Paper360 - May/June 2015 - (Page 40)
the bottom line | cOnSOlIDAtIOn WAtcH
Conventional wisdom says that the pulp and paper industry is consolidating, which is necessary to its longterm health. In this and future issues of Paper360°, this column, provided by Fisher International, will analyze
consolidation within different grades of pulp and paper.
Asia-Pacific Tissue and Towel
In developed economies, tissue and towel has historically grown at roughly
the same rate as the population. However, in developing economies, the growth can be
attributed to more people adopting the use of tissue and towel products as wealth grows.
In fact, one of the very first "luxury" items to be brought into a developing economy is
tissue and towel products.
Over the past decade, there has been tremendous growth in tissue and towel production in the Asia Pacific region, adding more than 7 million tonnes since 2007 for a
Compound Annual Growth Rate of a blistering 17.4 percent. With such a high growth
rate, it is expected that there would be very little M&A activity. And, for the most part,
that is quite true. Figure 1 indicates the aggregate capacity of each company with operating sites in the Asia Pacific region.
With the world's population at 7.3 billion and a global tissue and towel production
capacity of 35.5 million tonnes annually, average consumption is approximately 4.9 kg/
person/year. Asia Pacific produces 32 percent of the world's tissue and towel, yet has
approximately 60 percent of the world's population, which means that the region has a
consumption rate that is just under half of global averages. Considering the 4.4 billion
population in the region and a market gap of 2.3 kg/person/year, there is room in the
tissue and towel market for another 10 million tonnes of production, or roughly 1,000
more machines, before the region's consumption is in parity with world averages.
With that much headroom in the market, it is more profitable for companies to build
their own capacity than it would be to acquire existing capacity, so it is expected that
M&A activity would be low, which it is. The question then is, how much new capacity
will be built by the current market share leaders and how much by new companies
springing up to meet the increased demand?
With the large number of machines installed from 2005 forward (Figure 2), and the
distribution of those machines over a multitude of companies (Figure 3), it is expected that
the trend will continue. New companies will meet much of the growing demand for tissue
and towel throughout Asia Pacific. Existing players, especially those who have already
demonstrated a desire and ability to invest in tissue and towel, will also vie for increased
share of the growing market.
Taking a closer look at APP (the largest market share holder) and how they got to be the top
producer in the region, it is apparent that the strategy has been to invest heavily in capacity
in their existing sites, placing new machines in several given sites year after year (Figure 4).
The same practice appears to be the case with Heng An and, to a lesser degree, Vinda.
While some smaller acquisitions have occurred in the region, they have typically been
confined to more mature micro-market segments (e.g., Japan) where domestic growth is
slower; it is generally the case that future M&A activity will be minimal until the rapid
pace of growth slows somewhat. In the meantime, we expect to see the larger market
share holders continue to invest in building out their own mill sites by adding machines
and doing significant upgrade projects as their machinery ages.
This analysis was compiled by Jon Kerr, senior consultant, Fisher International Inc., using
Fisher International's FisherSolve™, a data-driven business intelligence tool that contains a
paper industry specific database that accurately describes the
capacity of every pulp and paper mill in the world making 50 tpd
or more. To learn more, please visit www.fisheri.com.
FIGURE 1. Asia Pacific Tissue and Towel capacity has
grown at over 17% since 2007, with very rapid growth
over the past three years. Source: FisherSolve™© 2015
Fisher International, Inc.
FIGURE 2. Since 2005, the region has added tremendous
capacity. Note the large number of machines built
by Guangxi Huamei (dark pink band) from 2010 to
2013. 97% of capacity is dedicated to consumer
grade products. Source: FisherSolve™© 2015 Fisher
FIGURE 3. APP, Heng An and Vinda account for
32% of the total Asia Pacific T&T market. Source:
FisherSolve™© 2015 Fisher International, Inc.
FIGURE 4. APP has added capacity to selected sites year
after year, indicating a general expansion strategy that
focuses on building out their existing sites. Source:
FisherSolve™© 2015 Fisher International, Inc.
Table of Contents for the Digital Edition of Paper360 - May/June 2015
Over the Wire
An Interview with James Hannan
Special Capabilities at Lincoln Paper
TAPPI Journal Summaries
Dewatering Fibrous Sludge with Soy Protein
Index of Advertisers
Paper360 - May/June 2015