Tissue: Consolidation, capacity growth continue in 2000

Market structure. Tissue paper is used in sanitary products such as bath tissue, paper towels, facial tissue, and napkins, and is sold to consumer and commercial/industrial (C&I) customers. Also called the “at home” market, consumer tissue accounts for 63% of the entire tissue market. C&I tissue products, or the “away from home” market, represents the remaining 37% of shipments, and is sold at wholesale to janitorial supply companies, hotels, offices, restaurants, factories, schools, and government. A small quantity of tissue is used in absorbent products such as diapers, wipes, and feminine hygiene products, and is also used for wadding, and as base stock for waxing, wrapping, and miscellaneous uses.

Tissue is sold primarily as finished goods in cases rather than in roll or sheet form. Typical basis weights include 12 to 14 lb/3,000 ft² for single-ply bath tissue, and 29 to 32lb/3,000 ft² for single-ply towel. About 42% of all U.S. tissue is produced from purchased waste fiber, and 21% is produced from purchased virgin pulp. The remainder is made at onsite, integrated pulp and paper mills.

In the consumer sector, bath tissue represents about 47% of total volume, followed by paper towels (31%), with facial tissue and paper napkins making up the remaining 22%. In the commercial sector, towels account for about 44% of shipments, followed by bath tissue (around 30%), napkins (24%), and facial tissue (2%).

Price hike. Late last year two tissue producers kicked off what is expected to be a series of price increases on tissue products. In November, Kimberly-Clark Corp. (K-C) announced to customers a price increase on its away-from-home tissue products line effective Jan. 18. The “up to 10%” price hike applies to towels, tissues, wipers, and napkins. The increase is necessary “because of significant price increases in virgin and recycled fibers, as well as in labor, energy, and transportation costs,” explained a company official. K-C said it last raised commercial prices on Nov. 1, 1997.

Bay West Towel & Tissue and Marcal Paper Mills Inc. also announced C&I price hikes spurred by higher recovered paper costs.

Consolidation. Consolidation continues to shape the tissue market, and in 1999 the most significant was the combining of the away-from-home tissue businesses of Georgia-Pacific Corp. (G-P) and Chesapeake Corp. The new entity, Georgia-Pacific Tissue, is 95% held by G-P and 5% held by Chesapeake, the third-largest manufacturer of commercial tissue in North America. Chesapeake contributed the assets of its Wisconsin Tissue business to the joint venture for which it received the 5% stake as well as an initial cash distribution of about $755 million.

Other transactions that occurred in 1999 include Plainwell Inc.’s acquisition of Shelby Tissue Inc. of Memphis, Tenn.; Kruger Inc.’s buy of Shepherd Tissue Inc. to form Global Tissue LLC in February; and American Tissue Holdings Inc.’s purchase of Crown Vantage Inc.’s Gorham, N.H., mill.

Capacity growth. The tissue market is experiencing capacity growth unseen in other paper grades in North America. During 1999 through 2001, 11 new machines are scheduled for startup in the U.S. resulting in a net increase of more than 550,000 tons of capacity. The increase includes capacity gains from a number of machine rebuilds and the expected restart of a fourth machine at Global Tissue LLC in Memphis, Tenn.

The new machines scheduled to come online this year (with expected capacity increase in parenthesis) are as follows: Perkins Papers Ltd., Rockingham, N.C. (30,000 tpy); Edwards Paper Co. Inc., Tucson, Ariz. (15,000 tpy); two machines at Procter & Gamble Co., Cape Girardeau, Mo. (130,000 tpy); and Georgia-Pacific Corp., Zachary, La. (80,000 tpy).

By Nicola McIntosh News Editor