Global Warming

It may be difficult to immediately grasp the meaning of this topic since everybody is writing and talking about it.

At first thought, you may indeed think about the global climate changes and the greenhouse effect that is being hotly debated today. It seems like everyone is talking about it but no one is quite sure what to do. However, before I touch more on that topic, I’d like to talk about a more concrete hot spot, meaning what is happening today in the tissue industry...

Guy Goldstein

The situation concerning the Tissue Industry, particularly in Europe, is indeed getting hot. Georgia Pacific’s European operations were meant to be off-loaded by Koch in an auction that never took place. Their expectations were beyond what one would have reasonably expected due to their financial results in the last few years. The projections given to the prospective buyers were interesting but probably out of reach with the existing structure, so the proposals were not at all in the expected bracket. Koch kept GP Europe, now called GP EMEA (for Europe, Mid East & Africa), and engaged in the “rapid transformation” process in order to try and do what they were telling prospective buyers could be achieved.

THE FIRST STEPS WERE RE-CENTRALIZING THE BUSINESS, transferring all decision-making powers to the US, and then getting rid of the excess fat at the top, trying to run the operations with minimal overheads. A lot of local Presidents or General Managers have been “retired” early, the UK-based European HQ Office has been closed and moved to Brussels, the businesses were re-aligned and are now strongly “coached” by the Atlanta-based organization. Once they have sanitized the organization and proven to the world that their assumptions were possible, it will be back on the selling block. Start saving and prepare your check-book!

Meanwhile, Procter & Gamble Europe successfully sold their European tissue operations to SCA – a blow to GP! The future will tell us how SCA will fare in a branded environment which up to now was not really their cup of tea. SCA is definitely the most aggressive of the Big Four, trying to increase their Empire, but are finding that running it centrally from Germany is as tough as it was for the Roman Empire to be run by Caesar in Rome.

While GP and SCA were busy thinking about their future strategy, the smaller guys were not sleeping: Sofidel started up 150,000 tons of tissue; ICT (Tronchetti) expanded in Spain and Poland and improved their positions; LPC was getting busy in Sweden and then acquired two mills – one in Roanne, France and recently the K-C mill in Duffel, Belgium. I think their buying spree is not over yet.

WITH A LOT OF EXCITEMENT COMING UP AND A TOUGHER MARKETPLACE TO BE EXPECTED, WHO WILL BENEFIT –CONSUMERS OR DISTRIBUTORS? I believe distributors will have the lion’s share resulting from this concentration, and consumers will be left with the crumbs as usual.

In Central Europe there are many projects that are slow to materialize but capacity is needed to meet family income development and modern, more comfortable urbanization. We are seeing higher-end products coming to market since requirements for quality are becoming much more important. Hygiene improvements are also leading to AFH products proliferation as tourism is growing fast.

Projects are concentrated on cities or provinces rather than global, due to the size of the countries and distribution issues.

Distribution is growing and expanding and will definitely lead to market growth.

The TAD world is being challenged by Voith Atmos technology: will it deliver results? Voith is promising less energy consumption with similar end product results – certainly the way to lessen impact on the environment. Will it be more successful than Metso’s STT technology or GP’s e-Tad? Only the future will tell, but definitely it is a step in the right direction.

In Asia, China is still booming with APP announcing dozens of new tissue machines and starting their own tissue machine production. Vinda made a deal with SCA taking a minority share. SCA is also testing the waters in India. Either they have a real international expansion strategy, which I believe, or... they are firing in all directions just in order to be there so they don’t miss anything.

IN THE AMERICAS, THE BIG GUYS ARE STREAMLINING THEIR OPERATIONS, taking out high cost production and obsolete equipment, trying to be more competitive against newcomers. There really is a surge of converters back integrating due to tissue capacity becoming shorter.

Latin America is re-evaluating its strategy and needing to review its options, so you can expect more new capacity as the availability of US Jumbo reels is fading away. I anticipate quite a few 25,000-ton machines will be built as the market expands and penetration increases.

There is still a lot of new capacity coming on stream in the Middle East which should be a source of potential supply.

The Gulf area, Syria, Turkey, Egypt and Israel are all seeing large machines coming up, creating overcapacity. Africa will benefit from this output and it will delay local entrepreneurs from investing in their own tissue production... but they will pay a high price for Jumbos.

…AND NOW ONTO THE HEADLINE, GLOBAL WARMING. We read a lot in the newspapers about Global Warming issues.

It is an alarming phenomenon created by the 19th and 20th century industrial revolution in Europe and North America and for which we are now presented with the issues. Two centuries of neglect in forecasting the effects of these developments and still some countries reluctant to pay for a viable solution. I believe we need to speed up our efforts to lessen the effects of what is doomed to happen.

If we look at Carbon Dioxide (CO2) emissions in tons per country, this is what we can estimate:

• U.S.A. 7,068 Million tons

• Russia 2,024 Million tons

• Japan 1,335 Million tons

• Germany 1,015 Million tons

• Canada 758 Million tons

• U.K. 665 Million tons

• Italy 583 Million tons

• France 563 Million tons

There are no estimates for China or India yet but obviously these countries are not taking a very active stand. It is believed though that the figure for China is probably around 5,000-6,000 million tons due to the size of its population and the transfers. The shift of industries to lower cost areas is in fact moving pollution in less prepared areas that cannot afford solutions. Unless the Kyoto Protocol is signed and enforced by the major industrial countries, i.e., the US and Russia, deserts will expand and temperatures will rise further. Let us all try to influence our own countries to be more responsible in preserving our Planet.

We have to tackle the issues in a more professional way, as an industry, without waiting for political decisions that could come too late. The future of the planet is at risk. We are creating a weapon that could modify the entire environment and threaten our very existence, as well as that of our children and grandchildren. I really believe that it is time for us to collectively take the measures needed to decrease the risks and find solutions to this enormous problem.

What is the tissue business doing? How are we as an industry showing to be good world citizens? We, in general have been looking at saving Energy and sustaining forest stewardship, is it enough?

I truly believe we need to be more pro-active in finding ways to reduce significantly the emissions and work on the process.

Save fibers, water, energy. It will make a better tomorrow. •

If you have any questions you would like to place to Dr. Goldstein’s attention, you can write to: guy.goldstein@perinijournal.com

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