The last 2 years have seen a worldwide spurt in new tissue capacity. China is leading in the race and is expected to raise the capacity by 1.4 million tons between 2008 and 2010 to meet their domestic consumption growth rate of 8% per annum. In 2006 and 2007 China’s production was 3.7 million tons and 4.1 million tons respectively. Domestic consumption was keeping pace with supply and surplus production was being exported at competitive rates to Hong Kong, Japan, South East Asia and Australia.
Unlike China, consumption in India has lagged behind supply and tissue export from India is yet to take roots. India’s soft tissue consumption in 2008 is reckoned to be at 25,000 tons. This demand was largely met by local mills and partly through imports of prime and stock lots. In 2009 total production capacity of soft tissue has touched almost one lakh tons. Century Pulp and Paper and Orient Mills account for about 75% of this capacity. Six other known mills with capacities, ranging from 10 TPD to 20 TPD account for balance supply. While 2 large mills are using virgin fibre, the rest are using a blend of virgin cum recycled fibre.
Even at an assumed 20% p.a. demand growth rate,will take several years for the current supply to match demand. During this period, Indian mills have to lean heavily on exports at competitive prices with China and Indonesia. It does not appear that Indian mills have inherent strengths to manufacture soft tissue at lower costs, than China & Indonesia and therefore export prices might not be remunerative. The following table gives picture of World Production of Tissue and cost competitiveness of 3 regions of the World.
Overview of World Tissue Market
A. World Production in million tons
(Table prepared using Data published in “Tissue World” April/May 2009)
|Year||Total Paper & Board||Total Tissue|
|Growth % per annum||2.6/2.8||3.4/3.6|
(Comments: India’s total production and apparent consumption in 2008 was 10 million tons, a meagre 2% of the world-consumption.)
B. Cost Competitiveness of Tissue Mills in Asia
(Based on benchmarking of 3.8 million tons of production out of total Asia’s 8.3 million tons production)
|Weighted average of cash-manufacturing cost of all tissue products||$ 736 pmt (min $ 366, max $ 1054)|
|Weighted average of Napkin||$ 707 pmt|
|Weighted average of Bath (toilet)||$727 pmt|
|Weighted average of Towel||$743 pmt|
(Comments: Study also shows that China & Japan account for 66% of total production. Top 5 largest tissue-producing countries in Asia/Oceania are China, Japan, Korea, Australia & Indonesia.)
C. Cost Comparison of Tissue production in 3 World Regions
|Region||Weighted average cost per ton|
|Europe||$ 957 (30% higher than Asia; high fibre & energy cost)|
|North America||$ 813 (10% higher than Asia; high labour & engg. cost)|
The marked difference in average weighted price of 3 regions can be explained as:-
Europe: High cost of energy and fibres in this region are two factors pushing up finished cost of tissue.
North America: The region has lowest cost of fibre because of integrated forest operations, but it is partly neutralised by higher manpower and maintenance cost.
Asia and Oceania: China and Taiwan have high fibre cost due to purchase of chemical pulp from North America. Rest of Asia uses a mix of virgin and recycled pulp for low end markets. Lower manpower costs and lower energy cost in Indonesia brings down weighted average cost.
Demand Needs to be Tapped in India
An intensive marketing drive is needed to tap latent demand in India. There is a huge potential of selling facial tissue, handkerchief, pocket hankies, kitchen towels, tableware, doctors examination table rolls, industrial wipes and hand wipes. Perhaps the demand for toilet rolls may not rise beyond its use in hospitality industry and upper middle class segment because of our cultural practice. In China 85% of consumption of soft tissue is in the form of toilet rolls.
It requires pioneering effort from Indian mills to work closely with leading FMCGs, pharmaceutical and food & beverage companies to promote the use of facial and allied tissue products as substitute for cloth for environmental reasons and convenience of consumers. Indian retail business has not grown on expected lines, which could have generated volumes through several outlets and brand promotion through multimedia. Until this happens,,demand will grow at its own pace without any predictable numbers.
* Mr. M.M.Shukla, has been with the paper industry for many years, and is currently working as a freelance consultant to the industry.