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

Non-wood fibre pulp

CLP

Transformed Paper
Pulp

DWP

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

Global DWP Capacity

Temporarily Curtailed Capacity

Global DWP Demand

Global DWP Demand/Capacity ('000

tonnes)

6,000

4,000

2,000

0
2005

2006

2007

2008

2009

2010

2011

2012

Leading to feast and famine in recent years

Rayon Grade DWP & CLP Price
($ per tonne)

3,000

2,000

1,000

Rayon Grade DWP

Rayon Grade CLP (exl VAT)

Outlook for Chemical Cellulose Demand

Viscose staple is the principal cellulosic

product
Nitration
3%

Ethers
10%

High
Strength
2%

Viscose staple is the

principal product made
from high purity
cellulose.
In 2011 viscose staple
production accounted
for:

Acetate
12%

- 64% of chemical
cellulose demand
Other
Commodity
9%

Viscose
Staple
64%

- 69% of DWP demand

- 62% of CLP demand

Demand for chemical cellulose is set to

continue to grow strongly
Chemical Cellulose Demand ('000 tonnes)

Commodity Grades
8,000

6,000

4,000

2,000

Speciality Grades

Chemical cellulose demand growth is being

driven by the rise in viscose staple output
Chemical Cellulose Demand ('000 tonnes)

Viscose Staple

Viscose Filament

Lyocell

Other

6,000

4,000

2,000

0
2000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

And much of this rise in viscose staple

output comes from China
Chemical Cellulose Demand ('000 tonnes)

West Europe

India

Asean

China

Other

6,000
5,000
4,000
3,000
2,000
1,000
0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Aided by a large increase in Chinese

viscose staple capacity
Year-on-year Capacity Change (%)

250

50%

200

40%

150

30%

100

20%

50

10%

0%
2008

2009

2010

2011

2012

Year-on-year Capacity Change (%)

Capacity (1980 = 100)

Nameplate Capacity (2008=100)

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
Nylon 6 Staple

Nylon 6 Filament

Polyester Staple

Polyester Filament Viscose Staple

Fibre Production ('000 tonnes)

30,000
25,000
20,000
15,000
10,000
5,000

Nylon 66 Staple

Nylon 66 Filament Chinese

Viscose filament 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

At the same time Chinas share of global mill

consumption of MMF has grown appreciably
Manmade Fibres

All Fibres

China's share cotton

China's share MMF

China's share all fibres

200,000
180,000
160,000
140,000
120,000

70%

China's Share of Mill Consumption

(%)

60%
50%
40%

100,000
80,000
60,000
40,000
20,000
0
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20

World Mill Consumption ('000 tonnes)

Cotton

Source: PCI Fibres Red Book

30%
20%
10%
0%

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.

Textile sales in Europe and USA have been

hit and this is impacting Chinas industry
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.

120

110
105
100
95

20
12

20
11

20
10

20
09

20
08

20
07

20
06

90
20
05

2005=100

115

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.

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

High Chinese cotton reserve price means that

viscose staple price is now lower in China
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.

6
5

US $ per kg

Low cotton price

was the case in
China up to 2010.

3
2
1
0
-1
2009

2010

2011

2012

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
Lenzing

Birla

Other Viscose Staple Capacity

Share of Global Viscose Staple Capacity

(exl. China) (%)

100%

80%

60%

40%

20%

0%
2008
Source: Lenzing & Birla publications & author estimates

2011

2012

Much slower growth in output of cellulosic

products made from speciality grades
Chemical Cellulose Demand ('000 tonnes)

Acetate Tow
1,800
1,500
1,200
900
600

300
0

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

Rayon Grade DWP ($ per ton)

3,000
2,500
2,000
1,500
1,000
500
0

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
Terrace Bay (Ontario)

Canada

Birla

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)

Total Additional Capacity

1.8 million tonnes

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

Total Additional Capacity

0.35 million tonnes

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

DWP Capacity ('000 tons per annum)

Much of the growth in DWP capacity is in

the established developed markets
N. America

S. America

W&C Europe

East Europe

China

India

Other Asia

South Africa

New capacity from

2011 to 2016

8,000

N Am: 1.5mn tons

6,000

W&C Eur: 0.9mn

tons

4,000

China: 0.9mn tons

Others: 0.7mn tons

2,000

Much of this new capacity will be for

commodity grade DWP
Commodity DWP Capacity
8,000

'000 tonnes

6,000

4,000

2,000

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
Global DWP Capacity

Temporarily Curtailed Capacity

Global DWP Demand/Capacity ('000

tonnes)

8,000

6,000

4,000

2,000

Capacity utilisation assumed to be 95%

Global DWP Demand

Especially, excess capacity for commodity

grade DWP
Other Commodity DWP Demand

Commodity DWP Capacity

6,000

6,000

4,000

4,000

2,000

2,000

Capacity utilisation assumed to be 95%

Commodity DWP Capacity ('000 tonnes)

Chemical Cellulose Demand ('000 tonnes)

Viscose Staple DWP Demand

But much will depend on the growth in

viscose staple output in China
Commodity DWP Capacity

VSF Forecast

VSF Dmnd (+10% pa)

VSF Dmnd (+15% pa)

Chemical Cellulose Demand &

Commodity DWP Capacity ('000 tonnes)

VSF Dmnd (+20% pa)

6,500

5,500

4,500

3,500

2,500
2009

2010

Capacity utilisation assumed to be 95%

2011

2012

2013

2014

2015

With new speciality DWP capacity coming

on-stream surplus capacity anticipated
Speciality DWP Capacity

1,600

1,600

1,400

1,400

1,200

1,200

1,000

1,000

800

800

600

600

400

400

200

200

Capacity utilisation assumed to be 95%

Speciality DWP Capacity ('000 tonnes)

Speciality DWP Demand ('000 tonnes)

Speciality DWP Demand

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.