total capacity of each producing country.
There are two metrics for tissue machine quality that indicate performance capability. The average machine speed metric used in Figure 10 provides a productivity view of how quickly tissue can be produced. An alternative metric is the average tissue trim width for each machine, with more consumer rolls or sheets produced per meter of run time. Both metrics yield similar results globally, except in special cases like the United States, where older machines can be quite wide. In this instance, Italy and Poland have relatively narrow machines, which limits their productivity. The bubble chart methodology is restricted to three metrics at a time. Fortunately, FisherSolve Next can incorporate width, total production, speed, technical age, and other measures to calculate a viability index for the set. The viability index will be discussed in Figure 12.
Italy’s machines, like those in Poland and Spain, are somewhat outdated and operate slower than those in Turkey, Germany, and France. Additionally, Italian and Polish machines have narrower trims, which may impact their future viability. Emerging markets and regions closer to customers produce narrow and relatively fast tissue machines. This setup allows for smaller investments and market actions to cater to the smaller machines. Broader and quicker production enables costs to be distributed over a greater number of tons per hour or month.
Figure 11 compares the same countries with Italy, highlighting the average cash cost of producing a ton of tissue. The height of each bar reflects the production cash cost for each country, while the width indicates their relative tissue capacity. Furthermore, the coloured segments within each bar represent the costs involved, including raw fibre materials, market pulp, chemicals, energy, labour, materials, overhead, and any credits.
Indonesia is the lowest-cost producer, whereas France is the highest-cost producer. Energy costs in Indonesia are the lowest, partly due to the use of biomass energy in pulping and waste boilers, which are considered carbon neutral. Germany has the highest energy costs, as indicated by the width of the yellow band. Germany also has the greatest amount of recovered fibre, represented by the dark green bar at the bottom. Both Germany and France exhibit very high labour costs, while Poland, Italy, Indonesia, and Spain have the lowest labour costs.
Figure 11 shows a snapshot of the average tissue machine and mill viability. In this case, the cost of the bar height is determined by viability factors, where cost is only one of eight considered. The legend shows these factors as capital required, cost, grade risk, internal company risk, competitiveness, size, technical age, and tons per unit trim.
Turkey has the best (lowest) viability risk score, followed by Indonesia. Italy ranks at the top of the chart for the most significant viability risk. This is where the narrow width of Italy’s machines (size) and speed (tons per unit of trim) contribute to more risk, as shown in the taller bar for Italy.
Figure 13 illustrates the carbon emissions associated with Scope 1 (on-site fuel) and Scope 2 (electricity) in relation to the tons of finished tissue produced. The data indicates that Italy’s emissions are average, while Spain, France, and Indonesia demonstrate greater efficiency. Poland’s elevated emissions are primarily due to its reliance on a coal-fired grid. Germany utilizes on-site fuel effectively for power, hot air, and steam; however, it also faces significant challenges from a carbon-intensive electrical grid. Additionally, Italy has an opportunity to improve by reducing its high Scope 1 emissions when compared to neighbouring countries.
Italy’s tissue industry is experiencing slow growth due to a declining population, although this is somewhat offset by its focus on exports. Machine replacements and upgrades are progressing at a deliberate pace. Italy remains the most active tissue exporter in Europe. This position is supported by average tissue cash costs in comparison to its peers, yet Italy’s tissue machines are relatively narrower and slower than those of neighbouring countries. The average viability risk of Italy’s tissue machines is the highest among the comparison group, suggesting that Italy’s impressive status as a tissue exporter is at risk in the long term.
A detailed understanding of tissue producers and their individual machines is crucial for analysing the competitive landscape. This article presents an overview of the current tissue industry in Italy. Fluctuations in fibre prices, exchange rates, and environmental regulations create both opportunities and challenges for industry participants. Moreover, changes in ownership and consolidations are expected to persist among tissue mills in Italy, while investments in tissue-making capacity from neighbouring countries may impact imports and exports.
