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LAST WEEK's article "Sawmill Fires " can be found HERE
The Pulp and Paper Products Council and PricewaterhouseCoopers held their annual forestry and paper conferences this week in Vancouver, BC. Concurrently, the Wood Markets Group held its Global Softwood Log and Lumber Conference. Stakeholders, investors, and analysts from the solid wood, pulp, and paper industries gathered to network and hear presenters from around the world.
The keynote speaker at the PPPC's Pulp Week was Patrick Moore, of Greenspirit Strategies and original founder of Greenpeace. Reporter readers will remember that Moore also delivered the keynote address at the Truck Loggers Association AGM in January. He is a dynamic speaker with an excellent overall viewpoint on resource management, specifically in forestry.
Conferences
Morning presentations on Monday were kicked off by Donna Zhang, CEO of Vinda International Holdings, a major Chinese personal care products manufacturer. Zhang's presentation, "Perspective on the Chinese Tissue Market", explained that -- as the world's second largest tissue producing country -- China's macro-economic conditions continue favourable, and that trend is expected to remain.
"From 2010 to 2011, China's tissue market grew by 22 per cent while tissue exports dropped by almost 4 per cent," said Zhang. "As manufacturing and sales centres move inland, the tissue industry will become more consolidated. From our pulp suppliers, consistent quality is critical, then second is the need to keep costs stable."
Robert Wilson, Director at AMEC Forest Industry Consulting, gave a forecast of the "Pulp and Paper Industry in 2035 to 2050: Making the Right Choices Today."
Echoing sentiments expressed by all presenters, Wilson focussed on future demand for paper products in emerging markets. "Emerging economies are not necessarily consumer-driven," explained Wilson. "There are issues of resource scarcity, particularly in the areas of fibre, energy, and water. For example, oil usage is approximately 1-5 barrels per capita per year in the developing world, whereas it is 10-20 barrels in developed countries. There is huge demand for energy coming, but increasing difficulty to extract that fuel, which is going to increase costs.
"Operations with high energy costs; old plants or those with old boilers, are most at risk of pain. These operations will be unable to get the energy contract they have made in the past, and will be unable to switch to renewable and alternative fuel sources, or put in waste-to-energy components. For example, two-thirds of the aluminum industry in Europe will soon be shutting down due to high energy costs."
Wilson maintained that the future is in oil replacement, in bioenergy, biomaterials, biochemicals and biotechnology. "Currently, prices in renewable energy markets are artificial because they are based on targets," continued Wilson. "The realities are that European industry will require a US$50 billion investment to meet that region's standards for 2020. Likewise in the US, investments to the tune of US$80 million will be needed by 2022.
"It is not possible to sustain these legislated targets with current global forests. By 2030, the cost of cellulosic ethanol will come close to that of ethanol and petrogas. In fact, I think this will happen sooner than 2030."
Tuesday morning started with the always excellent analyses provided by PPPC staff.
Paul LeClair, PPPC Vice President and Chief Economist, talked about the paper side.
"Printing and writing paper demand for 2011 was 94 million tonnes, this is down from the 2007 peak of 105 million tonnes but up from the low in 2009," began LeClair. "We forecast demand to grow by 0.7 per cent per year to 2014. Declining demand in the industrial world will be offset by growing demand in emerging markets. Capacity, meanwhile, will grow by 0.9 per cent per year to 2014. There is a high likelihood for more capacity being taken out, which will balance the new production coming onstream this year and in the next couple of years.
"China has been so aggressive in pushing paper exports, especially in the coated wood-free grades, that the US and EU are imposing trade barriers in the form of duties."
"The big story is in tissue," continued LeClair. "Global tissue demand will rise by 3.5 per cent. The rate of growth for tissue capacity will be between 4 and 5 per cent in 2012 and 2013, which is approximately 3.1 million new tonnes. This will be mostly in the emerging markets.
"Due to the probable decline in printing and writing paper demand, even with the growth of tissue usage we see a slowdown for market pulp coming."
Next Emanuele Bona, VP of Europe for the PPPC, provided an update on global pulp.
"In 1Q 2012 there was the highest global demand for NBSK (northern bleached softwood kraft) pulp in history," Bona started off. "This was driven by increased demand from China, which had a 30 per cent rise in demand for that quarter.
"There is still not solid data on consumer stocks in China, but there are some things we do know. Information provided by shipping companies, some of which is admittedly anecdotal, tells us there has been on average approximately 400,000 to 500,000 tonnes of market pulp stores in China either in transit, stored in warehouses at the ports, or stored in warehouses inland. However currently, our information is that there is approximately 900,000 tonnes. This is of course an estimate. Regardless, it suggests historic high levels.
"In chemical pulp, last year there was negative growth. So far this year demand is growing, with China again taking the lead. In 1Q 2012, demand for chemical pulp from China was up 18 per cent compared to the same time last year. There is a question however: if this is due to stockpiling. Is demand reflecting consumption? We ask this because from 2000 to 2008, the average growth of chemical pulp demand was 11 per cent, then in 2009 to 2011 it was 30 to 35 per cent.
"We don't believe this is based on actual demand, for several reasons. First of all, there were a huge amount of printing and writing, and tissue, machines started up in China in the past couple of years, all of which had a one-time need for start-up inventories. Secondly, there was a lot of speculative buying in 4Q 2011 due to low prices. And third, there is a time lag between paper production and shipments, so we are still waiting for data on that.
"In the end, we can say for sure that global demand for pulp capacity was up in 2011, and will not be up by as much this year," concluded Bona. "We predict moderate growth in 2012, then more substantial growth in 2013 and 2014, which will be focussed almost entirely in Russia, Latin America, and China."
