MarketIssues
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MI
MarketIssues
COSTS HAVE REACHED UNPRECEDENTED HIGHS: HOW TO MITIGATE THEIR WORST EFFECTS
Tissue producers faced multiple challenges in 2021 as demand cooled down and input costs increased significantly. During the third quarter of 2021, modelled manufacturing costs in Europe and North America exceeded previous historical levels on both sides of the Atlantic. For good reasons, companies are increasing their attention towards additional fibre sources and energy efficiencies to take on cost fluctuations. Here, AFRY Management Consulting’s Pirkko Petäjä, Principal, Hampus Mörner, Manager, and Santtu Koskinen, Analyst, assess the situation.
I Pirkko Petäjä Principal, AFRY Management Consulting
n the wake of the pandemic, the tissue industry has been experiencing two very different but also somewhat extreme years. In short, 2020 was characterised by strong global sales (At-Home) combined with low and mostly stable input costs, while 2021 was the opposite in the form of declining or modest sales growth combined with soaring input costs. Last year, the tissue industry was exposed to surging fibre and energy costs simultaneously. A rare situation hardly observed historically. This overall rise in commodity and energy costs had of course a negative impact for all raw material and energy intense industries, including tissue. Reading from available financial results, the negative impact from increasing manufacturing costs on profitability seems to have lasted throughout the most part of 2021. Signs of improvement started to become visible only towards the end of the year in the form of costs being passed on
Hampus Mörner Manager, AFRY Management Consulting
to the clients in prices and early easing of fibre costs (at the time of writing, financial results from the fourth quarter are still to be released).
Fibre and energy took a major toll on manufacturing costs Based on AFRY’s unit price databases and cost modelling tool, manufacturing costs for selected European and North American tissue machines were modelled. The analysis covers most of the production footprint in North America and Europe and is divided into four different cases depending on fibre base and region. Full usage of the main fibre is assumed, no virgin/RCF mixture furnishes are considered in the analysis. For fair comparison, every tissue machine in each respective case is assumed to be producing comparable products with similar grammage (gsm) and fibre furnish.
READING FROM AVAILABLE FINANCIAL RESULTS, THE NEGATIVE IMPACT FROM INCREASING MANUFACTURING COSTS ON PROFITABILITY SEEMS TO HAVE LASTED THROUGHOUT THE MOST PART OF 2021. SIGNS OF IMPROVEMENT STARTED TO BECOME VISIBLE ONLY TOWARDS THE END OF THE YEAR IN THE FORM OF COSTS BEING PASSED ON TO THE CLIENTS IN PRICES AND EARLY EASING OF FIBRE COSTS (AT THE TIME OF WRITING, FINANCIAL RESULTS FROM THE FOURTH QUARTER ARE STILL TO BE RELEASED). Europe (EUR/t). CIF
1580
NA (USD/t). DD 1325
1150
1133
900
968 712
577 229
NBSK
BHKP
20Q3
Santtu Koskinen Analyst, AFRY Management Consulting
4
Tissue World Magazine | January/February 2022
284
Office waste (GER)
21Q3
Figure 1: Fibre prices 21Q3 vs. 20Q3.
157 NBSK
BHKP 20Q3
207
Office waste 21Q3
