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Tissue makers get tough on pulp requirements
Pulp producers used to attach little significance to producing tissue pulp, seeing this type of fiber as one way to pad out the order books. But Sweden's Södra is working hard to form links with its tissue customers and asking them exactly what they expect from a pulp supplier
by Caroline Jewitt
Södra is one of those companies that quietly chips away at the block in the background. Which is probably why not many people know that the company has been propelled to the forefront of tissue pulp research and development (R&D) in the past 12 months following the acquisition of Norske Skog's Tofte and Folla mills in Norway.
In May last year, the Swedish forest products giant paid SEK 1.4 billion ($148 million) for the two Norwegian mills. Södra also gained a sales director for its Tissue and Board sector under the deal. Hågen Rismark swapped his role as market manager at Folla under Norske Skog for a position within the Swedish group. He brings a wealth of knowledge and experience to the company and makes no bones about the value of the prize that Södra has won by snapping up the two mills. "Södra's big move toward tissue came with the acquisition of Tofte and Folla," Rismark says. "They [the mills] gave Södra new knowledge about tissue production. It's no secret that Tofte was way in front of Södra's mills regarding how to produce tissue pulp for high quality tissue products," he comments.
Consolidating skills
Now Södra's main task is to spread this knowledge throughout the company's existing mills, while driving Tofte even further ahead in terms of groundbreaking work. One of the ways that the Swedish outfit hopes to achieve this goal is through its new Pulp Academy. The academy was launched in January and is aimed at intensifying and simplifying the group's R&D process. Södra Cell's marketing director, Ulf Edman, explains, "Over the last two years in particular, we have increased our input into our customers' own R&D work. However, in some cases, requests for technical assistance have been more profound than our resources allowed. Out of this came the idea of creating a specialist 'task force', which could handle in-depth technical projects. Hence, the Pulp Academy."
Looking at tissue pulp in particular, Södra aims to draw on its team of production experts that were inherited along with the Tofte and Folla mills. The company aims to combine their knowledge with market information and feedback from customers, as well as using the academy and input from Bengt Axelsson, the company's technical product manager. "This helps to give direction to our research," Rismark says.
Södra's Folla mill
aims to be a top player |
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R&D in the tissue sector is taken very seriously at Södra as it is one area that helps the company to build strong relationships with customers. Not so many years ago, it was almost unheard of for a tissue pulp producer to be working with customers to their mutual benefit rather than just churning out a standard product that was easy to produce and guaranteed a sale. But these days, producers are placing greater importance on customer relations as a tool for staying ahead of the competition. For example, Södra holds regular technical meetings with its tissue pulp customers. The meetings provide a forum for customers to specify their pulp requirements. In turn, a group of experts led by Axelsson gives advice on Södra's fiber production suitability.
"Very often, the customer has quite a clear idea of what pulp should be for them, depending on the segment, for example, high quality bathroom tissue and kitchen rolls. We need to define which direction to take through these meetings," Rismark says. "We do our homework too in the mills to see what standards we can meet," he adds.
Esko Uutela, general manager of EU Consulting in Germany, supports the theory that times have changed for tissue pulp producers. "Until now, most pulp producers were only interested in tissue as a grade where they could make up some tonnage. Tissue was seen as an area where they could sell a second rate product," he says. "Now there are definite quality requirements and the producers are interested in delivering tailor-made solutions to their customers," he explains.
In line with the focus on customer satisfaction, Axelsson says that Södra is looking at dividing its pulp production according to the different end-users. "It will apply across all our mills with one mill producing pulp for this end-user, one mill producing for that end-user," he says. "Today, pulp producers sell pulp as a commodity. In five years time, they will be selling [pulp] based on specific fiber properties," he maintains.
While customers' fiber requirements depend largely on the tissue product itself, Södra has seen a general increase in demand for higher quality fiber with greater emphasis on tensile strength. Axelsson says that customers are looking for strength development along with low refining properties. "Customers want long slender fibers for increasing bulk softness and surface softness," Axelsson comments. "They [the customers] are looking for pulp with low fines content," he adds. Axelsson predicts that the industry will see a general increase in long softwood fibers being used in tissue making in the future. "There will also be a move toward creating wet strength without using chemicals. That's what Södra's R&D division is working on just now," he says.
Quality rises
Rismark is also witnessing a change in customer demands. He points out, "Most developed countries are demanding higher quality tissue grades. They require a more developed fiber for domestic tissue business." On top of that, Södra is convinced that buyers are starting to favor higher quality virgin fiber for tissue making instead of opting for a cheaper, lower quality grade. "We find that [manufacturers of] private labels are looking for improved grades," Rismark explains. As if that is not enough, he claims, "Many European countries have reached the upper limit of their recycling percentage capabilities." On the surface, it appears that some customers may have no choice but to order more expensive virgin fiber, but Rismark is adamant that there is a general trend toward using the higher quality fresh variety. "You can't compare the quality of cheaper grades with high quality virgin fiber. It is more difficult to use recycled qualities due to strength and softness demands these days," he says.
Uutela prefers to draw a clear line between the consumer tissue grades and grades in the away-from-home market saying that the latter will continue to use mainly recycled fiber as its product base. He says that there is a call for higher quality fiber at the top end of the away-from-home range, but points out that this sector accounts for less than 30% of western Europe's total tissue consumption. The remaining 70% is taken up by the consumer sector, which is driving toward a quality upgrade. The consumer market is pushing for change, he says. "It [the consumer market] is looking for softness in toilet paper and facial tissues, as well as absorbency in kitchen towels," according to Uutela.
He says that through air-dried (TAD) tissue is making its way into Europe, but not as quickly as many producers would like. "Germany, Austria, Switzerland and the Netherlands find it difficult to switch to TAD toilet paper," he comments. Uutela bases this assumption on the fact that in Germany, for example, standard toilet tissue is multi-ply with three or four layers. The tissue is embossed to achieve the multi-layer effect, which in turn can bring down the softness quality of the grade. For German consumers, this is not a big problem, as the bulk of the country's toilet tissue is sold in discount stores where buyers' quality expectations are generally lower. Meanwhile, consumers in the UK are playing a whole different ball game.
According to Uutela, UK consumers are accustomed to buying two-ply toilet tissue. The UK's buying habits make the country an attractive market for tissue giants such as Procter & Gamble, which started up a new TAD tissue machine in Manchester, UK, at the end of 1999. Other tissue producers that have jumped on the UK bandwagon include Sweden's SCA. SCA made inroads into the UK market with its acquisition of AM Paper in September 1999. AM Paper has a total tissue capacity of 60,000 tonnes/yr. The company brought a new 30,000 tonne/yr TAD machine on line in January 1999. Italy's Cartoinvest is forging ahead with plans to start up PM 2 at the Oakenholt mill in Wales, UK. The 50,000 tonne/yr machine is due to start up in April. Cartoinvest brought its first 25,000 tonne/yr tissue PM on stream at the site at the beginning of last year.
The UK's Leicester Paper Company (LPC) is also expanding its operations with the addition of a new 50,000 tonne/yr tissue PM at the Leicester site. Startup of the new PM is penciled in for mid-2001 and will coincide with the company bringing on line a new deinking and converting plant to handle the machine's output. On a slightly smaller, but still significant scale, Charles Turner switched on a 15,000 tonne/yr tissue PM at the Springside mill in the UK in October last year. While last, but not least, Celtech invested in a new Andritz TissueFlex PM in 2000.
Many end-product sellers think that it will be easier to convert UK consumers to the new TAD standard, while mainland Europe will have to get used to the idea that toilet tissue will no longer consist of three or four layers before it allows TAD tissue in to its bathrooms, Uutela says. One area where TAD has hit it big in Europe, though, is with highly absorbent kitchen towels. These have been readily accepted across the region, but at relatively high prices.
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Expertise gained at the Tofte mill
will help boost Södra's position
in tissue pulp production |
While TAD techniques continue to make the headlines in the tissue business, Uutela points out that important trends are gaining ground behind the scenes. He maintains that back in 1994, some 54% of the fiber used in tissue was recycled. But by 1998, the figure had dropped to around 52.5%. Looking ahead to 2005, Uutela predicts that just 48-49% of all tissue fiber will be recycled. If this is correct, it looks like the market is swaying in Södra's favor. Despite the anticipated surge in virgin fiber use, the company has not seen a corresponding significant increase in sales yet. The biggest boost to the company's balance sheet recently came as a result of the Tofte and Folla acquisition. "Södra's sales volumes went up automatically," Rismark says. "Tofte is ahead in areas where Södra previously couldn't deliver. It opened up new segments," he adds. Södra's pulp production rose to 1.9 million tonnes/yr with the addition of the Norwegian sites, 17% of which is destined for making tissue.
Capacity concerns
With the magnitude of Södra's pulp output, Rismark might do well to take heed of the threat of lower capacity utilization in the tissue sector, though. In Uutela's most recent publication, "Outlook for world tissue business, 2001", he says that capacity utilization peaked at around 94% in 1999-2000 and predicts that the level will fall back to 92% in 2002. But Rismark is hanging on to the belief that European tissue consumption will continue to grow by around 3.0%/yr until 2010. "Södra's business plan for 2000/2001 is to work very hard to defend its goal of being the number one supplier to its customers. If we can achieve that, then we don't need to worry about capacity utilization falling," Rismark explains. "We expect total growth [in tissue consumption] of 3.5% from 1996-2010. This is the growth that Södra wants a piece of," he says.
As to how the company is going to grab an extra piece of the action, Rismark is keeping any potential plans under wraps for the moment. "Södra is focusing on its home market in Europe. We're keeping an eye on Asia, but there's no decision to set up regular shipments outside Europe for the time being," he comments. "China will see the biggest percentage growth in the coming years, something like 6%," he adds.
Södra is never a company to rest on its laurels, though. "It is very dangerous to think that we are so much ahead of the competition that we don't have to worry at all," Rismark says. "We will try to develop our grades to remain competitive. Södra wants to be considered as the top supplier in terms of quality, logistics and service. Since tissue markets are mostly growing in Europe and the rest of the world, we want to be a part of this," he concludes. All eyes are now focused on Södra to see if the company's blueprint for continuous growth will involve any moves to expand either within or outside Europe.
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Folla, Norway - 100,000 tonnes/yr chemi-thermomechanical pulp (CTMP)
Tofte, Norway - 215,000 tonnes/yr softwood; 150,000 tonnes/yr hardwood
Mönsterås, Sweden - 450,000 tonnes/yr softwood; 244,000 tonnes/yr hardwood
Mörrum, Sweden - 267,000 tonnes/yr softwood; 124,000 tonnes/yr hardwood
Värö, Sweden - 313,400 tonnes/yr softwood pulp
Source: Södra |
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