São Paulo launch is a Tissue World winner with Brazilian flair. Here, TWM summarises some of the key talks from the three day conference.
Tissue World’s first venture into the vibrant South American tissue market attracted 1,119 influential participants from across the continent and beyond.
Feedback during and after the exhibition and conference set the seal on a successful, high level exchange of ideas and deal making.
The event was held from 20-22 May and welcomed key personnel to a hall where 63 companies were exhibiting.
Meanwhile, 27 speakers kept delegates up-to-date with the latest developments from across the industry.
They included the Bank of America Merrill Lynch’s Thiago Lofiego, Klabin’s Francisco Razzolini, CMPC Celulose Riograndense’s Edvins
Ratnieks, Huntsfield Brazil Consultancy’s Geraldo Ferreira and Euromonitor’s Leonardo Freitas.
Key talks were particularly relevant as Brazil, a BRIC nation, is an immense and unique country with a set of strict business rules and regulations that operators must abide by in order to leverage its undisputed potential.
Highlighted trends included: global pulp market and supply/demand trends; Brazil’s tissue market opportunities; engaging in the world production chain; key trends and opportunities in the expanding Brazilian tissue and hygiene market; and regional economic forecasts.
Tissue World São Paulo 2015 was launched with focus at the growing tissue industry in Brazil and South America, a fast growing market that has not previously had a dedicated tissue show to refer to.
Neighbouring countries also show great potential, in particular Columbia, Peru and Chile.
Tissue World São Paulo sponsors included Suzano, BTG and SKF.
TW will return to São Paulo from 7 – 9 June 2017 at the Transamerica Expo Centre (Hall E).
SUMMARY OF THE KEY TALKS
GOING GLOBAL – towards sustainable tissue and pulp production to meet regional and international market demands
Overview of the South American economic climate and market opportunities
View on pulp production, consumption, and trade flows
Graham Toft, founder, Paper Technics, UK
The Big Picture: 2013 Production Values
Total pulp: 407 million tonnes
Recycled: 240 million tonnes
Chemical pulp: 150 million tonnes
Mechanical: 28 million tonnes
Bleached: 100 million tonnes
Market pulp is around 55mtpa (total of global exports)
BHKP is 33mtpa, BSKP is 22mtpa
Global Pulp Production By Region 2013
North America: 37%
Latin America: 13%
Total global production: 179m tonnes (2012: 182 million tonnes)
Top 10 Producers: Pulp For Paper, Total, Production Weight (Tonnes)
United States: 26.9%, China: 11.3%, Canada: 9.7%, Brazil: 8.5%, Sweden: 6.3%, Finland: 5.6%, Japan: 4.8%, Russia, Indonesia and Chile: remaining
Global production = 179mmt in 2013
Top Four Pulp Producers Globally:
Canada: decreasing quickly
US: stable, slow decrease
Brazil: rapid increase!
The Future Expectation From Latin America
Brazilian pulp production and exports in the first nine months of 2014 were 7.7% and 12.8% higher, respectively, on a year- over-year basis.
What does the export picture look like?
Top 10 exporting countries: Brazil, Canada, US, Chile, Indonesia, Sweden, Finland, Netherlands, Russia, Uruguay.
Top four pulp exporters: Brazil, US, Canada, Chile
Brazil and Chile have showed rapid expansion from early 2000s
Latin America expansion of market pulp capacity was 4.7% from 2009-2014
Latin America produces around 15 MTPA of market pulp currently (2015). Chile around 4.5 MTPA and Brazil around 9.5
Most of the exports from Latin America are BEK pulp (app 5 MTPA to CEPI in 2013 and 5 MTPA to Eastern countries).
Brazil’s tissue market opportunity: Klabin’s puma pulp mill project
Francisco Razzolini, project and industrial technology officer, Klabin, Brazil
In 116 years of history, Klabin grows supported by projects based on value creation
Largest Paper producer and exporter in Brazil
Market leader in all its businesses
Capacity of 2.0 MMtpy paper
Sack kraft: 210 Ktonnes
Coated boards: 750 Ktonnes
Kraftliner: 800 Ktonnes
Recycled paper: 270 Ktonnes
Exports to 70 countries
Listed in BMF BOVESPA with a market capitalisation of US$6bn
Puma Project: Located over an area of 830 hectares in Ortigueira, Parana state, the project’s huge numbers will lead Klabin to double in size by 2016
Total investment: R$5.8bn excluding forestry assets, infrastructure improvements and taxes
Production capacity: 1.5tpy: 1.1m tonnes of hardwood pulp, 400,000 tonnes of softwood pulp, with a portion converted into fluff
The fluff pulp – used primarily to make diapers and sanitary pads – will supply the domestic market, which currently imports this material
Some 1.1m tonnes of short fibre; 400,000 tonnes of long fibre
Due to the forest management model, Klabin was the first company in the pulp and paper industry in the southern hemisphere to receive FSC in 1998
High responsibility products for personal hygiene and health care
By the end of April, 58% of the project completed according to the budget.
Global pulp market and supply / demand trends
Thiago Lofiego, analyst – pulp and paper market, Bank of America Merrill Lynch, Brazil
Global Pulp Market
Pulp market well balanced; new supply well absorbed by demand growth
Prices to range-bound in the coming years
Hardwood prices up US$50/t since recent lows; we see room for another US$10-15/t in the short-term, as S/D remains balanced / tight
However, we do foresee pulp prices to soften during summer, on seasonally weaker demand and coupled with the start-up of Guaiba II (1.3 million tonnes)
Structurally, we believe hardwood prices should remain within the US$700-800/t range in the coming years, sustained by:
(1) Chinese paper production growth, with still low penetration per capita;
(2) recovering developed market demand (US and EU);
(3) further potential capacity shutdowns, given the high cost base of the industry.
Pulp Supply / Demand model
Demand growth is sustainable at 2-3% in the coming years or 1-1.5 million tonnes of additional demand
Key driver should be China, with demand expected to grow ~5% p.a. in the coming years: Imports are up 6% YTD in 2015, after a 7% increase in 2014
Hardwood shipments to China up 32% YTD
Closures / conversions can provide additional support, with 1.5 million tonnes already announced in 2015-16 and over 2 million tonnes closed in 2013-14
Pulp demand remains healthy
Chinese pulp imports up 6% YTD, after increasing 7% in 2014 (or +1.1 million tonnes)
Paper projects in China to add 1.5 million tonnes of demand in 2015-16
Expect global demand growth of 2-3% in the coming years (1-1.5 million tonnes)
China the key driver
A long cycle ahead, led by a shift to a domestic consumption driven economy
Chinese paper consumption/capita is still low at 70-80kg, versus ~200-300kg in developed economies fibre substitution will also play a role, as polluting domestic capacities are shutdown
Solid pulp demand growth expected in the coming years
Supply: one major project per year until 2017
One major hardwood project mandated until 2017-18,
Supply “Tsunami” never happened, prices bottomed at a healthy ~US$725/t
Closures and conversions provide additional support
Closures removed 1.3 million tonnes in 2013 and another 0.7 million tonnes in 2014
Weaker EUR could mean less closures, but still expect them to continue, focused in Northern Europe and North America.Conversions to other non-paper pulp grades also provide support, with 1-1.5 million tonnes already announced for 2015-16.
Inventories supportive for hardwood prices:
Hardwood inventories stand at 38 days, vs 39-day historical average Softwood inventories stand at 33 days, vs 29-day historical average
Lean hardwood inventory levels should help support prices in the short term.
We expect hardwood pulp price at US$735/t in 2015, US$740/t in 2016 and US$720/t in the LT We expect softwood pulp price at US$889/t in 2015, US$880/t in 2016 and US$850/t in the LT We expect softwood / hardwood spread to stabilise at US$130/t
Pulp prices structurally supported, as supply additions are matched by demand growth
Pulp prices supported in the short term, but seasonal correction expected during summer months
Project pipeline in 2015-18 could raise concerns, but is absorbable by demand in our view
Demand growth is sustainable at 2-3% in coming years, or 1-1.5 million tonnes of additional demand (1 project)
Key driver should be China, with demand expected to grow ~5% p.a. in the coming years
Closures/conversions can provide additional support, with 1.5 million tonnes already announced in 2015-16.
Emerging acceptance of eucalyptus fibre – a tissue maker’s perspective
Edvins Ratnieks, technology manager – woodpulp, CMPC Celulose Riograndense, Brazil
CMPC is a P&P company, established in 1920, that produces solid wood products, pulp, paper, packaging products and tissue in Latin America
CMPC’s Figures: Sales: 4,831; EBITDA: 974; Net Debt: 3,494; Assets: 14,861
Market capitalisation of US$7bn as of 30 April 2015
Operations in eight countries, selling to more than 45 countries
CMPC has expanded significantly through Latin America over the last two decades. 11x asset growth since 1990 (before CMPC’s international expansion process)
Selected technical aspects of the eucalyptus fibre to set the ground for the tissue applications:
Technological achievements that connect fibres and equipment to produce the papers with the desired quality and productivity
Products’ requisites around the world and the impact on the machinery
The technological future for fibres and equipment.
Selected technical aspects of the eucalyptus fibre
The theoretical design of tissue paper softness is based on three main variables with a positive correlation among them:
1. Number of Fibres Per Gram (NFPG) – numerous small fibres sticking out of the surface
2. Wet Web Flexibility (WWF) – adequate 3-D structure which produces the bulk softness and the pores for water absorption
3. Dry Bonding Strength (DBS) – efficient inter-fibre bonding to “freeze” the aforementioned features after paper drying
NOTE: The concept of paper strength is developed separately, in a dedicated layer with fully refined long or short fibres.
Selected technical aspects of the eucalyptus fibre
- In this three-pronged design – NFPG, WWF, DBS, the regular pulps in the market would fulfill the needs of a conventional tissue machine e.g. Crescent Former and its improvements:
- Concerning WWF and NFPG :
- Eucalyptus wood density range is 450 – 550 kg/m3 with WWF=0,5–1,0
- NFPG = 15 – 30 Million
- Indonesian Acacia has WWF = 0,7 and NFPG = 30 Million
- Concerning DBS:
- Unbeaten tensile strength should be enough for dry bonding
- Refined tensile strength preferably developed in a dedicated headbox
- refined pulp (BSKP – softwood or BEKP – eucalyptus)
- chemical/enzymatic treatments are valid treatments
The new technological achievements connect fibres and equipment
- Besides the micro-texture effect, in an advanced structured tissue papermachine, the wet pockets formation stresses and strains the tissue structure, release loose fibres out of the surface of the paper (again, the ubiquitous loose fibres!)
Technological achievements connect fibres and equipment
- TAD and Structured tissue variations produce a bulkier, more absorbent, and softer tissue product. A structured or molded pattern is created on special fabrics or belts and then maintained with subsequent hot air drying and pressing with significantly less nip loadings than conventional tissue machines.
- North American consumers purchase premium and ultra-premium tissue and towel products, and pay more for it.
- More energy efficient variations of the technology recently have been commercialised and are implemented mainly in North America.
Products requisites and the impact on the machinery have been driven by:
- Emergence of a small luxury sector in China could be serviced by the newer structured technologies.
- China and Latin America are set to grow. It opens up the opportunities for new generation machines to come on-stream and more quality segmentation to happen.
- Latin American market is largely conventional, no big opportunities for structured tissue. Small producers possibly could succeed. Swing machines can make a range of products. South America has the cheapest and abundant eucalyptus pulp. It is producing the world’s highest quality conventional tissue. Several mills are making Crescent Former quality bath tissue with 100% eucalyptus.
- Europe is basically frugal. It is hard to change the toilet tissue values of Europeans. No one sees the premium tissue really taking off there. Probably some structured tissue to make higher quality paper towels.
Niche markets have been explored around the world
- APP is re-launching its premium brand in Australia
- Premium parent-roll market is small, however it makes profits
- Structured towel quality is common in NA and Europe. Some Latin American countries already have such operations for local supply and exports
- Colombia and Mexico produce high quality bath tissue based on bulk softness both in conventional and structured/texturised machines.
Products requisites and the impact on the machinery:
- The conventional machines operating in Latin America with eucalyptus as the main fibre have in general one-layer headbox. To develop strength, the whole pulp is refined to some extent.
- Such tissue papers are of good quality. The “Scott handfeel” grade ranges from 80-85 points for those papers (100 represent the benchmark).
- The latest machines orders are energy-efficient, layered headboxes Crescent Former TMs, with gentle pressing, etc. They can arguably produce 100% eucalyptus separate layers for softness (un-refined) and for strength (fully refined).
The technological future for fibres and equipment:
- Bulk property measures include; compression, tensile stiffness, elongation, bending stiffness, and sonic modulus.
- Surface property measures include texture and friction.
- Instruments have been developed to make combined measurements simultaneously, like bending and friction.
- To date no single instrument or physical method used alone has been found to adequately classify a broad range of samples in the same fashion as the human hand and brain. The use of multiple measures and physical tests is required.
- Developmental trends in the field of remote sensing and surgery may lead to new insights and instrumentation that could eventually tell us how the human hand senses touch.
The technological future for fibres and equipment:
For the forerunners, it is the right time for a breakthrough. The model based on friction, stiffness and structure of a tissue is going to an end.
- Fibres selection, paper machine technologies and surface friction reducing chemicals have played important roles in the last 40-45 years.
- Several fibre suppliers have set their tree breeding programs to include the variables that play a role in tissue papermaking.
- The paper machines are evolving towards energy efficiency, productivity and quality.
- The chemistry, the belts and wires of the structured papers have been a good field for development.
- The accumulated knowledge is becoming common to several interested papermakers with affordable investments and production costs.
- The ultimate goal is to provide a tissue product that could be considered as good as a piece of the finest fabric.
Engaging in the world production chain
Geraldo Ferreira, Huntsfield Brasil Consultancy
There is a vicious circle between the Brazilian tissue industry, new capacities vs market absorption
Driving forces for future demand in South America:
Economic Growth – Constants up and downs, strong growth periods followed by financial difficulties.
Population Growth – Latin America continues to grow but at a lower rate, about 1% p.a.
Product penetration level – This will be the main demand driver, by increasing the number of users, and expanding the present users to consume a wider range of tissue products.
Development in tissue quality and product specification – main trend from single to double ply
Brazilian market extremely fragmented:
53% – 14 different mills, 14% – Santher, 13% – Mili, 10% – Kimberly-Clark, 10% – CMPC
Four national players dominate in China:
APP, Hengan, Vinda and C&S are top national players in China. APP and Hengan have capacity exceeding or close to one million tpa.
China market is less concentrated than developed regions
China shows lower concentration of tissue supply as top five players take up 44% of total capacity whereas the share in North America and Europe are up to 73% and 56%. Consolidation will take place in the future.
Chinese tissue industry
In 2013, the globe consumed 32m tonnes of household paper of which China accounted for 19%.
In 2008-2013, global consumption of household paper surged by 4.21m tonnes, of which contributed by China.
Creating market for high end tissue products
Head to the high end and added value product – Chicken x Egg factor
- Industry still production minded when they should be more commercial minded
- Main assets of the Brazilian mills:
- Market Knowledge
- Customer Knowledge
- Credit know how and knowledge.
Being part of the world production chain and work with your potential threats at its origin.
Importation of regular toilet tissue to create and open market for a new machine.
Imports to increase mix products adding high end added value products to your range.
Explore the good government relationship the Brazilian pulp and paper association has to implement a program of import duty free before a new machine is installed.
China will not invest on tissue production in Brazil. The focus is their local market.
The present and future overcapacity situation in China is crucial and will force players to export even more.
In the matured markets, like Japan, Europe, North America and Australasia, there is not much to grow. These markets will focus on the developing markets, especially South America lead by Brazil.
That is the importance of having the South American producers engaging themselves to the world production chain by exploring this oversupply in China to their benefit instead of waiting for them to come to their home market.
Key Trends and Opportunities in the Expanding Brazilian Tissue and Hygiene Market
Leonardo Freitas, research analyst, Euromonitor, Brazil
Latin American tissue and hygiene market
Brazil: the fourth biggest market in tissue and hygiene
Opportunities in fastest growing sectors
Investments in product sophistication
Key drivers behind the dynamic growth in the forecast period
25.47 billion – value in USD of Latin American (LATAM) retail tissue and hygiene market
30% – Brazils market share
944m – Value sales in USD for Kitchen towels in LATAM
18.7% – Current growth for incontinence products in Brazil in 2014
2.6bn – Value in USD of the Brazilian toilet paper market
Points to take into consideration for LATAM
Private label share is still at 3% in the region
Currency issues are pushing the industry on a regional level, making imports less accessible
Significant room left for further penetration of private label
It is not possible to analyse the Latin American consumer as just one
Marketing strategies to bring products to consumers and capture those looking for commodity product.
Brazil: The fourth Biggest In Tissue And Hygiene Worldwide
Brazil is the fourth biggest market, but the second one among the biggest in growth. Social changes have boosted sales for several product categories in Brazil.
Higher income = higher penetration rates.
So what to expect from the biggest categories in retail tissues in Brazil?
Toilet paper: +4.4% CAGR (2015-2019)
Kitchen towel: +3% CAGR (2015-2019)
As a future prospect: The elderly population is growing in Brazil.
A higher gender equality within the workforce may push sales for practical household products… Why?
Higher added value and raw material is being perceived by consumers.
Opportunities In Fastest Growing Sectors
A positive review period, but how’s the consumer pocket nowadays?
So, what are the alternatives for the Brazilian consumer to continue buying quality products?
- Cash and Carry has an important role towards this behaviour
- Bulk shopping is one of the alternatives to balance cost-benefit for consumers
Does quality always means a well known brand in a price sensible market?
- As manufacturers are developing and improving their production, many lower cost products are also being enhanced in raw material quality.
Investments In Product Sophistication
More complete solutions and extra features are being offered
How to highlight the advantages of a high quality kitchen towel?
What do tissues have which towel doesn’t?
Key Drivers Behind The Dynamic Growth In The Forecast Period
Key drivers: Product sophistication/ trade-up, value for money, higher investments in production capacity and new technologies, segmentation, higher average income over the past years
Neighbourhood stores: Improving the portfolio to gain space in the market
Fernanda Accorsi, trade marketing & retail specialist, founder FA Retail/cofounder NoFish, Spain
Improving the portfolio to gain space in the market
Why The Neighbourhood Stores?
They are 50 – 60% of the market for the two main categories: Toilet Paper and Kitchen Towel.
They are a good opportunity to increase: the market penetration (for categories that can still be developed); the offer/ demand for premium versions – add SKUs with higher value.
The new consumption patterns – what changed?
Location: 73% want to save time during the purchase: Fast, Simple, Enjoyable.
Convenience: It is not based on size anymore, but on the need. A neighbourhood store does not want just the little packings – they also want Toilet Paper with 16 rolls (not just the four rolls pack).
The BIG want to be small. The dispute for the neighbourhood (location and convenience) – Key accounts are investing on the small formats.
Technology: Many stores are already automated and also prepared with modern systems and softwares; Supply Chain, store management, shopper data.
Attention: 52% expect better service and complain for not receiving help from the staff.
REVIEWING THE PORTFOLIO: Let’s think about how many active SKU’s we have in our Portfolio.
Are we negotiating them on the right channels? If small stores want to offer the same SKUs as the big ones..
Reduce your mix, improve the shopping experience. Help the shopper to find what they are looking for.
Reduce the ‘out of stock’ of popular products. Don’t wait for the client to reduce the range. Focus on the Core business.
Develop the market choosing more profitable SKUs. Develop the market choosing more sustainable options.
Advantage of small retail: Private labels are not present in all of them. Less can be better. Make your portfolio stronger.
Challenge: Stop wasting costs, time, efforts .. and paper!
Developing a maintenance strategy and implementation of CMMS
Robertas Krutikovas, general manager, Grigiškės, Lithuania
Developing a Maintenance Strategy and implementation of CMMS
With rapid growth and business changes, production lines need to be reliable and maintenance cost has to be optimised. Grigiškės had big reliability problems with equipment. There was no frequent predictive maintenance activity and maintenance was mostly firefighting and sometimes preventive maintenance was done. Grigiškės needed to change the maintenance strategy. The changes were made and they give good results.
Innovative and growing
Group: established in 1923: “Grigiškės”, “Baltwood”, “Klaipėdos kartonas”, “Mena Pak”, “Klaipėda Recycling”
Geography – Lithuania, Ukraine
Sales – €99,6m in 2014
Investments – €20,4m in 2014
Identifications for improvement
GRIGIŠKĖS had big reliability issues related with equipment, because there was:
No frequent Predictive Maintenance (PdM) activity
No Preventative maintenance, mostly firefighting
No Computerized Maintenance Management System (CMMS)
No Asset register, no hierarchy
No daily Planning and Scheduling
No Work orders
No systematic Lubrication management
No clear Spare parts management
No documented Root Cause Failure Analysis (RCFA)
No Proactive management for continuous improvement
No Work history: Meantime Between Failure (MTBF), Failure modes,
No maintenance culture
GRIGIŠKĖS was looking for solution how to:
Increase OEE (overall equipment effectiveness)
Minimise unplanned downtime on production lines
Reduce total maintenance cost per product ton
Manage spare parts stock level
Ensure human resource efficiency
Achieve improvement in reliability and efficiency of production
Develop a maintenance strategy
Company objectives: Why did GRIGIŠKĖS choose development with qualified consultants ?
Knowledge and data stays inside company
Possibility to apply “best practice”
Time saving with strategy implementation
Optimal investment compared to full outsourced maintenance
Lower risk compared to own staff strategy development
Implementing the new strategy into a Computerized Maintenance Management System
Start of the project” February 2011
Duration: 12 months
Scope: 3000 assets, six Business units (departments), MSR+CMMS+PRM
CMMS: IBM Maximo 7.5
MSR: AMST 7.0
Scope of the project
CMMS (computerized maintenance management system) implementation
Maintenance strategy review (SRCM)
PdM program with continuous improvement and RCA
Lubrication optimisation and management
Spare part and lubricant stores assessments
Proactive management for continuous improvement
Benefits from complex implementation of CMMS, MSR and Proactive Reliability Maintenance (PRM)
Maintenance strategy review
This method creates the documented basis for the maintenance program. The results are:
time-based tasks, predictive and condition-based tasks, operator tasks and run-to-failure (RTF) identified
Changing the company culture to accept the new maintenance strategy and systems
1. Culture change
It is important to understand what is happening and what benefit the changes will bring. The mentality could be changed using good practice examples.
2. New way of work
The understanding that the way people worked before is not the only best way – is not cheap, quick and easy. New inspection and maintenance technologies.
What does keeping tolerances mean? What is the influence of lubrication and axial alignment?
Working conditions, effecting work quality – maintenance is the “cleanest work”.
Failure cause identification and management Hummer is not the main and best tool.
3. Resources, Roles and Responsibilities
Everything must be known: What? Why? How? Who? When?
4. Production apart Maintenance, Electrician apart Mechanics
Better collaboration between operators, mechanics and electricians.
5. This is not a short-term project
Company benefits: Available data and KPI to analyse, BOM (bill of material), Clear Downtime registration, Maintenance cost, HR efficiency, Maintenance strategy, Asset/Work priorities, Preventive Maintenance (PM) tasks, Clear and documented business processes, Planning and Scheduling, Proactive maintenance, PDM implemented, RCFA in place, New organisation structure, Culture change, Training more than 1,000h, No more “good enough”, competence growth.