Features
Uncertainty clouds the forecast for chemicals

Although market conditions for the manufacturers of industrial chemicals used in the Canadian pulp and paper industry were somewhat more stable in 2012 compared to the recent past, the outlook for 2013 appears uncertain and ambiguous. Like many other heavy industries, the chemical industry will continue to soldier on and hope that better days are, if not just around the corner, at least at the end of the tunnel.
Demand mirrors paper production
Ted Kelly, vice-president, business management, paper chemicals at BASF Corporation, says the demand for paper coating and paper-making chemicals in 2012 was in line with production trends.
“North American paper manufacturing in 2012, compared to 2011, was a mixed bag, depending on the paper grade,” Kelly said. “We saw a decline in the production of graphic paper versus 2011, by just over 3.5%, while the production of packaging paper grades and tissue grades were essentially flat compared to 2011.
“However, an exception to this rule is the paperboard market, where the use of chemistry enables the manufacturer to reduce basis weight or substitute recycled fibre for virgin fibre, while maintaining strength. It also gives a second option to increase productivity on machines that are dryer-limited by improving drainage.”
Kelly foresees a continuing decline in the production of graphic papers over the next five to eight years, driven mostly by the replacement of paper storage by electronic storage.
“We expect to see production levels decline by about 2.5% per year in that time,” he said. “In the packaging segment, we expect a roughly flat production tonnage between now and 2020. And in the tissue area, the expectation is that tissue production will grow at a rate close to GDP. The chemical demand for those grades should parallel their production trends, but with some upside in the packaging segment related to packaging innovation.”
Upward price pressure in 2013
Buckman’s Davor Mehes is cautiously optimistic about the North American chemical manufacturing sector in 2013, despite various projections to the contrary and the high degree of uncertainty in the market  
“We expect 2013 demand growth will exceed 2012 modestly, while overall supply and demand will remain balanced,” says Mehes, vice-president and general manager – sales of Buckman Canada. “We are preparing for 5% upward price pressure on overall chemical pricing in 2013. However, significant uncertainty remains about the future of the overall global economy and we remain positioned for exaggerated pricing or supply and demand movements in either direction.”
Mehes says Buckman Canada continues to grow as it gains pulp, paper and tissue industry market share.
“However, demand for our chemicals has dropped where pulp and paper production capacity has been curtailed,” he said.
Mehes says overall growth of industrial chemical demand in 2012 was less than in 2011, but was roughly in line with the growth of North American gross domestic product. Swings in demand continued in 2012, but with less exaggerated movements and shorter up-down cycles compared to previous years.
The chemical industry’s concerns can be summed up under the general heading of uncertainty, Mehes says.
“The magnitude and general surprise of the financial collapse followed by the European sovereign debt and other crises have left a lasting impression on manufacturers”, he said. “This has resulted in a threshold shift down in overall business confidence and manufacturers are exercising an abundance of caution. Manufacturers of industrial chemicals are much more cognizant of the global events, systemic risks, geo-politics and the macroeconomic environment. In this regard, there is much unsettled business and risks remain elevated.”
Focus on engineered solutions
Some chemical manufacturers are responding to these uncertain conditions with new initiatives to consolidate their operations or introduce new products they hope will win them greater market share. For example, AkzoNobel Pulp and Performance Chemicals (formerly Eka Chemicals) launched the EcoFill family of products in 2012. Lee Sampson, vice-president sales and marketing for paper chemicals America, says EcoFill will be “a heavy focus” of the company in 2013.
EcoFill is based on engineered cellulosic additive (ECA), which enhances paper strength and filler content. The company says EcoFill makes it possible for papermakers to significantly reduce costs and improve the sustainability of their operations, without having to compromise production efficiency.
As part of a new business strategy and management team, Eka Chemicals changed its name in April 2012. Sampson says the move aligns Eka Chemicals more firmly with the AkzoNobel parent company.
The name Eka will stay as a product brand for the pulp and paper industry. The company says the new strategic focus will broaden the scope of the business and accelerate expansion into new markets.
“We are going to focus on innovative solutions for the future and we see a large potential in bleaching chemicals, silica technology, polymers and expandable microspheres, which are some of the key areas for growth in the long term,” said  Ruud Joosten, managing director.
Another chemical manufacturer on the restructuring path is Kemira Oyj, of Helsinki, Finland. According to senior manager of external communications Anna-Kaisa Säkkinen, Kemira has been busy restructuring its business over the last five years.
“As a result, we have been able to consolidate our business in line with the end-customer industry,” she said.
Sales of chemicals from Kemira’s paper segment increased in every quarter between January and September 2012, but were still lower than in the comparable period of 2011.
On a more positive note, Säkkinen says, prices strengthened to some extent in 2012. In March, Kemira’s paper segment announced price increases in all regions of 5 to 15% for polymers, dispersants and wet- and dry-strength products.
In July, Kemira launched KemFlite. The company says KemFlite is a new concept to reduce paper and board machine problems that are caused by deposits due to the agglomeration of hydrophobic particles. KemFlite manages hydrophobic substances, particularly their size, before they form deposits.
Chemical buyers can only hope that the global economy does not prompt major supply /demand inbalances in 2013, and that chemical suppliers continue to develop more effective but less costly solutions to pulp and paper process challenges