Selective Cuttings

Dissolving pulp: A growing market?

January 10, 2013

Dissolving pulp is a chemical pulp that has been further processed into a product that can be used as feedstock for products such as rayon, cellophane, or cellulose acetate. When cotton prices spiked in 2010/2011, rayon became increasingly used as a substitute for cotton in many textiles, which sharply pushed up dissolving pulp prices. This has become a boon to the Canadian pulp industry.

Canadian dissolving pulp exports

This chart shows dissolving pulp export values between 1995 and 2012, to China, the U.S., India and the rest of the world. Dissolving pulp exports for the first 11 months of 2012 are higher relative to the same period in 2011, primarily due to the rapid growth of exports to China completely offsetting the reduction of exports to the U.S. and the rest of world.

Canada’s volume of dissolving pulp exports rose 43% in the first 10 months of 2012 compared to the same period in 2011.  China was the major recipient of increased production, accounting for 49% of total dissolving pulp exports, followed by India.  Over this period, Canada’s export value of dissolving pulp totalled $645 million, equivalent to 21% of total NBSK exports.

The growth in exports to China and India are explainable, at least partially, by ownership structure. A high percentage of dissolving pulp is used internally within vertically integrated companies, including some multinational conglomerates from emerging economies who have actively invested in the pulp industry in Canada in recent years. The entire output of some Canadian mills is shipped to textile mills in India or China.

Recently, dissolving pulp prices have declined due to increased supply from newly created global capacity, mostly from conversions from market pulp mills.  In addition, projections of further cotton shortages have failed to materialize, and the dissolving pulp market is somewhat oversupplied.  However, over the longer term, conservative estimates suggest global demand for dissolving pulp could grow at 6.5-7% per year, feeding into the growing global textiles industry, and the dissolving pulp markets will continue to be healthy.

Industry analysts expect that dissolving pulp prices will likely stabilize in 2013 as demand and supply become more balanced.