Sappi expects to grow its dissolving wood pulp production capacity by about 50% over the next five years, says the group’s Southern Africa CEO, Alex Thiel.
"Worldwide growth rates are about 4.5%. We’re quite fortunate in that our two main customers are really frontrunners and we see our capacity growth in dissolving pulp at about 8.5% per annum for the next five years — so we’re desperate in terms of adding capacity at this stage."
Sappi is investing in its dissolving wood pulp business to mitigate declining demand for paper. Dissolving wood pulp is used to produce viscose fibre for clothing and textiles, among other applications.
"There’s strong demand, we’re getting good pricing," Thiel told Business Day.
Demand was being driven by a global shortage of cotton and a general preference for clothes made from viscose fibre rather than polyester.
Thiel said while the strengthened rand was "not ideal" for exports — Sappi sells dissolving wood pulp mainly to manufacturers in Indonesia, China and India — "even at the R12 rate [to the dollar] we still make pretty good margins on the product".
Sappi would spend about R1.3bn on its Ngodwana mill in 2018 to expand its dissolving wood pulp production capacity at the facility by 50,000 tonnes a year. It also planned to spend R6.2bn to expand its dissolving wood pulp capacity at its Saiccor mill, Thiel said.
Sappi said in December it had started preparatory work on the Saiccor expansion. The group wanted to increase the mill’s capacity by 250,000 tonnes a year "to meet strong projected demand growth".
At the group’s Cloquet mill in the US, Sappi was contemplating similar expansion plans.
According to data from market-intelligence service Hawkins Wright, global demand for dissolving wood pulp was just under 7-million tonnes in 2017, with textiles accounting for 60% of that. Demand was likely to reach about 8.5-million tonnes by 2020.