The specialty cellulose market is opaque, with supply concentrated among a handful of suppliers while demand is highly fragmented across multiple sectors. Unlike the paper-grade pulp industry, there are no formal association statistics to quantify shipments. This lack of data has led to a wide range of opinions about the market's size and varying representations of historical and future shipment trends.
This ambiguity prompted us to conduct an in-depth appraisal of the sector, aiming to map shipments by grade and destination. Our estimates are derived from multiple sources, including discussions with industry contacts, information published in company reports, and global trade statistics.
Our results reveal a market that has faced a challenging decade, with relatively stagnant demand coinciding with the emergence of low-cost supply from Brazil. This combination has exerted significant pressure on prices and discouraged further investment in new capacity. However, the sector appears to be at a pivotal juncture, as the long-term outlook for demand improves just as capacity begins to contract due to the closures of GP Foley and RYAM Temiscaming.
In the short term, the impact of these closures will be mitigated by an unprecedented fall in ether-grade demand, driven by a collapse in the demand for cellulose ether derivative products, particularly those used in the construction industry. Other grades have also struggled in the context of a relatively weak global economy.
However, when demand starts to recover, we believe the full repercussions of the mill closures will become apparent, with the supply/demand balance expected to tighten significantly. This tightening is likely to support higher prices, particularly for grades where GP Foley had a significant market share, such as tire cord, casings, and technical paper.
Ultimately, these higher prices are expected to stimulate a supply and demand response that will help restore balance to the sector. New supply, beyond what we have forecasted, could come from the restart of several plants: Temiscaming, Foley, or Cosmo. However, more realistically, higher prices may curb demand by encouraging the increased use of hybrid pulps, especially in the MCC market. In our view, this constitutes a major risk to our shipments forecast.