Demand Cellulose Acetate

Chemical Cellulose: Supply-Demand Outlook

Richard Brice

What is chemical cellulose

Chemical Cellulose or High Purity Cellulose:

Dissolving Pulp (DP) (80%):

Dissolving woodpulp (DWP) Bamboo pulp Transformed or modified paper pulp

Cotton linter pulp (CLP) (20%)

How chemical cellulose demand was met in 2011

DWP

Transformed Paper Pulp

CLP

Non-wood fibre pulp

Chemical cellulose demand = 5.4 milion tonnes

And what is it used to make

Commodity Grades Viscose staple Viscose filament, lyocell, cellophane(film) & sponges

Speciality Grades Acetate tow as well as fibre, film & plastic Ethers MCC Nitration (hi & low nitrogen nitrocellulose) High strength (tyre yarn & food casings)

Demand and supply have not been in balance

0

2,000

4,000

6,000

2005 2006 2007 2008 2009 2010 2011 2012

Glo

bal D

WP

Dem

and/

Capa

city

('0

00

ton

nes

)

Global DWP Capacity Temporarily Curtailed Capacity Global DWP Demand

Leading to feast and famine in recent years

0

1,000

2,000

3,000

Ray

on

G

rade

DW

P &

CLP

Pric

e

($ pe

r to

nn

e)

Rayon Grade DWP Rayon Grade CLP (exl VAT)

Outlook for Chemical Cellulose Demand

Viscose staple is the principal cellulosic product

Viscose Staple 64%

Other Commodity

9%

Acetate 12%

Ethers 10%

Nitration 3%

High Strength

2%

Viscose staple is the principal product made from high purity cellulose.

In 2011 viscose staple production accounted for:

- 64% of chemical cellulose demand

- 69% of DWP demand

- 62% of CLP demand

Demand for chemical cellulose is set to continue to grow strongly

0

2,000

4,000

6,000

8,000

Chem

ical

Ce

llulo

se D

eman

d ('0

00 to

nn

es)

Commodity Grades Speciality Grades

Chemical cellulose demand growth is being driven by the rise in viscose staple output

0

2,000

4,000

6,000

2000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Chem

ical

Ce

llulo

se D

eman

d ('0

00 to

nn

es)

Viscose Staple Viscose Filament Lyocell Other

And much of this rise in viscose staple output comes from China

0

1,000

2,000

3,000

4,000

5,000

6,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Chem

ical

Ce

llulo

se D

eman

d ('0

00 to

nn

es)

West Europe India Asean China Other

Aided by a large increase in Chinese viscose staple capacity

0%

10%

20%

30%

40%

50%

0

50

100

150

200

250

2008 2009 2010 2011 2012

Year

-on

-year C

apacity

Ch

ange (%)

Capa

city

(19

80 =

100)

Nameplate Capacity (2008=100) Year-on-year Capacity Change (%)

China defines much of the global chemical cellulose & DWP market

65% of production of cellulosic derivatives is made up of viscose staple

60% of that production takes place in China

Even so viscoses share of Chinese MMF output is small

Chinese production of man-made fibres has risen five-fold between 2000 and 2011 to 28.6 million tonnes.

Polyester is the dominant fibre with staple accounting for 29% and filament 61% of production in 2011.

Viscose staples share is 6%.

Source: PCI Fibres Red Book

0

5,000

10,000

15,000

20,000

25,000

30,000

Fibr

e Pr

odu

ctio

n ('0

00 to

nn

es)

Nylon 6 Staple Nylon 6 Filament Nylon 66 Staple Nylon 66 Filament Polyester Staple Polyester Filament Viscose Staple Viscose filament

At the same time Chinas share of global mill consumption of MMF has grown appreciably

China share of global fibre mill consumption has reached over 50% and is set to top 54% by 2020.

The countrys share of MMF uptake has risen from 28% in 2000 to 57% in 2010 and set to reach 57% in 2020.

But the share of cotton consumption peaked at 42% in 2010 and is set to fall to 36% by 2020.

Source: PCI Fibres Red Book

020,00040,00060,00080,000

100,000120,000140,000160,000180,000200,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Wo

rld M

ill C

on

su

mpt

ion

('0

00 to

nn

es

)

0%

10%

20%

30%

40%

50%

60%

70% Chin

a's

Sh

are

of M

ill C

on

su

mp

tion

(%)

Cotton Manmade Fibres All FibresChina's share cotton China's share MMF China's share all fibres

Textile sales in Europe and USA have been hit and this is impacting Chinas industry

90

95

100

105

110

115

120

2005

2006

2007

2008

2009

2010

2011

2012

2005

=10

0

USA EU-27 Euro-zone After strong growth between 2005 and 2008, textile sales have been harmed by economic turmoil in both the USA and Europe.

Sales in both markets now flat or falling and this is impacting demand for textiles exported from China.

USA: Indexed & deflated seasonally adjusted apparel retail sales at clothing stores (excludes apparel sales at general merchandise and department stores) EU-27: Indexed & deflated seasonally adjusted retail sales (excludes motor vehicle sales)

Source: US Bureau of the Census & Eurostat.

High Chinese cotton reserve price means that viscose staple price is now lower in China

-1

0

1

2

3

4

5

6

2009 2010 2011 2012

US $

per

kg

Viscose Staple Cotton (328) Viscose Staple-Cotton Differential Cotton A-Index

Outside China cotton is cheaper than viscose staple but viscose output and demand has stayed buoyant.

Low cotton price was the case in China up to 2010.

But since October 2010 the price of viscose staple has consistently been below the price of cotton apparently boosting viscose demand.

Outside China Lenzing & Birla have boosted their share of the market

0%

20%

40%

60%

80%

100%

2008 2011 2012

Shar

e o

f Glo

bal V

isco

se S

tapl

e Ca

paci

ty

(exl. C

hin

a) (%

)

Lenzing Birla Other Viscose Staple Capacity

Source: Lenzing & Birla publications & author estimates

Much slower growth in output of cellulosic products made from speciality grades

0

300

600

900

1,200

1,500

1,800

Chem

ical

Ce

llulo

se D

eman

d ('0

00 to

nn

es)

Acetate Tow Other Acetate Ethers MCC Nitrocellulose High Strength

Outlook for DWP Supply

High DWP prices in Q4 2010 & Q1 2011 encouraged a surge of new DWP projects

0

500

1,000

1,500

2,000

2,500

3,000

Ray

on

G

rade

DW

P ($

per

ton

)

Substantial new capacity (mill conversions) added between 2011 and 2013

Canada Fortress Speciality Cellulose Thurso (Quebec) Brazil Cambar Paper Cambara

Czech Rep. Lenzing (Biocel Paskov) Paskov Austria Schweighofer Fiber GmbH Hallein

Sweden Sdra Cell Mrrum

Sweden Vida Paper Lessebo

Finland Stora Enso (Enocell) Uimaharju China 7 mills

Total Additional Capacity 1.9 million tonnes

And more scheduled to come on-stream by 2016

Canada Birla Terrace Bay (Ontario) Canada Fortress Speciality Cellulose Lebel-sur-Quevillon (Quebec) Canada Paper Excellence Prince Albert (Saskatchewan) USA Sappi Cloquet Cloquet (Minnesota) Laos Birla

China

Japan Nippon Paper Kushiro

South Africa Sappi Ngodwana Nelspruit (Mpumalanga)


Along with capacity expansions at current producers

Canada Tembec Tmiscaming (Quebec) USA Buckeye Technologies Perry (Florida)

USA Rayonier Jesup Jesup (Georgia)

Sweden Domsj rnskldsvik

Austria Lenzing Lenzing

Japan Nippon Paper Gotsu


This will nearly double capacity between 2011 and 2015/16

million tonnes

New converted/greenfield capacity 1.9

Anticipated converted/greenfield capacity 1.8

Capacity expansions 0.35

Total additional capacity 4.0

Much of the growth in DWP capacity is in the established developed markets

New capacity from 2011 to 2016

N Am: 1.5mn tons

W&C Eur: 0.9mn tons

China: 0.9mn tons

Others: 0.7mn tons

0

2,000

4,000

6,000

8,000

DW

P Ca

paci

ty ('0

00 to

ns

per

ann

um

)

N. America S. America W&C Europe East Europe China India Other Asia South Africa

Much of this new capacity will be for commodity grade DWP

0

2,000

4,000

6,000

8,000

'000

ton

nes

Commodity DWP Capacity Speciality DWP Capacity

Other sources of chemical cellulose

Cotton linter pulp Little or no change in supply cotton linter supply

constrained

Bamboo pulp At least three bamboo pulp mills in China

Other sources - transformed paper pulp Used as low ost extender up to % in lends

with DWP because of quality issues. Current DWP

prices offer little or no incentive to use this pulp.

As a result, substantial excess capacity is anticipated

0

2,000

4,000

6,000

8,000

Glo

bal D

WP

Dem

and/

Capa

city

('0

00

ton

nes

)

Global DWP Capacity Temporarily Curtailed Capacity Global DWP Demand

Capacity utilisation assumed to be 95%

Especially, excess capacity for commodity grade DWP

0

2,000

4,000

6,000

0

2,000

4,000

6,000

Co

mm

odity D

WP

Cap

acity ('000 to

nn

es) Ch

emic

al Ce

llulo

se D

eman

d ('0

00 to

nnes

)

Viscose Staple DWP Demand Other Commodity DWP Demand Commodity DWP Capacity


But much will depend on the growth in viscose staple output in China

2,500

3,500

4,500

5,500

6,500

2009 2010 2011 2012 2013 2014 2015

Chem

ical

Ce

llulo

se D

eman

d &

Com

mo

dity

D

WP

Capa

city

('0

00 to

nn

es)

Commodity DWP Capacity VSF Forecast VSF Dmnd (+10% pa) VSF Dmnd (+15% pa) VSF Dmnd (+20% pa)


With new speciality DWP capacity coming on-stream surplus capacity anticipated

0

200

400

600

800

1,000

1,200

1,400

1,600

0

200

400

600

800

1,000

1,200

1,400

1,600 Speciality

DW

P C

apacity

('000 ton

nes)

Spec

ialit

y D

WP

Dem

and

('0

00 to

nn

es)

Speciality DWP Demand Speciality DWP Capacity


Summary Market currently oversupplied, a situation that could persist

beyond 2015.

This oversupply has stemmed from investment in DWP capacity (notably in mill conversions) although the contribution from the new capacity in China is uncertain (but it will overhang the market).

Other sources of chemical cellulose not expected to make a notable contribution.

As far as the supply/demand position is concerned much will depend on the growth in viscose staple production inside and outside China.

Outside China viscose staple demand has stayed buoyant, aided by the growing focus on speciality grades.

Within China high cotton prices and rapid capacity expansion has led to high growth in viscose staple output.

Documents

Demand Cellulose Acetate