Tissue: a global tour.

Editor's note: The following article is in three sections written by different authors.

TISSUE: HITTING THEM HIGH AND LOW

ALAN ROOKS, EDITORIAL DIRECTOR

This year's Super Bowl, held in Houston, Texas, showed just how much change our culture can take and what we are willing to watch on television without being shocked. I'm talking, of course, about Procter & Gamble's offbeat television ad for its Charmin toilet paper, which first aired during the Super Bowl. While the media may be entranced with the Janet Jackson/Justin Timberlake "what did they know about the bustier and when did they know it" scandal, the Charmin ad broke a few rules of its own.

The ad shows a football quarterback entranced by the softness of a length of toilet paper somewhat oddly affixed to the backside of another football player. After unsuccessfully chasing his Charmin-holding cohort around the field, the quarterback turns his attention to a mascot (the Charmin Bear), also incongruously holding a roll of toilet paper, The commercial ends with the tagline. "Soft and strong for your end zone."

Referring, even indirectly, to the actual use of toilet paper used to be strictly off limits, with ads focusing only on the softness and strength of the product. Now, apparently, anything goes. SCA Hygiene's Velvet brand is advertised under the slogan "Love your bum," and who knows what is next.

Actually, these ads point to one of the reasons for the continued success of the tissue market: pushing the limits to sell products The current trend, in the high-end "premium" tissue market is to aggressively market ultrahigh quality tissue products made with through-air-drying (TAD) processes to ever-pickier consumers. Georgia-Pacific Corp., Atlanta, for example, has invested more than US$ 500 million over the past three years in TAD technology, using it to produce a new Brawny paper towel that is soft on one side and "tough" on the other. The company has launched the product with one of its biggest marketing efforts ever.

Even in Europe, the proverbial home of low quality, scratchy tissue products, quality is selling. Previously unheard of products, such as tissue with Aloe Vera and vitamin E added, toilet paper with a perfumed core, and, of course, ultra soft tissue products are selling briskly.

But that's not all. Developing nations (especially China) are fueling enormous growth in tissue demand by expanding their use of tissue products, particularly in lower quality "price brands" made using more traditional technology. Put these trends together and you have the current recipe for success in the still strong, still growing tissue market.

"Tissue has a bit of special position in papermaking," said Ingmar Andersson, vice president technology, Metso Tissue Making Lines, Metso Paper Karlstad AB, Sweden. "All other paper grades are converted to make something else--there always is a secondary purpose. Tissue is the only grade where manufacturers make a product to be used directly by consumers."

As in the past, tissue manufacturers are harnessing technology to support their marketing objectives. Specifically, TAD has given manufacturers the opportunity to dramatically upgrade the softness and absorbency of their products while maintaining competitive pricing. At the same time, developments in Crescent former technology allow manufacturers to develop the lower quality, price-sensitive portion of the market more effectively.

Creating and then catering to customer demands has produced solid results for tissue manufacturers. As of 2002, annual global production of tissue was 23 million metric tons on about 2000 tissue machines (750 of which were in China), according to Jaakko Poyry. The average capacity for these tissue machines is 25,000 to 50,000 metric tons, though the largest topped 100,000 metric tons/yr.

As might be expected, the largest tissue manufacturers were those with the highest marketing expenditures. In 2002, Kimberly-Clark topped the list at 3.8 million metric tons of production, followed by Georgia-Pacific at 3.6, SCA Hygiene (1.9) and Procter and Gamble (1.5). Even with these global giants, however, nearly 54% of tissue is manufactured by other companies, leaving plenty of room for smaller players.

Annual global demand growth for tissue was 3.5% in 2002, according to Jaakko Poyry, with Eastern Europe, China and "Other Asia" leading the way with growth rates ranging from 5.6% to 6%. Latin America was also above average, at 4.2%. Western Europe's tissue consumption growth, at 2.8%, was double that of North America's (1.4%), as European consumers, parting with tradition, were using more paper towels and napking instead of cloth--in addition to fueling the aforementioned trends in tissue and toilet paper.

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Of all the technological innovations in tissue making, TAD has had the most impact on the premium and super premium tissue market. In a TAD system, pressing is eliminated, drying is accomplished through hot air blown through the sheet on a large drum, preserving sheet quality. The most dramatic effect of TAD is its capacity to hold water.

"In traditional tissuemaking, a flat sheet is dry creped and embossed but collapses when confronted with water," said Andersson. "TAD makes the sheet three-dimensional and 'freezes' the shape between fibers--when water is introduced, the sheet keeps its void volumes and does not become flat." The effect on toweling is particularly dramatic. A conventional paper towel can hold 5 times its weight in water, while a TAD towel can hold 10 times its weight.

The other major tissue technology trend focuses on Crescent former machines, which are based on forming the sheet around a large diameter roll. In the past, Crescent formers were used exclusively by Kimberly-Clark, but now have become the standard for low basis weight bathroom tissues, according to Andersson.

"Most development work in Crescent forming has focused on the dry end of the machine," he said. "With headboxes and formers running at high speeds, handling the delicate sheet on the dryers is the hard part. New technology has allowed better support for the sheet, allowing for speed increases and better productivity."

He noted that a world record for tissue machines was held until recently by a 6 meter wide Crescent former unit at Oji Paper's Tokushima Mills. The record--2050 m/min on 11 gsm facial tissue--was surpassed in January 2004 by a tissue machine in China (see article below).

Andersson noted that Crescent formers and TAD units together account for about 95% of all new tissue machines being installed, with Crescent formers typically used in developing markets and TAD in established markets. Fiber/energy tradeoffs factor into the decision as well. TAD consumes more energy per ton in drying costs due to the lack of pressing, but typically uses 20 percent less fiber than conventional tissue making.

CREATING A SOFT PRODUCT FOR A TOUGH MARKET

JIM KENNY, CONTRIBUTING EDITOR/EUROPE

The tissue market has not only been good for tissue manufacturers--it has also proven to be an excellent market for one of the world's largest pulp producers: Sodra, based in Skogsudden, Sweden.

As tissue product manager for the company, Hagen Rismark has been in the middle of the action. "In 1998 we were only selling around 100,000 metric tons/yr in the tissue area. Today, that's gone up to well over 400,000 metric tons/yr." he said.

The critical factor was Sodra's purchase of the Tofte, Norway mill. "Management wanted to build up the company's presence in tissue mainly because it's a fast growing business," said Rismark. "But just as importantly, it is a sector that's very stable in terms of demand compared to the fine paper market. We have made dramatic changes in the past few years and we have learned a great deal from the acquisition of the Tofte mill--especially in wood sorting, process optimization, and different ways to develop long fiber that is suitable for tissue products."

NEW FORMULA

"Basically, we're trying to develop a pulp that is as suitable as possible for tissue," said Christer Fasth, technical product manager for Sodra. "There are many different ways of doing that, from wood selection to furnish, refining and chemicals. For softer grades of tissue, we are looking for an easy beaten softwood pulp. In this case, that can mean 20-25 year-old spruce, so we are looking for the first thinnings. Then, if we're looking for something that needs to be absorbent and bulky, say for kitchen towels, we recommend the use of some CTMP combined with the right softwood pulp."

The company's research team at Morrum, Sweden is also developing entirely new formulations for its pulp. For example, the Tofte, Norway mill is concentrating on the use of chemical eucalyptus pulp. Experts at the Folla, Norway mill have been developing a CTMP eucalyptus grade. "The chemical eucalyptus is proving to be useful for the very soft products because the properties of the small fibers really help with the surface softness," says Fasth. "We're also working closely with tissue makers, chemical suppliers and machine builders."

Last year, Sodra launched its first product using CTMP made from pine and eucalyptus. "It was our first campaign, but from the results we'll likely be doing another one shortly." says Fasth. "We're importing eucalyptus to find the best product. R & D is important, but it's also important to know what is happening at the mill level. I travel all over Europe to get a first-hand look at the processes and to do trials, because it is very difficult to replicate those conditions in the lab on a 20 gsm sheet."

TAD TRICKY

In addition to research at Tofte and Folla, Sodra's Varo mill near Gothenberg, Sweden, is looking into the potential for optimizing pulp to make tissue on TAD machines, which are becoming increasingly common across Europe. Success in this area could prove important to Sodra's prospects in the tissue segment.

As Rismark said, "The market is going two separate ways at the moment. On the one hand, some companies are using TAD technology for almost all of their new machines, but others are focusing on the more traditional technology."

A glance at order lists from the machine builders underlines the differences--companies such as Kimberly-Clark and Proctor & Gamble tend to favor TAD, while many of the southern European groups, including several of the big Italian firms, are keeping faith with conventional tissue production techniques.

According to Rismark, it can be difficult to satisfy TAD customers because they are more used to Canadian long fiber material. As he explained. "It's no secret that Canadian fiber is very good for producing TAD tissue products. Canadian fibers tend to be long and slender with thin fiber walls, which is obviously quite a good starting point for making an easy beating pulp for tissue that has good initial strength. Compared with northern fibers, ours tend to be shorter and thicker, so we have to be a lot cleverer in developing new fiber characteristics to make our pulp more suitable for TAD machines."

Sodra sells its pulp to some 80% of Europe's producers, including tissue makers with TAD machines. However, the company feels that it can make more of an impact in this market if it can get the right pulp product. The target now is to create several pulps specifically tailored for TAD customers.

There are other challenges in addition to the natural advantages of Canadian pulps. "We are already supplying pulp for TAD machines, but it's not as easy to get close to those producers." Fasth explained. "The big companies tend to have trade secrets that they want to protect, so you don't have the same possibilities to work closely with them on the research side. But having said that, we do know that a TAD pulp has to be easy beaten and easy to dewater so we can aim for that. We can also do a lot of work on the refining side in the lab and we have a lot of customers who have been helping us to compare the lab results with what actually happens in the mill, so we have made good progress."

CHINESE TISSUE INDUSTRY HANDLES DOMESTIC DEMAND, TARGETS EXPORTS

BY HANNU OINONEN AND ESKO UUTELA

China has a vibrant and growing tissue industry. Unlike other countries, the major players in the market are not multinationals such as Georgia-Pacific, Procter & Gamble, and Kimberly-Clark--although they do have a market presence. The biggest tissue companies in China are based in Asia, and they are doing a booming business.

Per capita consumption of tissue in China is growing rapidly, from 1.95 kg per capita in 2000 to an expected 2.6 kg in 2005 and 2.9 kg in 2010. China's tissue consumption was slightly over 3 million metric tons in 2003. Export surplus amounted to 0.17 million metric tons. Today, the Chinese tissue industry is partly export oriented with converted product customers mainly in Hong Kong (80,100 metric tons in 2003), the USA (16,000), Japan (7,800) and Macao (4,700). Parent reels go primarily to Australia (24,900 metric tons in 2003), Hong Kong (16,900), Japan (8,300), the USA (4,600) and Taiwan (3,100).

Tissue demand growth in China has been rapid over the past 13 years, averaging more than 11% per year. The largest markets are located in Guangdong, Shandong, Jiangsu, Shanghai, and Zhejiang provinces. Recent years have yielded lower growth averaging 7%. Tissue accounts for about 6.8% of Chinese paper and board production, higher than the 6.2% global average.

The biggest companies in the Chinese tissue industry include Sinar Mas/APP China (Indonesia), Yuen Foong Yu and Long Chen (Taiwan), Oji Paper (Japan), and Kimberly-Clark (USA). Procter and Gamble sold its mill to Oji Paper and does not have a manufacturing plant in China.

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Figure 1 shows the region's tissue paper production capacities. APP China's total tissue converting capacity already exceeds 160,000 metric tons/yr, and some other players, such as Kimberly-Clark Paper (Shanghai), have notable converting capacity. White Swan and Meijie Paper also have more converting than papermaking capacity.

The largest 12 tissue suppliers have a total capacity of 610,000 metric tons/yr, only 20% of the total but over 50% of the premium and super premium tissue paper production. Most of the large mills are new. For example, APP's Gold Hongye was built in 1999-2000. Changde Hengan has built most of its capacity during the past 5 years, and Vinda has steadily expanded since the early 1990s.

Current newcomers include Shanghai Potential Paper, where the California-based recovered paper collector Potential Industries Inc. (already holding a 32% share in the newsprint mill Shanghai PanAsia Potential Paper) is expanding into the tissue business. In Hainan, Gold Hongye Paper (Sinar Mas/APP China) plans to build one or two tissue machines similar to those in Suzhou.

The Chinese tissue industry is largely based on small tissue machines built adjacent to fine and packaging paper mills, they rely on reject paper from those larger paper machines. The small tissue machines are typically 1.57 meters or 1.76 meters wide and produce 1000 to 5000 metric tons/yr.

MAJOR CHANGE

The biggest change in the Chinese tissue industry has been the construction by APP (Gold Hongye Paper) of two world-class machines in Suzhou in 1999. Both machines are 5.6 meters wide, produce 60,000 metric tons/yr, and run at speeds up to 2000 m/min. These machines have been efficiently managed--PM2 set a world record in January 2004, running 13.2 gsm facial tissue at a speed of 2100 m/min for five days. PM1 was not far behind, running at 2060 m/min on 17.5 gsm toilet paper. Large new Chinese tissue machines are also exporting to neighboring countries and also overseas (Australia, United States, and Japan). Taiwan tissue companies engage in tissue trade between mainland China and Taiwan.

The Chinese Household Paper Association expects the Chinese tissue industry to continue growing at an average rate of 5-7%. reaching production of 4.1 million metric tons in 2010. EU Consulting's forecast is even somewhat more optimistic, exceeding 4.2 million metric tons in 2010.

                                                        PAPER CAPACITY
COMPANY                       MILL                    (1000 metric t/yr)

Gold Hongye Paper (APP        Suzhou, Jiangsu               120
  China)
Vinda Paper                   Xinhui, Guangdong;             90
                              Xiaogan, Hubei;
                              Pinggu, Beijing;
                              Pudong, Shanghai
Changde Hengan Paper          Changde, Hunan                 65
Guangdong Zhongshun Paper     Shalang, Zhongshan,            61
  Group                       Guangdong
Guangxi Guitang Paper Group   Jiebao, Liuhua,                52
                              Guangxi
Dongguang White Swan Paper    Wanjiang, Dongguan,            43
                              Guangdong
Zhongshan Sanjiao Paper       Sanjiao, Zhongshan,            36
                              Guangdong
Ningxia Xinhui Group Meijie   Helan, Ningxia                 32
  Paper
Jiangsu Sund Group            Jiangsu                        30
Jiangsu Shuangdeng Paper      Huangshagang, Sheyang,         28
                              Jiangsu
Jiangsu Jinlian Paper         Jinhu, Jiangsu                 26
Ningxia Zijinhua Paper        Youngning, Ningxia             25

Figure 1: Chinese tissue production capacities.

IN THIS ARTICLE, YOU WILL LEARN:

* How tissue manufacturers are building markets in the "high end" and "low end" of the market.

* Why a European pulp company is using R & D to create better pulps for tissue manufacturing.

* How an already strong Chinese tissue industry will grow ever larger.

ADDITIONAL RESOURCES:

* Sodra web site: www.sodra.com

* World Tissue Business Monitor: www.wtbm.com

RELATED ARTICLE: SODRA CELL R & D: CURRENT RESEARCH FOCUS AREAS

* Softness and absorption -- short fibers help produce soft products, but what do the long fibers contribute?

* CTMP offers high bulk -- how does this affect absorption?

* CTMP -- how does it act as a "chemicals thief"?

* TAD tissue -- developing fiber characteristics to meet this market.

* Paper chemistry -- how important are factors such as charge and hemi-cellulose content?

* Beating -- comparing pilot trials and mill results on a variety of processes