Focus: Dissolving Pulp — Lessons Learned A Year On
As traditional markets for paper face long-term decline, a number of paper pulp producers are turning their attention to the textile industry.
TW Special Report
"When Södra Cell made the decision to move into Textile Pulp™ — dissolving pulp for viscose staple fiber — at our Mörrum mill in Sweden, it was with the full intention of swinging between paper pulp and dissolving pulp," Benestad says. "We didn't think we'd have enough of a market in a brand new area, and we weren't sure how much time we'd need to meet the quality demands of a completely different set of customers. Many said two years was too ambitious a timetable to come to grips with a whole new field. The fact that the line has remained dedicated to birch-based textile pulp just four months after startup, and that we've already surpassed 100,000 mt in just over a year — production began December 2011 — has really exceeded our expectations. We're now considering a second textile pulp line, this time using softwood, which is testament to our commitment to this new market."
Dissolving Pulp In Brief
The dissolving pulp market is split between cotton linters and cellulose-based fiber. The latter totals approximately 6 million mt per year (mt/yr), of which around 65 percent ends up as viscose. By far, the largest end-use for viscose is textiles, but other applications include films and casing — for example, sausage skins. Lyocell currently accounts for around 3 percent of the market. The rest is made up of acetates, 17 percent, for use in cigarette filters and as a reinforcing material, for example; ether, at 11 percent, for paint thickener, pill casings and glasses frames, for example; and nitrates, 4 percent, for car lacquer.
The European market has only a few major viscose producers. Lenzing AG, Austria, is the leading player, with a market share of around 80 percent. Driving pulp producers' interest in this market is its highly promising potential for growth. As Benestad explains; "Global consumption of textiles is around 80 million mt/yr, and with the world's population growing at 1.1 percent per year, the market is expected to reach 100 million mt by 2020.
"Everyone needs clothes and textiles for their homes," Benestad remarks. "Within a generation, the middle class in China will be roughly four times the size of the American middle class population, according to the United Nations Population Division and Goldman Sachs. By 2030, China should have approximately 1.4 billion middle-class consumers compared to 365 million in the United States and 414 million in Western Europe. India is next, with its citizens moving up the income ladder and reaching a sizeable 1.07 billion in a little under 20 years. This is a significant factor in the potential of the textile market, which is projected to grow by about 3 to 3.5 percent per year for the foreseeable future. That's why we're excited."
Not all of the new growth will be met by cellulose-based fibers. By far, the largest share of the textile market is oil-based man-made fibers such as polyester and nylon, which represent about 60 percent of consumption. Around 30 percent is currently cotton fiber, but this sector looks unlikely to show the same growth as cellulose-based products. "A major drawback with cotton is that it requires an enormous amount of water," Benestad explains. "The three main producers are China, India and the Southern United States — all regions that will need their water and land to grow food.
Another major consideration is the large quantities of fertilizer and pesticides involved, and these environmental concerns will only intensify the debate in the coming years. For that reason, cotton production is unlikely to grow much beyond 1 to 2 percent per year. The man-made fibers market is forecast to grow by around 4 percent per year, but that still leaves a gap that will need filling, and this is where dissolving pulp comes in. We think growth of 8 to 9 percent per year is possible for cellulose-based fibers."
However, that's not to say the market will be smooth sailing. Extremely poor cotton harvests a couple of years ago exposed the dependency of the textile industry on cotton and drove prices sky-high. Dissolving pulp prices rose accordingly as the market tightened, from $1,100/mt to $2,500/mt in a matter of months. Unsurprisingly, dissolving pulp suddenly became an attractive prospect for paper pulp suppliers looking for more profitable avenues than commodities. Benestad recognizes there's a danger that the market will become flooded with dissolving pulp producers, but he is confident that Södra will be in the business for the long term.
"We know there are several mills in China, for example, that can swing from paper pulp to dissolving, and that does introduce an element of uncertainty to the market," he says. "We don't adopt that swing strategy. We have converted the Mörrum line to be dedicated to dissolving pulp, whatever the stage in the price cycle, and we will seek to build a reputation for reliability and consistency. Just as people were interested in entering the market when prices were high, so many dropped out again when prices fell."
Dag Benestad is Södra's business area manager, Textile Pulp.
Benestad continues: "Luckily, we had done our calculations for the line based on more realistic levels. Today's prices, at $900-950/mt are not attractive for high-cost mills, and we see several projects being withdrawn or put on hold. In the future, we're likely to see this market repeat the pattern of paper pulp — production lines will get bigger, and the smaller, less cost-effective mills will have to withdraw. Still, it would take relatively little to destabilize the market: The dissolving pulp market is still only worth about 4 million mt in volume terms for viscose staple fiber, or 4 to 5 percent of the world's textile market."
Has it been worth the risk? Absolutely, according to Benestad: "We still have a long way to go in finding our feet in this new area, and we have no intention of abandoning our traditional paper markets. We're using the experience from what we knew and transferring it across — we established PulpServicesOnLine for textile pulp customers (PSOL Textile) to provide market data, production information and such. It is based on the model we have for our paper customers, and that's been extremely well-received, both in Europe and in Asia. We're now on target to produce around 130,000 mt of textile pulp in 2013 and look forward to a long future helping meet the growing demand for environmentally friendly textiles."
April 16, 2013