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PÖYRY POINT OF VIEW BLOG / 25 Apr 2016

Evolution in the North American tissue industry

Ahead of International Pulp Week in Vancouver, Pöyry’s experts examine the North American tissue industry landscape in a new Point of View.

This point of view follows on from Pöyry’s series focusing on tissue, including Slowdown in China – a threat for Southeast Asian tissue markets? and Changing patterns in the global tissue market: private label versus brands.

Tissue is a big end-use for market pulp, and its role is growing. In North America there are only five tissue mills that are vertically integrated into virgin pulp. Globally speaking, 40% of market bleached hardwood kraft pulp (BHKP) and 25% of bleached softwood kraft pulp (BSKP) is sold for tissue manufacture. According to Pöyry’s new ‘World Fibre Outlook up to 2030’ report, the share will grow to close to half of market BHKP and inch closer to 30% of market BSKP just over the next 5 years. This growth in volume is significant. In addition, the tissue market keeps reinventing itself in terms of products and players, even in the developed markets. Hence, tissue is a very important topic going into International Pulp Week in Vancouver. - Soile Kilpi, Director, Pöyry Management Consulting, USA

When looking at the North American tissue industry landscape, there are several dynamics clearly evolving that have a direct impact on the market pulp business.

The client landscape is evolving

Over 700 million USD changed hands in the last quarter of 2015 alone in North American tissue transactions. European tissue players (e.g. SCA, Sofidel) have been noticeably active in North American tissue M&A. Will the Latin American (e.g. CTMP) and Asian (e.g. APP) counterparts continue to follow the Europeans’ footsteps? Are global market pulp purchasing platforms developing? Or is backward integration increasing, as paper producers exposed to declining Printing & Writing paper markets diversify into tissue?

Resolute Forest Products announced its entry into the U.S. tissue market in June 2015 by building a new tissue machine at its Tennessee facility. Resolute sped up its entry by acquiring Atlas Paper Mills in November 2015. In December 2015, Catalyst announced it will convert its uncoated mechanical PM11 at its Powell River mill to begin producing a towel product. If successful, could Catalyst look to convert additional assets, or try to acquire others?

The products are evolving

Private Label penetration is lower in North America than in Europe, but its share of demand is growing. Driving that growth are millennials, who are much less brand loyal when it comes to tissue. Private label tissue product characteristics and fiber needs to differ from those of branded products.

Chinese producer Shandong Tranlin’s plans to produce straw-based tissue products in the US. Will alternative fiber based tissue products remain marginal, and mainly import based, or is there an emergence of plant based tissue revolution?

These are some of the many questions and issues explored in our new Point of View, North American tissue industry flush with M&A activity – and feel free to come and join in the discussion with us at International Pulp Week in Vancouver, 1-4 May 2016.

Read the full report