Spotlight on tissue

The European market: Bodo Kottwitz’s analyses



The tissue market has always accompanied the economic dynamics of various markets and becomes a precise indicator of their growth. Following the evolution of the tissue market can help understand how to make the best investments in view of the market of the future.

The tissue market in Europe is worth 8.44 million tonnes a year. It is a lively market that has started showing the first signs of recovery after a long period of crisis. Analysts believe that, although one cannot talk about proper growth yet, the levels lost in the past years can at least be recovered.

In Europe, the first four countries that totally have one quarter of the market will be leading in this trend, specifically Germany (17%), United Kingdom (13%), France (11%) and Italy (10%) (figure 1).

The European tissue market in 2015 (source: Risi).

Although it is true that consumption and production are important factors to consider, a lot of useful information can be obtained from the analysis of the way in which tissue and tissue-based products are marketed.

This was clearly stated in Lucca (Italy) on the occasion of the Miac 2016 exhibition by Bodo Kottwitz, founder and director of BKay Tissue Advice, who chaired the two conferences devoted to the tissue industry that took place during the fair.

«The future European tissue market is faced with unknowns, especially with reference to Indonesian productions and the way in which Turkey will act on international markets»

The trade flow

Kottwitz illustrated the evolutions and forecasts of the tissue market and particularly focussed on tissue distribution. The identification of the destination of trade flows can namely allow to understand what the markets of the future are and where companies are going to direct their investments.

Based on available data, in particular, «imports and exports accounted every year for more than 3 million tonnes in Western Europe and 1 million tonnes in the Eastern part of the continent. Kottwitz says that «this is great news, showing that in Europe tissue producers can meet the needs of the local market, as well as find commercial outlets for their products outside the national borders. Tissue is furthermore marketed in various forms, both to be processed elsewhere and as a finite product after converting (figure 2).

Tissue imports and exports in European countries, first six months of 2016 (source: Risi).

Every nation obviously has its own characteristics. Once again, Germany is one of the largest markets. The country, which is already the biggest European producer and is characterized by a substantial balance between imports and exports, «shows a high level of imports, as well as large quantities of tissue paper being exported – as a matter of fact, Germany is the base of the biggest producers of tissue handkerchiefs and napkins, which are also marketed abroad, especially in neighbouring countries.

Sweden is yet another major producer with about 100 thousand tonnes of paper being exported every year, while as far as imports are concerned, numbers are much lower, with only 20 thousand tonnes of tissue paper being imported every year.

Another very interesting market for the sector is undoubtedly Poland. The striking data here refer to imports with about 150 thousand tonnes imported every year, while exports are mainly targeted to the Czech Republic and Germany. Kottwitz explains that «Finished products enter the Polish market, i.e. tissue table cloths or handkerchiefs; the vast majority of local producers do not manufacture the quality products so much demanded by the internal market». The Polish market is, however, yet another market that is currently undergoing a transition towards better production, that is why it might be appealing for the companies in this sector.

Importers and exporters

According to Kottwitz, however, the data on the United Kingdom, Italy and Greece is the most striking one. Great Britain is characterized by large imports, Italy by equally high exports, which Greece registers an equal share of imports and exports.

More specifically, the English tissue sector has registered a reduction in production back to 2011 levels. «This is mainly due to the difficulties currently faced in investing in Great Britain. This decrease in production is, however, countered by an increase in tissue consumption on the internal market», which leads to a resulting increase in imports «mainly coming from Turkey (figure 3), which exports 100 thousand tonnes every year to the English market, thereby reaching a total value, net of transport costs, that is similar to the one registered by local products». This implies the need to reorganize internal production. As Kottwitz says, «English producers should undoubtedly review their costs and invest in new machinery for tissue production», in other words they should consolidate their production to meet the demand of the local market.

Imports of big parent rolls in Great Britain in the first six months of 2014, 2015 and 2016 (source: Risi).

Compared to 2015, 2016 also registered an increase in the quantity of paper imported from Indonesia, whereby the United States remain the country’s preferred export destination. «Indonesia’s production capacity is, however, rising between 1 and 2 million tonnes, whereby this additional quantity won’t be totally or partially absorbed by the US and Taiwan, i.e. another sales market for Indonesian products, and might therefore be directed to England or Croatia as new target markets».

And while Great Britain is an importing country, as was pointed out, Italy is doing the opposite. In Italy, «over the last five years a 115 thousand tonne increase in production was registered as against a stable internal consumption. In particular, the country registered an increase in the production of parent rolls, that are mainly manufactured by 40% of companies whose exports are mainly targeted to the German market, which remains by far the biggest target market for Italian products» (figure 4). A relatively stable trend has emerged from the data analysed, which refer to three years: 2014, 2015 and 2016. Exports to the British market are relatively stable, too, although data have highlighted a slight upward development with about 40 thousand Italian parent rolls bound for Britain. As Kottwitx points out, Italy is faced with the problem of energy costs that are markedly higher compared to the rest of Europe.

Imports of big parent rolls in Italy in the first six months of 2014, 2015 and 2016 (source: Risi).

The Greek case and the Turkish ability

The tissue market in Greece is very peculiar. «The country has shown stable consumptions, yet with a slightly decreasing production» (figure 5). As Kottwitz points out, the country is not facing a favourable situation: there is no development and there is lack of several goods and services, which have to be necessarily imported. Tissue products are permanently imported especially from Italy, however over the last few years to an increasing extent from Turkey, too, whereby the latter has even doubled its imports to Greece registering a marked difference in 2016 compared to the same period of 2015. «Turkish producers are quick to detect the future needs of the markets and can thus rapidly become market protagonists. By way of example, they invested in double paper machines for the production, in particular, of tissue rolls, to be mainly sold on the Greek market», and much more than that.

Imports of big parent rolls in Greece in the first six months of 2014, 2015 and 2016 (source: Risi).

Turkish producers have proven to act better and more rapidly than others on European markets. This is evidenced by data, which show a constant increase in the exports of parent rolls from 2014 with a significant acceleration in 2016. The major leap forward of tissue exports in Turkey mainly concerns Greece, where Turkish exports doubled in 2016 compared to the same period of 2015. Yet the lion’s share was taken once again by the United Kingdom, which remains the first sales market for Turkish tissue products. The Israeli market ranks third in terms of Turkish exports (figure 6).

Exports of big parent rolls in Turkey in the first six months of 2014, 2015 and 2016 (source: Risi).

What to expect

As Kottwitz says, the analysis of available data shows a European market whose development is still characterised by several unknowns: uncertainties still remain on the increase of the Indonesian production capacity and how Turkish producers will continue to act in the tissue sector. This is certainly a vital market, which is changing a lot and can hold some real surprises in years to come.

As regards Italy, the country will always keep high capacities, however there are currently no signs of a stage of development where the internal market can absorb the tonnes of tissue produced in the future. In the analyst’s conclusions, the Italian sector is definitely called upon to optimize its costs, including production costs, and face the increased imports of tissue products that will come from Turkey in the future.

Thanks to

This article was written on the occasion of the Miac Tissue conferences held in Lucca (Italy) during the Miac 2016 exhibition.