Getting the balance right

By Hågen Rismark, Business Area Manager, Tissue & Board, Södra Cell International

BRUSSELS, March 31, 2009 (Viewpoint) - Traditionally more immune to business cycles than commodity grades, tissue producers are nevertheless beginning to feel the effects of the global recession. According to tissue analyst, Esko Uutela, who produces RISI’s World Business Tissue Monitor, consumption growth has slowed substantially in Western Europe from the average of 4.1% annual growth in 1995-2000, but still reached an acceptable level of 2.8%/yr between 2000 and 2007. Uutela says: “In 2007, the market saw major apparent consumption growth of 3.6%, after an exceptionally low growth of only 1.8% in the previous year. But we believe that stock changes have played a major role for the two past growth figures, and that true consumption has continued on its growth track of close to 3%/yr.”

Weakening demand is being felt more in the Away from home (AfH) sector than the At-Home sector, and Uutela believes the napkin sector is likely to suffer most, both in AfH and At-Home applications. “Kitchen rolls will also see weakening demand as some households move to the use of cloth towels to avoid discretionary spending,” he says. “The consumer tissue market is likely to see de-stocking at home and a trend towards smaller package sizes as consumer try to reduce the cost of their shopping bills. On the other hand, more price-conscious households on tight budgets may see the cost advantage per roll of bathroom tissue or kitchen towels when purchasing in large bundle packs, so it is difficult to assess which of these two trends in pack sizes will be more effective. But probably the trend towards smaller package sizes and money saving versus time spent shopping is stronger. Value-for-money products are expected to benefit from the poor economy.”

Tissue producers can take some comfort from reduced input costs; pulp prices have dropped about 20% from the peak prices experienced in the second and third quarter of 2008 and recovered paper prices have fallen even more. Lower oil prices are also pushing down natural gas prices, chemical, polyethylene-based wrapping materials and transport costs (gasoline/diesel costs). Uutela says the decline in energy costs, which already accounted for 12-25% of total tissue manufacturing costs at the energy price peak, has particularly helped the economy of energy-intensive through air drying (TAD) tissue production.

However, falling consumer confidence, tight credit controls and the prospect of more to come means that in the short term at least, the industry is likely to take more downtime and Uutela forecasts that the US 2008 market growth will remain around 2%, despite the surprisingly good performance of the first three quarters last year. As a result, players are rationalizing and aiming at higher margins rather than increased market share. Smaller producers are particularly vulnerable to high manufacturing costs and poor profitability. Consumer tissue especially remains highly competitive with retail chains continuing to put pressure on producers.

For suppliers to tissue producers, there is an increasing recognition that long-term partnership is crucial to success. It’s often tempting to have a short-term perspective and save costs by cutting down on research but at Södra Cell, we believe in the long term. In tissue especially, innovation is crucial for our customers and we need to be alongside them, ensuring that we play our part in helping to initiate and develop better products for the ever-more demanding consumer of the future.

Hågen Rismark, business area manager, Tissue & Board, at Södra Cell International

Be the first choice

We already have a strong relationship with our key customers, but our goal is to be the tissue maker’s first choice for northern bleached softwood kraft (NBSK) pulp in Europe. To help us achieve that, Södra has doubled its team of experts dedicated to the sector. Two recent recruits have come from SCA, Sverker Albertson joins Catharina Fechter in R&D and Peter Carlsson joins Christer Fasth as a product manager for tissue. Together with Bengt Wiberg in product development and analyst Åke Axelsson, we try to look into the future and learn more about our customers’ customers. We seek to anticipate future trends, demands and challenges, so that we can serve our customers better in the future, investing wisely in projects that will add value. Key to that outcome is good communication between both Södra’s sales team and the R&D department, and our customers.

At the same time, Södra is always looking at ways to add value for its customers, offering a range of services from technical support and fiber education to SMI and IT solutions. We have a history of re-investing profits back into the mills and a strong balance sheet which makes us a reliable partner, even in difficult economic times.

Södra’s sales to the tissue industry have grown substantially since 1999 and tissue customers now account for 30% of the company’s total pulp sales. This year, around 560,000 tonnes of Södra’s total pulp output of 2.1 million tonnes will be sold to tissue producers, up from just 140,000 tonnes to tissue producers in 1999.

Major areas of focus within the tissue sector for Europe’s largest market pulp supplier are the furnish and fiber treatment. Christer Fasth, Södra Cell International technical product manager, Tissue & Board, explains: “The first part of the tissue mill where we can look at creating potential improvements in the fiber’s properties is at the refining stage. Last year we gathered around 30 different refining optimization studies. We don’t want to destroy the fibers, we just want to have them squeezed in the right way. Some of our customers are asking us to look at more or less all their tissue mills. This refining follow-up is a part of Södra Pulp Support activity. Pulp Support is one of the services Södra Cell is offering our customers.” The refining auditing service is open to all Södra’s customers and many tissue mills use the company’s reports to discuss machine optimization and performance with their machine suppliers. Figure 1 illustrates the expected fiber length development in an optimal refining process, but also shows that the samples taken in tissue mills have a high degree of fiber cutting.

Figure 1 - Fibre length development, refining

“No one can offer customers as many different pulps as we can – we have 11 softwood pulps in total”, says Fasth, “so we work on the principle that if one pulp is not up to a specific job, we will try to find an alternative one that is.” The company offers a wide portfolio of grades, from chemi-thermomechanical (CTMP) to northern bleached softwood kraft (NBSK), and short fiber pulps such as birch and eucalyptus. Not all the softwood pulps are used for tissue applications. Mainly due to wood-sorting we offer three different types of pulps. The black group has its origin in thin-walled fibers. The blue group has a medium coarse fiber and the green group has coarser fibers. And since the 50,000 forest owners who make up Södra’s stakeholders (or ‘members’) are also its timber suppliers, the company can exercise very strict control over its raw material. This has the added advantage of providing a good base for a high amount of certified wood.

“We have never been in a better position as far as investing in people in R&D is concerned,” Fasth continues. “First I have a new colleague, Peter Carlsson, who is working with me as a technical product manager. We also have two tissue specialists now working in our R&D department, dedicated to finding ways to optimize the performance of our pulps in tissue applications.”

One of those two is Sverker Albertsson. He spent 10 years working on tissue product development for SCA and eight years in the bleaching chemicals department of Eka Chemicals before joining Södra Cell. His knowledge of the tissue producing perspective brings invaluable experience to the R&D department when supporting the technical product managers who liaise with customers on trouble shooting and process optimization.

Albertsson’s current focus, optimizing Södra’s pulps for tissue applications, has a three-tiered approach through each step of the process: Sorting the wood at source, the pulping process, and fiber modification. A two-year project with full-scale trials will look at each aspect of the process to see if any further improvements can be made.

“We are looking again at the very first stage of the process, the quality of the wood coming out of our forests and how best to sort those qualities with the exact properties we want before the wood enters the process,” Albertsson explains.

Södra’s “Black” group of pulps are well suited to tissue, thanks to their high tensile, which reduces refining energy requirements, and the softness they impart. The best substitute for Canadian pulps which have lost market share in Europe as Canadian producers have been seeking other markets, Södra is currently looking at ways of enhancing yet further both the performance and production of Black pulp which continues to enjoy strong demand. The gradual withdrawal of Canadian pulp volumes from the European scene has undoubtedly served to boost Södra’s business with Europe’s tissue makers considerably.

Black volumes have increased from 225,000 tonnes/yr in 2002 to some 360,000 tonnes/yr in 2008. Individual Black grades have soared in volume terms, such as Södra Black 85Z. Parallel with increasing the Black volumes, Södra has also been developing its Blue pulp grades, which have also proved popular among tissue makers.

Albertsson explains, “North American white and black spruce is well known for its suitability for tissue because of the intrinsic strength qualities of the thin-walled cellulose. Our job is to try and create a lookalike fiber as best we can and Black is an excellent substitute but we still want to go further. The thickness of the fiber wall within a tree’s fibers depends on a variety of conditions, such as the latitude the forest is located on. The question for us is how to get the very best wood without incurring significant additional costs.

“Recently we have been investing in on-line measuring and quality control in the final products to improve the accuracy and consistency of product quality and a new reporting system to our customers. This is a good base. Step two is looking at running our mills in the most efficient way, including quality. We don’t know yet if we’ve done all we can to optimize the pulping process, it may be that we have, but we think it’s worth making sure which is why we are constantly revising this area.

“Third on the research program is chemical fiber modification. Tissue customers always want increased softness at no expense to strength. If we can’t get that strength from the natural composition of the fiber structure, the next step is to modify it. If we can provide our customers with a stronger fiber, which is easy to refine and which can be blended with an increased percentage of short fibers, we can increase softness and maintain strength. In the R&D department, we measure the differences between fibers, change them as best we can, and then validate those changes on tissue pilot plants or customer full-scale machines to see if we can maintain higher strength, for example, throughout the process. However it’s a tough call because once the base sheet passes to the converting line, its bulk softness is often reduced in the lamination process – long solid glue lines used on toilet roll lines to improve visual appearance and ply bonding, for example, stiffen the paper and so reduce softness.”

In the meantime, Södra continues to evaluate equipment such as the EmTec softness analyzer and it is investing in Z-potential analyzers and the vertical tensile tester which can be easily converted to test burst, friction, bending and stiffness (as opposed to the more traditional horizontal analyzer which measures only wet and dry strength). “We know that a crucial factor for improving softness in tissue paper is strength,” Albertsson remarks. “If we decrease strength we increase softness but not so much as to compromise performance through the converting line. We need to increase the fiber’s ability to withstand distortion. Better fiber bonding will not be enough, we know that, so we just have to keep trying new ways of finding more answers.”

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