Tag: Taeyoung Industry Corp.

  • A Common Thread

    A Common Thread

    Photo: Celanese

    Filter manufacturers face higher prices and tow shortages, though not everybody has been equally affected.

    By Stefanie Rossel

    Of the roughly 5.2 trillion cigarettes consumed globally each year, 98 percent feature a filter made from cellulose acetate (CA) tow, a thermoplastic cellulose fiber with excellent absorption characteristics manufactured from dissolved wood pulp. Over the past years, suppliers of this base material faced many challenges, among them the continuous decline in global cigarette consumption since 2013, which also meant decreasing demand for tow and cigarette filters.

    Since last year, however, the situation has reversed: The market for acetate tow has tightened. In May 2022, Celanese Corp., one of the world’s leading suppliers of acetate tow products, declared force majeure on western hemisphere acetyl chain and acetate tow products because of unanticipated interruptions in raw material supply in the Texas Gulf Coast. The condition was lifted again in December. Celanese Corp. was unavailable for comment.

    In the meantime, other tow manufacturers announced price hikes. Cerdia, for example, announced a cost surcharge of $0.46 per kilogram on all acetate tow grade shipments as of March 2022.

    Christian Chavassieu

    “Last year, prices for acetate pulp went through the roof because of rising costs for wood, chemicals, labor, energy and shipping,” says Christian Chavassieu, managing partner at CelCo Cellulose Consulting in Geneva. “Manufacturers could either accept the price increase or risk a shortage.” Acetate tow suppliers also suffered from other issues, such as a lack of essential chemicals. Acetate tow is made by dissolving wood pulp in a mixture of acetic anhydride and sulfuric acid. The resulting solution is then extruded through small holes to form thin fibers, which are cut into small lengths after cooling.

    To create high-purity cellulose pulp as used in acetate tow, 95 percent to 97 percent of the cellulose content has to be extracted. Only a handful of specialized companies are capable of this process. The cellulose “bank” is the world’s biggest source of organic raw material with 700 billion tons, according to CelCo Cellulose Consulting. The overwhelming part of cellulose products manufactured every year is used to manufacture paper, packaging and tissue.

    The specialty cellulose industry, of which acetate tow manufacturers are a part, accounts for only 2.5 percent of the entire processed cellulose spectrum. “Hit with higher pulp prices, suppliers of acetate tow have been forced to pass the increase on to their customers. In its recently published second quarter results, Eastman Chemical said that prices for acetate tow went up 33 percent, leading to 32 percent higher selling prices,” says Chavassieu.

    Higher selling prices were also due to more efficient use of production facilities. “Some players, such as Eastman, have diversified their mills to produce textile fibers to improve their capacity utilization,” explains Chavassieu.

    HTPs Drive Demand

    Hyunyoung Park

    Hyunyoung Park, sales and business development manager at Taeyoung Industry Corp., a South Korea-based supplier of mono, dual and triple filters, says the scarcity of acetate tow occurred in part to an unplanned production stoppage at a leading supplier. “This trend has not ended and will continue until the balance shows stable figures,” he says.

    The increasing popularity of heated-tobacco products (HTPs), too, has contributed to the tight market, according to Robert Pye, CEO of specialty filter manufacturer Filtrona. “We see rapid double-digit growth in HTPs, which basically use different grades of tow but actually increase the amount of tow that is used in comparison with combustible cigarettes because of the filter design. It eats up the decline in demand we have seen from traditional cigarettes.”

    Pye also attributes the current challenges in the acetate tow market to the Covid-19 pandemic, which decoupled supply chains. “Before, we were all in a just-in-time sort of mode, developing strategies for our supply chains,” he says. “This has changed—we have seen people wanting to have more inventory in their supply chain. Basically, manufacturers have reduced the risk of shortage and developed a different way of managing supply chains.”

    The Russia-Ukraine conflict has left its mark too, with some supply from those locations affected. “This has definitely made the supply chain more complex,” says Pye. Like Chavassieu, he expects these developments to continue. “We’re seeing an inflationary market in acetate tow,” Pye says. “Supply is somewhat tight. It won’t continue up, but how much it comes back would be something the market would have to see. I don’t see too much change for next year.”

    Their views are reflected by another major acetate tow manufacturer, Japan-based Daicel, whose management recently forecast that the worldwide demand for cigarettes would gradually start increasing after 2026. Daicel’s management said it anticipated demand for acetate tow to remain stable or increase, driven by the proportion of demand for HTPs, which currently account for 3 percent of the global tobacco market and are expected to increase by 0.5 percent to 1 percent annually in the future.

    An increase in the length of cigarette filters to cater to consumers’ growing health awareness and an increase in filter use in countries such as Indonesia, Bangladesh and India were named as further contributing factors. Daicel expected the recent increases in raw material and fuel prices to level off soon but the demand for acetate tow to consistently exceed supply.

    Sustainable Solutions

    Robert Pye

    As a long-time global player with long-term supplier contracts, Filtrona has been unaffected by the shortages, according to Pye. “The way we had our supply chains organized allowed us to grow in double digits that year. We also supply a sustainable range of products, which helped customers in some markets.”

    Park adds that his company has noticed new requirements for a secure supply chain and sourcing stability. “Customers are benefiting from the stable supply chain network we have built up and continued during the pandemic,” he says.

    Pye notes that the shortage of cellulose acetate has been driving interest in Filtrona’s biodegradable filters, such as the Eco range of products, in more regions, predominantly around western Europe but also elsewhere. “Also, products like BiTech, a mono-segment filter produced in a single pass and offered in various ratios of tow and either paper or other nonwoven materials, thus using less acetate tow than a normal filter, were more sought after,” he says.

    While paper-based solutions have traditionally been more expensive than CA filters, the price gap has narrowed recently. “These days, the cost and capability of the nonwoven products are more interesting,” says Pye. “There are certain characteristics to the product line that make them more interesting to compete with acetate tow.”

    Excluding China, special filters account for 5 percent of the global market. Of these, Filtrona has a market share of nearly 50 percent. The remaining share is divided between smaller local players. “We see the market growing, mainly in areas where tobacco companies may want to differentiate themselves from other brands, for example, when they operate in regions with plain packaging,” says Pye. “Special filters are also becoming increasingly popular with manufacturers with a maturing customer base, i.e., when consumers are moving up from their gross domestic product, more specialty products come into these markets. India is an example of this: A few years ago, the country had very limited flavor-based products. Today, it has lots of flavors, tubes and other complex filters. The market has more specialty filters in the last two years than in the last 10 years combined.”

    Pye thinks this trend will continue. “Filtrona’s task is to bring new filter technologies into these markets,” he says. “That’s why we have a joint venture in China. The Chinese market uses all sorts of slims, such as super slims or demi slims, but not too many combined filters, and previously, there hasn’t been a market for additives either.”

    Despite the challenges, the market is quite dynamic, according to Pye, with different regions having requirements for different filters and specialty filters and even in filter supply. “We see this dynamic playing out not on a daily but on a quite regular basis, with sustainability and HTPs becoming more important,” he says. “The challenges in supply chains haven’t quite left us, so I think it’s an interesting time. As a supplier and committed partner to this industry, we’re making sure that we can help the industry move into more sustainable solutions but also ensure they get the supply because their supply chains are challenged as well.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Pure Play

    Pure Play

    Photo: Essentra

    Filter manufacturers consider their strategies in an increasingly challenging environment.

    By Stefanie Rossel

    In October last year, Essentra fueled speculation about the future of its filter business: The Singapore-based company, which manufactures plastic caps, work-holding clamps, fasteners and knobs, said it was studying strategic options for two of its three divisions, cigarette filters and packaging, in an attempt to become a “pure play” components business over time. The review is expected to conclude by the end of June 2022 at the earliest. Since the announcement, the company has appointed several new people to key positions, including Robert Pye as Essentra Filters’ managing director.

    SK Low

    “A strategic review normally covers the full range of strategic options for a business, i.e., the best structure for that business to reach its full potential and deliver value for shareholders,” explains Seng Keong Low (SK), global marketing manager at Essentra Filters. “These reviews can include a number of potential outcomes including sale, demerger and other outcomes. We don’t yet know what the outcome of the filters review will be, and no decisions have been made regarding any of the divisions. The filters business will still be in operation, just that it may or may not be under the banner of Essentra pending the outcome of the strategic review. The most recent appointments to the global filters leadership team are longtime filters leaders, which were decided before the announcement of the strategic review.”

    According to the company’s 2021 pre-close trading update, the filter division performed well in the fourth quarter of 2021, with revenue up 22.3 percent during that period. “The division continues to benefit from higher volumes from outsourcing contracts and a strong performance in Europe,” the update said. “Further progress has been made in the delivery of its ‘game changers’ with the China joint venture continuing to gain momentum after successful commencement in June. Our range of proprietary eco and heated-tobacco products continue to attract increased interest. The number of projects underway continues to grow.”

    At the end of 2019, Essentra announced the establishment of a joint venture in China, China Tobacco Essentra (Xiamen) Filters, which launched in June 2021. Shareholders in the joint venture are Essentra with 49 percent, China Tobacco Fujian Industrial Co. with 21 percent, and three Chinese investment management companies holding ten percent each. The JV manufactures specialist and next-generation filters locally at a new facility in Xiamen in Fujian province.

    Tackling Logistics

    While awaiting the outcome of Essentra’s strategy review, filter manufacturers must navigate the ongoing global logistics crisis, which has led to a shortage of shipping containers, significant in freight rate hikes and delays in the supply chain. “We have been working closely with all partners covering long-term plans that required more accuracy than before,” says Hyunyoung Park, sales and business development manager at Taeyoung Industry Corp. in South Korea. “Nevertheless, other activities, such as keeping a high level of stock or production capacity build-up, can help to mitigate the delivery issue. However, it is affecting factory operation severely.”

    Essentra says it is experiencing extended lead times on deliveries from many suppliers. “To ensure supply continuity, we are working several BCP (business continuity planning) plans, e.g., holding more safety stocks, working on finding more local solutions, etc.,” says SK. “To minimize supply disruption and delay to our customers, we are doing additional pre-build where possible, making advance bookings for deliveries and driving more end-to-end synchronization of our materials planning with finished goods delivery.”

    In addition to supply chain challenges, the price of raw materials, including wood, has risen significantly due to the Covid-19 pandemic. Wood, of course, is the basis of cellulose acetate tow used in cigarette filter production. “We have seen increases across our raw materials as well as other commodities, from packaging materials to spare parts,” says SK. “The increase in wood prices has affected our plug wrap suppliers, acetate tow suppliers, packaging and pallet suppliers. We are also seeing significant increases in power prices.” Because of these developments, Essentra Filters had to raise prices in 2021. “We have to find the right balance in accepting and passing on any price increases and constantly evaluate our positions with both suppliers and customers given any potential changes in the pandemic situation around the world,” says SK.

    Park has also observed an impact on prices due to the logistic and raw material situation. “Raw material price is affecting not only our factory operation but [those of] other manufacturers as well. However, the cost of logistics is underlying geographical influences, which made it difficult for the export business and increased chances to find alternative suppliers for cost saving or minimizing cost impact, and these activities will concern all manufacturers involved in the cigarette business except major players.”

    Growing Importance

    Another theme affecting the filter sector is sustainability. In July 2021, more parts of the European Union’s Single-Use Plastics Directive entered into force. While cigarette butts have been exempted from the rules for the time being, a provisional agreement in the legislative process seeks to further encourage innovation in the development of sustainable alternatives to plastic-containing tobacco filters through the introduction of extended producer responsibility (EPR).

    EU member states have until Dec. 5, 2023, to set up EPR schemes for tobacco filters, but to date, there is no implementation guidance for member states. Since July 3, 2021, all packs of filtered tobacco products in the EU have been required to display a pictogram against littering.

    Legislators in other jurisdictions are considering similar measures. In February 2022, Californian lawmakers introduced a bill that would ban the sale of single-use cigarette filters and vapor products. Under the bill, sellers would risk fines of $500 per violation, defined as the sale of one to 20 items. Ninety percent of the approximately 12 billion cigarettes sold in California each year are filtered. The state spends millions of dollars annually on cleaning up cigarette litter, according to proponents of the ban.

    “Sustainability has always been important to us at Essentra Filters, and we have long had nonplastic filters in our product portfolio,” says SK. At the end of last year, the company added two new varieties to its sustainable filter range: the ECO Active Filter, a plastic-free alternative to active carbon acetate filters that is 100 percent biodegradable, and the ECO Flute Filter, a nonplastic alternative to the company’s Combined Performance Superior Filters. The design of the Flute Filter is customizable for length, circumference, pressure drop and flute length and can be combined with other filter segments. “Our new ECO range is currently the largest step change in our sustainability efforts, and with an increasing number of customers asking us about sustainable, nonplastic filters, we are confident that investing our innovative efforts in sustainability is the correct strategy,” says SK.

    Park, who in a previous interview mentioned that Taeyoung’s research and development department was working on filter development with nonacetate tow and carrying out studies on the replacement of conventional filter materials, said that the company had made progress with that initiative. “However,” he added, “market feedback is more important for actualization. I believe this kind of development is continuing under rapidly changed business circumstances including environment, social, governance criteria.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Innovation as a Driver

    Innovation as a Driver

    Photo: Celanese

    Even in challenging times, filter and tow suppliers find new business opportunities in innovative nicotine products.

    By Stefanie Rossel

    Over the past years, manufacturers of acetate filter tow and cigarette filters have come to learn how to best cope with challenges. The continuous decline in global cigarette consumption since 2013, which also resulted in lower demand for tow and filters, has been one such issue.

    Hyunyoung Park

    In 2020, tobacco companies sold 5.06 trillion cigarettes worldwide, representing a decline of 3.7 percent compared to 2019, according to Euromonitor. Increasing restrictions on tobacco products as well as the rise of reduced-risk alternatives contributed to this development. “Philip Morris International’s conventional cigarette-free world mission is a big challenge to filter makers,” notes Hyunyoung Park, sales and business development manager at Taeyoung Industry Corp. of South Korea, a supplier of mono, dual and triple filters to multinational cigarette manufacturers.

    The year 2020 added more trials for the tobacco industry, most notably the Covid-19 pandemic. At the ITGA’s Issues Day in November 2020, Shane MacGuill, Euromonitor’s senior head of tobacco research, said he expected combustible cigarette volume to decline further in the next five years, aided by a pandemic that left many governments scrambling to refill their coffers.

    Harald Bruggeman

    For the time being, the most tangible effect of the pandemic for suppliers of acetate tow is logistic in nature, says Harald Bruggeman, vice president of commercial acetate tow at Celanese in the U.S. “A challenge for the entire industry is that the global liner market remains tight with lower performance and higher freight rates that continue to climb,” he says. “To ensure supply chain security, Celanese has a global warehouse network and healthy inventory levels.”

    Bruggeman notes that pandemic-related travel restrictions continue to impact business. To provide best possible service, he explains, Celanese provides remote sales and technical customer support by offering video conferences, online training, webinars, web-based software for item selection, filter and cigarette design calculations and RealWear devices, such as hands-free, voice activated, head-mounted tablets, for remote assistance.

    The pandemic follows a period during which tow manufacturers were busy preparing for tighter regulation. In February 2018, the European Commission published the classification of titanium dioxide (TiO2), a delustering agent that had been used in paints and varnish, plastics, paper, printing inks and many other applications for about 100 years, as a suspicious carcinogen for inhalation. Although many scientific studies show that TiO2 does not cause cancer in humans, the classification will take effect Oct. 1, 2021. “The filter tow manufacturers are transitioning to acetate tow without added TiO2, which increases complexity in manufacturing, portfolio and supply chain,” Bruggeman says. “Celanese has completed all necessary preparations for the commercial production of acetate tow without added TiO2 at both manufacturing sites, i.e., Narrows, Virginia, USA, and Lanaken, Belgium.”

    Jens Ebinghaus

    Jens Ebinghaus, CEO of Swiss-based acetate tow manufacturer Cerdia, formerly Rhodia Acetow, stresses the positive side of this challenge. In November 2018, the company launched DE-Tow, a tow made of cellulose acetate that is free from TiO2. “Most of our customers have already switched to TiO2-free filter tow while others still use tow with TiO2,” he says. “Supplying both customer groups adds complexity to the manufacturing process and creates opportunities to the most flexible suppliers.” In 2019, Cerdia’s Freiburg, Germany, plant committed to invest close to $100 to strengthen its competitiveness, to foster the growing market share of specialty filters produced in Freiburg and to focus on product innovation as well as diversification.

    Taeyoung Industry Corp. is developing filters with non-acetate tow and studying alternatives to conventional filter material.

    Toward Increased Sustainability

    While the pandemic is far from over, this summer brought about new challenges for the sector: On July 3, 2021, more parts of the European Union’s Single-Use Plastics Directive (SUPD) entered into force, banning the sale of items such as plates, cutlery, straws and cotton bud sticks made of plastic as well as food containers and expanded polystyrene cups. The directive was drafted to fight marine pollution. Although cigarette filters are among the 10 single-use plastic products most often found on Europe’s beaches and seas, representing as much as 60 percent of all waste items, they are not among the prohibited products. Worldwide, around 98 percent of cigarette filters are made of cellulose acetate, a bio-based polymer that biodegrades over several months to several years, depending on the conditions of the environment where it has been discarded.

    Instead of the originally discussed consumption reduction targets for filter cigarettes, the European Parliament reached a provisional agreement stating that “the huge environmental impact caused by post-consumption waste of tobacco products with filters, discarded directly into the environment, needs to be reduced. Innovation and product development are expected to provide viable alternatives to filters containing plastic, and this development needs to be accelerated.” Through the introduction of extended producer responsibility (EPR), a reinforced application of “the polluter pays” principle, the provisional agreement seeks to further encourage innovation leading to the development of sustainable alternatives to tobacco product filters containing plastic.

    More specifically, the directive will require producers to cover the costs of consumer awareness-raising measures and EPR schemes tackling the clean up of litter and its subsequent transport and treatment, the costs of data gathering and reporting, and the costs of collection of waste of tobacco filters discarded in public collection systems. EU member states have until Dec. 5, 2023, to set up ERP schemes for tobacco filters that contain plastic, but to date, there is no available guidance for member states as to how such EPR schemes should be implemented. As of July 3, all packaging of tobacco products with filters are required to be marked with a pictogram warning against littering.

    “The most burning concern at the moment is the impact of the SUPD—how to deal with the directive and product solutions that are compatible with the criteria it sets out,” says Ebinghaus. “The role that biodegradability of filters and tow will play in the future depends heavily on littering regulations. Cellulose acetate is based on wood pulp, a renewable raw material. With Cerdia DE-Tow, we have already created a product that is characterized by certified rapid biodegradability. We are convinced that this topic will continue to accompany us in the future and are glad that we can already offer a future-proof solution to our customers.”

    “The criteria for biodegradability under the SUP directive are not expected to be established by the EU until 2027,” notes Bruggeman. “The EC is concerned about potential misleading claims around biodegradability of filters as it could likely have an inverse effect on littering behavior. Certifications of biodegradability alone do not resolve the fundamental problem of reducing the impact of ‘littering’—thus, the measures called for in the EU SUP directive remain as important and necessary to be adopted, i.e., contribute to awareness-raising EPR, including cleanup, collection and waste treatment, and labeling requirements for cigarette packs.”

    SK Low

    Seeking the Gold Standard

    Filter manufacturers are also busy trying to meet changing requirements for an expanding environmentally friendly products market. Taeyoung’s R&D department is working on filter development with non-acetate tow and is carrying out studies on the replacement of conventional filter material. Seng Keong Low (SK), global marketing manager at specialty filter manufacturer Essentra, explains that the greatest challenge now is to find the perfect substitute for cellulose acetate filters—“a gold standard, so to speak. While we have commercially launched paper-based filters from our ECO range, we also acknowledge that there are certain tradeoffs when using these alternative materials. That is why Essentra Filters continues to learn, innovate and improve upon these products to achieve that gold standard.” He relates that his company has several intermediary products within its portfolio of products, such as BiTech, which mixes cellulose acetate and paper, thus increasing the biodegradability of the product.

    Sustainability issues aside, filter designers continue to seek innovative solutions beyond the usual range. Filter and tow makers observe an ongoing shift toward slim and superslim formats while capsule filters remain popular. “Outside of the EU, flavors continue to play a role in driving consumer demand, especially in countries like China, Japan and Korea,” says SK.

    While cigarette consumption will likely continue to decrease, heated-tobacco products (HTPs) are creating new opportunities for filter and tow manufacturers. Like conventional cigarettes, HTP consumables require a—highly complex—filter. Cellulose acetate tow is found in vape products too; it can be used in e-cigarettes to prevent leakage of e-liquids. “We see great opportunities and great potential in developing and producing a broader spectrum of specialty items for more specific new-generation products and in the advancement, refinement and expansion of the [HTP] segment,” says Ebinghaus.

    “We observe continuous innovation and product launches in the strong growing HTP market, e.g., PMI’s IQOS Iluma, BAT’s Glo Hyper plus, JT’s Ploom X or KT&G’s Lil Solid 2.0,” echoes Bruggeman. “Celanese partners with the major players in the HTP segment for the development of new filters for heated-tobacco sticks.”

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.