Post on 24-Jul-2018
The Packaging Revolution:The Packaging Revolution: Adjusting to the New Dynamics
in Europe and the Worldin Europe and the World
Alejandro MataE i E F P dEconomist, European Forest Products
November 2015
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Alejandro Mata, EconomistE F t P d tEuropean Forest Products
• Bachelor’s degree in Engineering,Bachelor s degree in Engineering, MBA degree earned in 2007
• Worked in business and market f f fintelligence functions for one of
Europe’s leading paper producers • Have been analyzing andHave been analyzing and
forecasting the industry since 2009• Author of the Paper Trader Europe,
the Paper Packaging Monitor Europe, the European Graphic andPackaging Paper 5-Year and 15-Year g g pForecasts
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What We Will Talk About?
Current conditions T j ti Two-year projections Capacity changes
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Current Conditions ContainerboardContainerboard
• Global snapshotDemand • Deep dive: Western Europe
• Capacity growth
Trade
S&D Balance
Profitability
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Is Global Containerboard Still Growing?
10%180
6%
8%
120
140
160
2%
4%
80
100
120
illio
ns
0%
2%
40
60
80Mi
-4%
-2%
0
20
40
Volume (L)
Percent Change (R)
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01 03 05 07 09 11 13 15 17
Emerging Markets Are Growing Faster
10.0%180Emerging Markets
6 0%
8.0%140
160Emerging MarketsMature MarketsGlobal Growth (R)
4.0%
6.0%
100
120
ons
0.0%
2.0%
60
80
Mill
io
4 0%
-2.0%
0
20
40
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-4.0%001 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Allowing Them to Gain Relevance
32% 19%
25% 21%
32% 47%%
7% 8%4% 5%
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Apparent consumption share of the total: 2000 vs. 2014
But Even They Are Slowing Down
10%
2001-2008
6%
8%2001 20082012-2017
4%
6%
2%
-2%
0%
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World North America
Europe Far East Latin America
All Other
Mind the Gap
120
100
110
90
100
Emerging Europe
80Western Europe1.2
1.4
onne
s / G
DP
60
70 Non-Durable
Industrial Production1
Thou
sand
To
Usage Rate (R)
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6001 02 03 04 05 06 07 08 09 10 11 12 13 140.8
01 03 05 07 09 11 13
EU Corrugated Box End Uses
Beverages
DurableDurable32%32%
Beverages
32%32%
F h P d tNonNon--durabledurable68%68%
Fresh Products
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Foodstuff
pe
6,000Capacity Demand Production
ern Europ
5,000
–Weste
4,000
(Virg
in)
3,000
erbo
ard
2,0002010 2011 2012 2013 2014 2015 2016 2017Co
ntain
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peern Europ
100%€ 700Production Cost Operating Rate
–Weste
90%
95%
€ 500
€ 600
(Virg
in)
80%
85%
€ 400
€ 500
erbo
ard
75%
80%
€ 300
Contain
70%€ 2002010 2011 2012 2013 2014 2015 2016 2017
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pe • Demand relatively flat for the next two years
ern Europ Demand relatively flat for the next two years
–Weste • Western Europe becoming more self-sufficient
thanks to Varkaus conversion
(Virg
in)
• Operating rates rising right now due to import substitution
erbo
ard
• Conversions will bring rates down as of next year
Contain
• Profitability might trend down due to weakening in the supply and demand balances
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• Profitability still higher than for recycled grades
Import Duties in TurkeyT k i i ADDTurkey imposing ADD
- 20% (CIF value) for US imports of unbleached kraft linerboard, 175 g and less
- Started in July 2015- Companies affected: IP, RockTenn
US exports down 52% (July)
US di ti t tUS redirecting exports to:- Latin America and Emerging Europe- Other southern EU countries like Italy and
Spain
Big benefits for:
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g- Any company selling in Turkey
ope
22 000
23,000Capacity Demand Production
tern Euro
20 000
21,000
22,000
d) –West
18 000
19,000
20,000
(Recycled
16 000
17,000
18,000
rboard (
15,000
16,000
2010 2011 2012 2013 2014 2015 2016 2017
Containe
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C
ope
100%€ 600Production Cost Operating Rate
tern Euro
95%€ 500
d) –West
90%€ 400
(Recycled
85%€ 300
rboard (
80%€ 2002010 2011 2012 2013 2014 2015 2016 2017
Containe
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C
ope
• Recycled packaging grades growing the most
tern Euro Recycled packaging grades growing the most
going forward
d) –West
• Exports need to rise due to strong capacity coming on line; however, world becoming more saturated
(Recycled
• Operating rates stable for the time being
• As of next year rates will start to come down a bit
rboard ( • As of next year, rates will start to come down a bit
due to conversions (covered later)
Containe
• Profitability still impacted by lower operating rates and higher recycled fiber costs
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C g y
Why So Much in Recycled Containerboard?
European Demand TrendsEuropean Demand Trends
Market Concentration
World Trends (trade flows)
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Major Capacity Changes (Containerboard)SKG Towsend Pro Gest
Stracel270,000 (FR)Conversion (LWC)
SKG TowsendLightweight (UK)Conversion (recycled)
Varkaus
Pro-Gest420,000 (IT)Conversion (Newsprint)
Aviretta200,000 (DE)
Conversion (SC)
Kraft and White Top390,000 (FI)
Conversion from UWF
Parenco385,000 (NL)Conversion (Newsprint)
2014 2015 2016
HHusumKraft White Top300,000* (SE)
Conversion (CWF)
Leipa290,000 (DE)Conversion (Graphics)
Hinojosa90,000 (ES)Conversion (Graphics)
KipasLightweight
Modern Karton400 000 (TK) Two New Machines in 2017
VirginRecycled
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Lightweight400,000 (TK)
400,000 (TK) Two New Machines in 2017• Hamburger – 450,000 (DE or TK)• Schoellershammer – 250,000 (DE)
European Demand TrendsIs cartonboard in
140
150Is cartonboard in secular decline?!
120
130
100
110
80
90ContainerboardC t b d
60
70
80 CartonboardNewsprintP&W
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6000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Market ConcentrationTop 5 Next 5 Other
Kraftliner
74%
22% • Clear(er) leadership• Overall steeper industry cost curve• Top players dominating the cost curve
4%
Top players dominating the cost curve
16%
Top 5 Next 5 Other
Recycled Containerboard
• No clear leadership38%
46%
• No clear leadership• Smaller gap between the first and fourth quartiles on the industry cost curve
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46%• Easier to secure an attractive position onthe industry cost curve
World Trends (Trade Flows)
North America – Net Exporter
Capacity Expansions
?
Capacity Expansions (Boxboard)
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Not many clear opportunities for Europe
World Trends (Trade Flows)LightweightLightweight
North America – Net Importer
Less capacity buildup globally
Warning! Global market becoming more
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Warning! Global market becoming more competitive
Current Conditions CartonboardCartonboard
• Global snapshot• Deep dive: Western EuropeDemand Deep dive: Western Europe• Capacity growth
Trade
S&D Balance CoatedProfitability
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Is Global Boxboard Growing?
10%70
6%
8%
50
60
2%
4%
30
40
illio
ns
0%
2%
20
30Mi
-4%
-2%
0
10 Volume (L)
Percent Change (R)
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01 03 05 07 09 11 13 15 17
Emerging Markets Growing Faster
10%70Emerging
6%
8%
50
60 MatureGlobal Growth (R)
2%
4%
30
40
illio
ns
0%
2%
20
30Mi
-4%
-2%
0
10
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01 03 05 07 09 11 13 15 17
But Even They Are Slowing Down
10%
2001-2008
6%
8%2001 20082012-2017
4%
6%
2%
-2%
0%
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World North America
Europe Far East Latin America
All Other
e
7,000Capacity Demand Production
n Europe
6,000
–Western
4,000
5,000
(Virg
in) –
3,000
,
nboard (
2,0002010 2011 2012 2013 2014 2015 2016 2017
Carton
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en Europe
100%€ 1,100Production Cost Operating Rate
–Western
90%
95%
€ 900
€ 1,000
(Virg
in) –
80%
85%
€ 700
€ 800
nboard (
75%
80%
€ 600
€ 700
Carton
70%€ 5002010 2011 2012 2013 2014 2015 2016 2017
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e • Demand will remain relatively flat for the next
n Europe
Demand will remain relatively flat for the next two years, at least in Western Europe
• Net exports rising for the moment
–Western Net exports rising for the moment
• Europe needs to raise net exports to help digest the conversions of Kotkamills and Husum
(Virg
in) –
• Operating rates rising right now mainly thanks to i i t d b tt d d i E
nboard ( increasing exports and better demand in Europe
• Conversions will bring rates down as of next year
Carton
• Margins under pressure due to conversions
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pe
4,000Capacity Demand Production
ern Europ
3,000–Weste
ecycled)
2,000
board (R
1,0002010 2011 2012 2013 2014 2015 2016 2017Ca
rton
b
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pe
100%€ 700Production Cost Operating Rate
ern Europ
95%€ 600
–Weste
90%€ 500
ecycled)
85%€ 400
board (R
80%€ 3002010 2011 2012 2013 2014 2015 2016 2017
Carton
b
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pe • Demand will remain practically unchanged
ern Europ Demand will remain practically unchanged
during the next two years
–Weste
• Net exports also not predicted to change much during the next two years
ecycled)
• Operating rates will continue to move down thanks
board (R
gto added capacity and flat demand requirements
Carton
b
• Weakening of supply and demand balances most likely to impact margins
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European Main Destinations?
Emerging Europe (46%)
Americas (14%)
Asia (21%)
Africa & Middle East (16%)( )
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Main Challenges for EuropeIn Europe
• Overcapacity•Active expansion in global marketsin global markets
•Net exporter of virgin boxboardvirgin boxboard
•Demand also struggling
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