In one of the world’s fastest-growing regions, the industry is strategically poised for expansion with populations and disposable incomes increasing. Bruce Janda, Senior Consultant of Fisher International reports.
The Middle East stands as a prominent birthplace of human civilisation, with shared linguistic and religious origins. However, enduring differences and disputes that have simmered for centuries and even millennia continue to hinder the development of pan-regional cooperation across many business sectors. Tissue is one of those.
It is politics, rather than geography, that dictates economic collaboration and trade within the region. Therefore, an analysis of tissue demand and production in the area must take into consideration these factors. The component countries of the Middle East are not well defined and vary by political instead of geographic definitions. Statistical sources use several different definitions. This report considers Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Palestinian Territories, Saudi Arabia, Syria, UAE, and Yemen.
Table 1 summarises key differences in the region derived from the World Factbook. Economic and trade rate data is more difficult to obtain in closed societies. Some of these figures are the best estimates of the source noted. In this case, the Palestinian Territories are broken separately as Gaza and West Bank. Data shown in the table are mostly 2023 estimates and go no earlier than 2021, except as noted for Syria and Yemen.
The disparity between rich and poor countries in the Middle East is shocking and probably the result of the current and historic conflicts. Despite this, tissue demand and production continue to increase. Several factors that drive the growth of the tissue industry in the Middle East include:
The growing population and disposable income. The Middle East is one of the fastest-growing regions in the world, and the population is expected to reach over 600m by 2050. This growth is accompanied by an increase in disposable income, making tissue products more affordable for more people.
The increasing awareness of hygiene and sanitation. There is a growing awareness of the importance of hygiene and sanitation in the Middle East. This leads to increased use of tissue products for personal hygiene and cleaning.
The rising demand for tissue products from hotels, restaurants, and other businesses. The tourism industry is increasing, driving the need for tissue products from hotels, restaurants, and other companies. However, it’s important to acknowledge some headwinds that impair the development of a robust regional tissue sector, such as:
Lack of access to recycled paper. The Middle East lacks robust access to recycled paper, a primary raw material for tissue production. This forces tissue manufacturers to rely on virgin wood pulp, which is more expensive.
Competition from imported tissue products. Some global tissue manufacturers are setting up production facilities near the Middle East to take advantage of the growing market. This is increasing competition for local tissue manufacturers.
We last discussed this region in 2021 during the pandemic. And since then, the Russian invasion of Ukraine has further divided the area and boosted energy exporters. A map of the Middle East region is shown in Figure 1, with tissue mills shown as pin markers. Egypt is an African tissue maker but continues to be part of the cultural and economic ties of the Middle East.
Tissue imports into the region are shown in Figure 2. Turkey and Indonesia are significant sources of tissue imports, with smaller amounts from China and Italy. Egypt is counted as a producer in the region, but it would be a substantial source on this supply chart if broken out separately.
Tissue product exports from the Middle East are shown in Figure 3. The enormous export contribution of Egypt tends to overshadow the other producers. A study of the intra-Middle East tissue trade would be complicated enough to merit a separate article. However, except for Egypt, relatively little tissue is exported from the region.
Egypt, Iran, UAE, and Saudi Arabia are the overwhelming heavyweight producers in the region. Iran and Saudi Arabia have also announced significant new tissue projects that are to come online in 2024-25. However, Lebanon, Israel, and Jordan have lost capacity over the trend period shown. Iraq discontinued production in 2012. The trend of tissue machine count changes is shown in Figure 4. Note the forecast increase in 2024. The number of machines can be misleading as the new machines coming in tend to be much larger and faster than the old ones that were shut down.
The region’s tissue fibre use for each finished product is shown in Figure 5. Some eucalyptus and other tropical hardwoods are used in the consumer grades. Relatively little recycled fibre is used, except in commercial bath. Some producers have work underway to increase the use of low-cost recycled fibre.
The exact breakdown by finished tissue product is shown in Figure 6. Here, the coloured bar segments represent each country’s tissue production mix. Most countries tend to make the same product range, but Iran specialises in absorbent liners and creped wadding.
The quality of the Middle East’s tissue machine fleet is shown in Figure 7. The size of the bubble for each country represents the relative production capacity. The X-axis represents the average technical age, and the Y-axis represents the average machine width. This tends to track well with average machine speed in most cases. Turkey is the leading tissue exporter on the border of the region and was included here for comparison. Saudi Arabia and Iran are poised to become bigger bubbles with younger and wider machines. Kuwait appears to be in a weak position.
The average cash cost for tissue production is shown in Figure 8. Turkey, Italy, and Indonesia are established tissue exporters to the Middle East and are included to help define their competitive position in the region. Surprisingly, many countries within the region have similar production costs and are not far behind Indonesia, the cost leader. Turkey and Italy are slightly higher, but they may well provide preferred product performance.
The tissue machine average viability by country is shown in Figure 9. This FisherSolve Viability Index provides a proprietary viability ranking based on each tissue machine’s future expected relative competitive position based on capital required, cost, size, and technological age. Now, the region’s tissue production shows more differences. The UAE, Saudi Arabia, Iran, Egypt, and Bahrain are all in the lowest viability zone with low-risk Turkey and Indonesia. Jordan and Syria are in an elevated risk zone with Italy. Israel, Lebanon, and Kuwait are relatively high-risk and require investment to keep pace.
Figure 10 provides a view of carbon emissions per ton of production for the comparison set. This chart was based on a cradle-to-gate methodology and includes the carbon content of raw materials. Kuwait and Israel stand out as high emitters, followed by Jordan, Syria, Saudi Arabia, Lebanon, and Bahrain. All the others have some differences in emission composition but possess very similar emission totals. The new Saudi Arabian projects may help change this.
Overall, the tissue industry in the Middle East is a dynamic and growing market despite the political and social barriers. Further peace movements could help accelerate this growth. While the industry is encountering certain challenges, it is also strategically poised for expansion. Through sustained investment and innovation, the tissue industry in the Middle East has the potential to emerge as a significant contender in the global market. As concentrated investments steer the future, not all countries involved in tissue production will maintain their prominence. Instead, attention is shifting towards smaller producing nations including the United Arab Emirates, Iran, Saudi Arabia, Egypt, and Bahrain.
The recently proposed India-Middle East-Europe Economic Corridor (IMEC) could significantly impact tissue demand and production in the Middle East region. The IMEC would create a free trade area between the three regions, lowering tariffs and other trade barriers. This could benefit tissue consumers with lower prices and more choices while increasing competition for the local tissue industry. It is challenging to forecast specific effects, such as security concerns that may impede the participation of all the countries in the region. This region was once closely connected by rail lines before World War I under the rule of the Ottoman Empire. Some of these rail lines are still visible in the desert areas.
Analysis of competitive position requires specifics on tissue producers and individual machines. This article presents a static summary of the Middle East’s tissue industry today with limited visibility on several countries due to internal and political issues. Fibre prices, exchange rates, and environmental regulations will change, providing some participants with advantages and new challenges. In addition, the Middle East’s tissue mills will continue to change hands and consolidate, and neighbouring countries may invest in tissue-making capacity, affecting the Middle East’s imports and exports.