Description of Rayonier Advanced Materials Inc's Business Segments
Cellulose Specialties
Cellulose specialties are an organic material primarily derived from either
wood or cotton and are used as a raw material to manufacture a broad range of
products. Cellulose specialties generally command a price premium and earn higher
margins through the economic cycle relative to commodity products. Typically,
product pricing is set annually in the fourth quarter for the following year
based on discussions with customers and the terms of contractual arrangements.
The manufacture and sale of cellulose specialties products are the primary driver
of the Company’s profitability.
Our cellulose specialties, derived from wood, require high levels of purity,
consistency and process knowledge. Our products play a significant role in our
customers’ (primarily specialty chemical companies) manufacturing processes,
which require cellulose specialties of high purity and uniformity for efficient
production. Therefore, our customers demand we consistently deliver products
of the highest quality. As a result, our products are custom engineered and
manufactured to customers’ specifications and require a stringent qualification
process as our quality and consistency allow our customers to operate more efficiently
and cost effectively.
Our key competitive advantage is our unique ability to utilize our flexible
manufacturing facilities to engineer cellulose specialties fibers to customers’
specifications. We are the only cellulose specialties producer with manufacturing
facilities that provide flexibility to use both hardwood and softwood, kraft
and sulfite cooking processes, as well as a variety of proprietary chemical
treatments to provide customized product functionality. Additionally, we have
a significant amount of process knowledge: the understanding of wood fiber properties
and their modification under a sequence of chemical processes, accumulated and
developed over 90 years of practical application to achieve unique properties
for a variety of customer needs. Combining this process knowledge with our manufacturing
flexibility and knowledge of customers’ applications and specifications,
allows us to have the most extensive capability set to modify cellulose fibers
in the industry.
Commodity Products
We have the ability to easily shift our production between commodity viscose
and absorbent materials to take advantage of market conditions and generate
the most attractive margins.
Commodity viscose is primarily sold to producers of viscose staple fibers.
Shifts in fashion styles and textile fiber blending have increased demand for
viscose staple fibers. Additionally, variability in cotton linter supply and
increasing environmental concerns about cotton production have resulted in viscose
staple producers shifting volume away from cotton linter pulp to wood-based
dissolving pulp.
Absorbent materials, or fluff fibers, are typically used in consumer products.
These fibers provide a medium for fluid acquisition, distribution and retention
in the products in which they are incorporated. Pricing for commodity products
is typically referenced to published indexes or based on publicly available
spot market prices.
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