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RBC Tissue Tracker: U.S. Operating Rates Climb to Seven-Month High

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RISI, Boston, Mass., USA, has released its U.S. tissue statistics for February. Highlights include the following:

Converted product shipments 2.4% higher y/y (+2.1% 2 mo. YTD) – Total at-home (consumer) shipments of converted tissue products rose 1.7% y/y in February (+1.7% 2 mo. YTD), with toilet paper volumes increasing 1.5%, towels up 1.9%, and facial 3.3% higher than a year ago. Total away-from-home (AfH) shipments of converted tissue products increased 3.8% y/y (+2.8% 2 mo. YTD), with toilet paper volumes increasing 2.9%, towels up 3.2%, and napkin volumes 2.6% higher than a year ago.

Parent roll production rose 2.3% y/y (+1.6% 2 mo. YTD) – Parent roll production was 670,000 tons, 2.3% higher than a year ago (-5.5% m/m). Domestic parent roll consumption was 684,000 tons, up 3.0% y/y (+1.7% 2 m.o YTD) and 4.7% lower m/m.

Higher operating rates m/m – Operating rates rose from 92.6% in January to 97.0% in February (+20 bps y/y), with monthly capacity 2.1% higher y/y (+2.0% 2 mo. YTD), due to Cascades' new Oregon capacity.

Capacity changes – RISI has moved up (by a quarter) the expected startup of APP's first (of two) new machines in Maine to Q415 due to the company's having commented that the civil construction delay (from harsh weather) will not affect the PM's expected December startup. RISI also noted that, in January, it mentioned talk in the trade that Sofidel's Cellynne business was looking at adding a tissue machine to target the consumer market.

Tissue market can support additional capacity (in moderation) – As discussed in its latest deep-dive report on tissue, RISI notes that the N.A. industry must increase capacity by ~160,000 tpy to meet demand growth of ~1.5%/yr. RISI estimates that industry "creep" leads to ~95,000 tpy growth in existing capacity, implying that the market requires at least one new 70,000 tpy machine per year to stay in balance. Factoring in likely capacity shuts, some in the industry believe that 2.5 new 70,000 tpy machines per year are needed to meet rising demand. With ~315,000 tpy of new capacity on track to start up this year, and a further ~275,000 in 2016, RISI says we may see some producers shut some of their older, higher-cost capacity to optimize their mill systems.

Parent roll prices up m/m for both virgin and recycled grades – High-quality virgin parent rolls experienced an uptick for the first time in six months in February to $1,299/ton, up 0.3% from January (-1.4% y/y). Recycled parent roll prices were also up, with the high-quality grade at $1,071/ton, up 0.6% m/m (-9.2% y/y). While converted product consumer prices saw high-single-digit declines in 2014, prices appear to have stabilized for bath tissue/facial in February 2015. In mid-2014, major producers announced AfH price hikes of 8%–10%, which started to take effect at the beginning of July 2014 (and are still being gradually partially implemented through H115).
 
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