A RECAP FOR TISSUE 2017 / 17 Jan 2018
Blog: Global tissue consumption continues to grow - differences in the regional developments
Together with the world economy the global tissue demand has grown quite steadily. The global annual growth rate in 2016 and especially 2015 has been approaching or above 4% while the market in longer term is forecast to grow some 3%/a.
There are major differences in the regional developments in the past few years but the overall economic growth is reflected in most regions.
The general economic forecast is characterized by improving GDP-growth during 2017-18, mainly driven by developed economies, slowdown is expected in 2019-early 2020, recovery resumes in late 2020-early 2022.
The current historically high pulp prices challenged tissue producers in 2017. Economic up-cycle and high pulp prices impact the tissue producers due to the fact that pulp prices significantly impact the costs but are only slowly reflected to product prices. Jumbo Reel prices follow pulp prices somewhat closer and therefore especially independent converters have suffered most in the current situation.
Tissue demand in Europe until 2025 is expected to grow 2.0%/a driven by Eastern European growth at an annual rate near 4% (excluding Russia). Russian market suffered from the conflict with Ukraine especially 2015 but has now recovered. Western Europe has suffered from long recession time, but in the past years the tissue demand has recovered together with the economy. Typically for a mature market with limited population growth the longer term demand growth is expected to continue at a moderate pace of 1.6%/a.
The growth rate in North America has been above trend levels especially due to the strong growth of AfH segment. AfH (Away-from-Home) is more sensitive to the economic development; higher employment, increasing disposable income resulting to increase in travelling and eating out contribute to the AfH tissue demand. Consumer tissue is much more dependent for instance on the population increase especially on a mature market with already very high consumption per capita.
Latin American countries have continued to suffer from political and economic instability and varying economic performance. Tissue market development has varied between the different countries. Brazil and Mexico account for almost 60% of the total Latin American markets. Brazil has been in deep recession and the tissue demand has declined and grown in turns, while market in Mexico has been growing or continued relatively stable. The longer term annual growth rate for Latin America is forecasted at some 4 %/a, the recent past years have been clearly below this.
Middle East and North Africa
Political turbulence in the MENA region lowered the growth in many regions in the past but in the last years the growth has been quite strong in many countries. Turkey has a great impact in the region, and for Turkey exports play a significant role impacting also the neighboring markets. Market growth in the region goes on at over 6 %/a rate. Export to Europe continues especially from Turkey.
China and other Asia
The developing markets in Asia, especially China are driving the global tissue market growth. Chinese tissue paper market is expected to grow at a strong 5.2%/a rate during 2016-2025 and tissue consumption per capita is growing faster than GDP per capita. Brown tissue (unbleached, often for instance Bamboo based) increases rapidly based on the environmental image and is expected to account some 15 % of the total Chinese tissue market by 2020.
Market growth drives the investment pace
Market growth drives investment pace, but for instance China is adding significant volumes, surpassing market demand. As international trade plays a minor role, overcapacity has been accumulating in the recent years resulting to lower capacity utilization rates.
Also in mature markets the investments tend to concentrate on certain hot spots. In Europe the current investment hot spots are Iberia and Central Eastern Europe.
Differently from China, even if the capacity and production well exceed the market size (examples Italy, Turkey, Poland etc.) the established trade flows mean, that the local overcapacity situation is not necessarily severe. However, capacity increase strongly exceeding the market growth tightens the competition. The tightening competition is urging the producers to search for new competitive advantages and cost savings. New technology concepts and fiber integration are examples of such advantages.
(Published as an article in the PITA Annual Review December 2017)