megamenu-bg

Producers use Fisher's business intelligence to understand their operating and competitive environment.

Mill suppliers use Fisher’s business intelligence to get the most out of product development, sales, and marketing investments.

Corrugate/box producers, suppliers and purchasers use Fisher’s intelligence to understand packaging markets.

Investors use Fisher’s business intelligence resources to identify opportunities and evaluate risks and potential returns.

x
 
FI Insights

Tissue World Japan, 2020: The Economy Shows an Upturn in Asia’s Leading Tissue Consumer

December 17, 2020
Author: Bruce Janda

At 17 kg consumed yearly per person, Japan’s tissue consumption rate leads all of Asia and is more like that of Western Europe and North America. Paradoxically, Japan also leads the world with the development and consumer acceptance of automated toilets that replace the need for toilet paper for cleaning. These appliances have become routine in upscale hotels and homes. It is possible that the Japanese tissue consumption rate could be even higher without the automated toilet systems.

Japan’s Tissue Mills range across its territory as shown in Figure 1. The growth of new capacity is shown in Figure 2 as the total count of tissue machines operating, under construction, or announced. The period from 2015 through 2018 saw an increase of over 70% of new tissue machines added as tissue companies in Japan built capacity to replace a portion of the tissue imports required to support consumption. More capacity is announced and under construction.

Figure 1 Japan’s Tissue Mills

tissue world 1

Figure 2 Japan Tissue Machine Additions/Deletions

tissue world 2

Japan’s economy has been suffering from low growth for decades, but it has recently improved. The blue bars in Figure 3 show the population slowly decreasing from 2007 to 2019. The population loss and overall aging has reduced consumer consumption, resulting in slower economic growth and lower total tissue demand. However, the plotted line shows strong growth in GDP per capita since 2009 that supports the ability of Japanese consumers to spend on tissue products such as paper towels.

Figure 3 Japan Population and GDP/Capita

tissue world 3.1tissue world 3.2

Inflation in Japan has been very low overall with some historic deflation as shown in the blue bars in Figure 4. More importantly, the plotted line in Figure 4 shows a large drop in unemployment since 2010. Taken together, these economic indicators support continued, but very slow, increases in tissue demand. This contrasts with the rapid buildup of new tissue machines seen in Figure 2. An examination of import and export volumes can shed further light on this matter.

Figure 4 Japan Inflation and Unemployment

tissue world 4.1tissue world 4.2

Figure 5 shows that Japan has relatively low exports versus the main customer countries. South Korea is the largest tissue customer for Japan. Other key customers include China, Philippines, Indonesia, and Hong Kong.

Figure 5 Japan Tissue Exports

tissue world 5

Figure 6 shows Japan’s tissue imports growing up to 2016 when the latest round of Japanese tissue capacity came online. Key tissue suppliers to Japan include China, Indonesia, Vietnam, and the United States.

Tissue imports are now outpacing exports by about 12X. Japan’s tissue companies have room to expand if their domestic production is competitive with these imports.

Figure 6 Japan Tissue Imports

tissue world 6The country’s domestic tissue production is focused on consumer tissue products as shown in Figure 7. Commercial or AfH products make up a small percent of the total production. This probably indicates that the aging population is focused on at-home products and the imports could be significantly comprised of commercial products.

Figure 7 Japan Tissue Grades

tissue world 7

A further breakdown of Japan’s tissue production is shown in Figure 8 with the finished tissue products produced. Despite Japan’s leadership in automated washing toilets, consumer bath tissue makes up most of its tissue production. Consumer facial tissue is the second most popular grade followed by consumer towels, indicating that Japan does not appear to have the consumer towel culture of North America.

Figure 8 Japan Tissue Finished Products

tissue world 8

Japan relies mostly on recovered paper for most of its tissue fiber as shown in Figure 9. Eucalyptus and Southern hardwood and softwood make up the rest of the fiber consumption. It produces no kraft pulp and a very small amount of sulfite pulp. Market recycled pulp is sold as bales and captive slurry systems.

Figure 9 Japan Tissue Fiber Sources

tissue world 9

Figure 10 Japan Tissue Producer’s Fiber % Purchases by Product

tissue world 10

Japanese tissue producers rely on mostly internally processed recycled fiber for the major finished products such as consumer bath, facial, and towel. The chart in Figure 10 shows that consumer napkin, tissue wrap stock, and absorbent liner production use mostly purchased pulps. However, some of these market pulps are from domestic recycled fiber producers.

Since most tissue production is consumer bath, this can be misleading as to where the volume of imported fiber is going versus the percentage makeup of smaller product types.

Figure 11 Japan Tissue Production Fiber Volume by Finished Product

tissue world 11

Figure 11 provides a view of purchased fiber type and volume by finished product. This analysis completes the view in Figure 10 to provide a comprehensive picture. Consumer facial and bath use most of the imported eucalyptus pulp.

The import and export data in Figures 5 and 6 suggest a comparison set for benchmarking Japan’s tissue manufacturing assets. China, Indonesia, Vietnam, South Korea, Turkey, and the United States all have tissue industries with regional or global impacts and are in the Japan trade data set. Please note that all the benchmark exercises that follow are based on the average of each country’s fleet of tissue machines. Some of the tissue fleets are very similar, while others have new and old assets.

Figure 12 Japan Benchmark of Tissue Machine Quality

tissue world 12

Figure 12 shows Japan’s average tissue machine against the benchmark set averages, differentiated by the technical age of the machines and speed of operation. The size of the bubbles represents the relative size of each country’s tissue production. The Unites States and Japan have relatively old assets, and China, Indonesia, Turkey, and Vietnam are much newer. China, Vietnam, and Japan operate machines slower on average. Turkey, Indonesia, and the United States are in the top speed group. Another way of evaluating the tissue fleets would be a comparison on trim width. China would probably rank much lower with its numerous small machines.

Unlike the United States, Japan and the rest of the benchmark set do not have a measurable advanced tissue technology for wet texturing and structuring. Over 42% of the American fleet has some form of this technology and current projects and announcements will rapidly push this to 50%. This technology hasn’t made an impact in the Asian Pacific Region yet, except for Australia. China is reported to be experimenting with smaller home-build equipment.

Figure 13 Japan Average Tissue Production Cash Cost Benchmark

tissue world 13

China, Indonesia, and Vietnam all are advantaged in average cost compared to Japan and the United States. If transportation costs were included, this difference would be magnified. Japan appears to have a much higher energy cost than all the others in the set, except for South Korea.

Figure 14 Japan Energy Benchmark

tissue world 14

Figure 14 spotlights the comparison on energy costs and shows the magnitude of disadvantage in this metric experienced by Japan and South Korea.

Figure 15 Average Tissue Mill Viability

tissue world 15

The cash cost benchmarks provide a snapshot of the health of the country’s tissue industry. Figure 15 provides a three-five year future assessment using Fisher International’s Viability Benchmark that includes costs and compares the future investments required, company risk, along with other forward-looking factors to predict future completeness. Again, Japan and South Korea appear to be more at risk of replacement or being shut down by import pressure.

Figure 16 Carbon Benchmarking

tissue world 16

Carbon emissions per ton of finished product are expected to become a larger factor in the cost and viability of operations and acceptance of imported products. Japan’s tissue assets are not significantly disadvantaged in this analysis. The United States has the highest level of emissions. This is expected due to its unusually inexpensive energy and high percentage of advanced technology. The TAD process uses more energy per ton of production but tends to produce higher performance at lower basis weights. That is not included in this analysis.

Japan is in the process of renewing its tissue assets with significant additions since 2015. These are expected to result in replacement of some of the older high-cost machines. Low-cost tissue imports from China and Indonesia will continue to compete based on lower cost manufacturing factors. The country is now growing its economy while continuing to age and lose population. Tissue consumption per capita will also grow slowly despite automated robotic toilets.

Analysis of competitive position requires specifics on tissue producers and individual machines. This article presents a static summary of Japan’s tissue industry today. Fiber prices, exchange rates, and environmental regulations will change, providing some participants with advantages and others with new challenges. The country’s tissue mills will continue to change hands and perhaps consolidate; neighboring countries will likely invest in tissue-making capacity, thus affecting Japan’s imports and exports.

 

iCRM CTA

 

Back to Blog

You May Also be Interested In

June 23, 2023
South Korea's Tissue Market Update 2023
In the export-driven powerhouse, the tissue sector is a rare exception - a net importer. But with unemployment and...
Continue Reading
April 13, 2023
Under Energy-Price Pressure Germany’s Slow-Growth Stage Sees Its Decarbonization Rate Accelerate
When we last focused on Germany's tissue market more than two years ago, the world was dealing with the severe...
Continue Reading
February 16, 2023
Impact of Out-of-Office Work Opportunities and Spain’s Preferred Climate Expected to Result in Further Gains
The Spanish tissue manufacturing business was last reviewed in this column a little over two years ago. We noted that...
Continue Reading