Fastmarkets RISI Global Boxboard Outlook · • Sappi conversion at Somerset mill Any grade...
Transcript of Fastmarkets RISI Global Boxboard Outlook · • Sappi conversion at Somerset mill Any grade...
Fastmarkets RISI Global Boxboard Outlook
2019 | Fastmarkets | Global Boxboard Outlook
Forces shaping the boxboard industry
1
Alejandro Mata
Director, European Packaging and Graphic Paper
Riding the down cycle
2019 | Fastmarkets | Global Boxboard Outlook
• Deceleration in the global economy
• Boxboard demand slowing
• Markets growing oversupplied
2017 was a strong year, 2018 not so much and 2019 even worse
2019 | Fastmarkets | Global Boxboard Outlook
The evolution of consumers and their shopping experience
Covering our needs
• Population growth
• Urbanization
Convenience
• Discount retailers
Consumer wellbeing
Hyper-convenience
• E-commerce
Blue planet effect
• Move away from plastics
• Loop
3
2019 | Fastmarkets | Global Boxboard Outlook
• Economy to affect growth in
the short term
• Population and urbanization
will increase per capita
consumption, especially in
emerging economies
• Consumers are expected to
remain loyal to boxboard
• E-commerce effect still
relatively small
• What if fiber-based packaging
solutions are not enough?
— Blue planet effect
• Plastic substitution from a
legislative point of view
E-commerce effect still relatively small
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64
65
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67
682
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9
Econom
y
Po
pula
tio
n/U
rb
an
ization
Co
nsu
mer
pre
fere
nce
s
e-C
om
me
rce
Blu
e p
lan
ne
te
ffe
ct
Pla
stic
su
bstitu
tion
202
1
Mill
ion
to
nn
es
Global boxboard demand
4
Let’s state some facts
2019 | Fastmarkets | Global Boxboard Outlook
6.5 Mill
ion t
onnes
Lost opportunities
between 2018 and 2021
4.1 Mill
ion t
onnes
Closures or delayed/
cancelled new starts
Weaker balances,
pressure on prices
84%
5
2019 | Fastmarkets | Global Boxboard Outlook
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion
to
nn
es
Current Previous
Global boxboard demand is weaker
Mill
ion t
onnes
Change in demand, global boxboard
Lost opportunities
between 2018 and 2021
6
21%
22%
51%
9%North America
Europe
Asia
Rest of World
2019 | Fastmarkets | Global Boxboard Outlook
Economic growth matters
• US economy doing better than other global regions
• China continues with its transformation; recent growth
affected by trade war with US
• Europe slowed since the second half of 2018 (trade
wars, Brexit)
What is driving the demand losses in China?
▪ Ongoing economic slowdown
▪ Imported fiber restrictions
▪ Higher paper prices
-1.0 0.0 1.0 2.0 3.0 4.0 5.0
No
rth
Am
erica
Eu
rop
eA
sia
Re
st
of
wo
rld
Million tonnesPrevious Current
Most of the losses are in Asia
- 376,000 tonnes
- 4.8 million tonnes
- 1.1 million tonnes
- 209,000 tonnes
Glo
bal
bo
xbo
ard
dem
and
7
A respite from overinvesting in capacity?
Operating rates back below
84% due to stronger demand
reductions in 2019
2019 | Fastmarkets | Global Boxboard Outlook
79.0%
80.0%
81.0%
82.0%
83.0%
84.0%
85.0%
86.0%
87.0%
88.0%
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.02
00
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
Mill
ion
to
nn
es
Capacity Demand OR
Global market balances
Global boxboard demand and capacity changes
-2.0 -1.0 0.0 1.0 2.0
Nort
hA
merica
Euro
pe
Asia
Rest of
worl
d
Million tonnes
Capacity changes, 2018-2021
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2019 | Fastmarkets | Global Boxboard Outlook
• Disruption of global supply chains
• Consumption lower than expected
• Fragile economies at risk of recession
• Rise in e-commerce shopping (incl. groceries)
• Potential production disruption at pulp and
paper assets (no stops confirmed so far)
9
China and Europe more at risk
2019 | Fastmarkets | Global Boxboard Outlook
0
20
40
60
80
100
120
NorthAmerica
Europe China Other Asia LatinAmerica
RoW
Mill
ion
to
nn
es Paper and board
Pulp & PfR
10
Imports taking most of the demand
growth in folding cartons
2019 | Fastmarkets | Global Boxboard Outlook 11
Demand growing moderately
2019 | Fastmarkets | Global Boxboard Outlook
0.96
0.97
0.98
0.99
1.00
1.01
1.02
1.03
1.04
1.05
1.06
1.07
11.4
11.6
11.8
12.0
12.2
12.4
12.6
12.8
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
No
nd
ura
ble
go
od
s in
de
x
Mill
ion
to
nn
es
Demand growth, 2018-2021
Nondurables set the tone for
demand
Good performance on food
service board
Weak performance in dry foods,
soap & detergent
Downward pressure on exports
due to expected strengthening
of the US dollar
220,000Thousand tonnes
12
2019 | Fastmarkets | Global Boxboard Outlook
Demand growth, 2018-2021North American boxboard grades
0.0 2.0 4.0 6.0 8.0
Fold
ing
cart
on
sLiq
uid
pa
ckagin
g /
cup &
pla
te s
tock
Oth
er
Million tonnes
27%
18%
55%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion to
nn
es
Folding carton Liquid packaging, cup & plate stock Other
Of the 220,000 tonnes of demand growth
• Folding carton -34,000
• Liquid packaging* +179,000
• Other +75,000
* Includes food service board (cup & plate stock).
Demand down 1.9% in 2019
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2019 | Fastmarkets | Global Boxboard Outlook
North American folding cartons
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
2012 2014 2016 2018 2020
Mill
ion tonnes
Bleached Recycled Unbleached
Un
ble
ach
ed
Re
cycle
dB
lea
ch
ed
Slowing food production is a limiting factor
Heavy competition with FBB and ivoryboard
War on plastic to have small impact on
folding cartons (food service board)
Changing consumer
preferences affecting
coated recycled board
Lower beverage production
and SBS substitution
Upside risk: green image
+2.4%
+1.8%
-8.4%
CAGR
19-21
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2019 | Fastmarkets | Global Boxboard Outlook
CUK prices above SBS in the USA• Historical premium for SBS close to US$80/ton
• Currently, CUK prices US$80/ton above SBSFactors behind higher CUK prices
• Far more concentrated supply
• Perception that brown products are more
environmental friendly
• CUK increasing popularity within food service board
Factors holding SBS prices down
• Imports of multi-ply from Europe and Asia affecting
domestic SBS markets
• Sappi conversion at Somerset mill
Any grade shifting out of CUK will impact CRB
more than SBS
Pricing gap between folding cartons and food
service board continues
600
700
800
900
1,000
1,100
1,200
US
dolla
rs p
er
ton
CUK SBS CRB
15
Cupstock markets tighter than folding cartons
2019 | Fastmarkets | Global Boxboard Outlook
0
50
100
150
200
250
300
350
600
700
800
900
1,000
1,100
1,200
1,300
1,400
Q12013
Q12014
Q12015
Q12016
Q12017
Q12018
Q12019
Q12020
US
do
llars
pe
r to
n
US
do
llars
pe
r to
n
Gap Folding cartons Cupstock
Better demand trends for
cupstock, as it has better
exposure to processed food
packaging and plastic
substitution
Cupstock
Most intense competition
from imports and new
entrants like Sappi
Closure of Georgia-Pacific
Crossett mill in October
influenced by this
Folding cartons
16
2019 | Fastmarkets | Global Boxboard Outlook
US boxboard trade
Exports
• The shift of Chinese boxboard producers to virgin
grades and overcapacity in Europe will keep US
boxboard exports constrained
• Strengthening US dollar not helping
Imports
• Most of the growth in folding carton demand will
likely be met by increased imports produced
overseas
• Flat prices in the US is pushing consumers to look
for alternatives elsewhere (imports)
• Imports to increase 4.1%, while domestic
production will increase only 0.8%, annually,
during the next five years
5.3
5.4
5.5
5.6
5.7
5.8
5.9
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
Mill
ion tons
Mill
ion tons
Exports Imports Production
17
Virgin boxboard markets weakens amid
soft demand and more capacity starts
2019 | Fastmarkets | Global Boxboard Outlook 18
Demand still lagging behind historical average
2019 | Fastmarkets | Global Boxboard Outlook
Asian boxboard
• Investment decelerated
since 2014
• Slowing in Chinese
economy and fiber import
restrictions changing the
landscape
• Consumption still
constrained
• High paper prices
contributed to the
accelerated demand
decline in 2018
75%
76%
77%
78%
79%
80%
81%
82%
83%
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion
to
nn
es
Demand Capacity OR
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2019 | Fastmarkets | Global Boxboard Outlook
Asian boxboard grades
0.0 5.0 10.0 15.0
Virgin
Re
cycle
dU
nco
ate
d
Million tonnes
23%
41%
36%
0
2
4
6
8
10
12
14
16
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion tonnes
Virgin Recycled Uncoated
Virgin boxboard demand will perform better
• Urbanization and increasing health awareness
driving demand for packaged food for
convenience and food safety
• Shift to higher quality for brand image purposes
• Recovered paper policies (import restrictions)
stimulating grade shifts from CRB to ivoryboard
20
2019 | Fastmarkets | Global Boxboard Outlook
China & Hong Kong SARMain Asian markets
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
0
5
10
15
20
25
30
35
40
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion tonnes
China/Hong Kong SAR Southeast AsiaIndia JapanSouth Korea & Taiwan Rest of Asia¹
60% of Asian boxboard demand, 31% of global boxboard
demand and 75% of regional volume growth (2004-2017)
Chinese demand down 6% (-1.3 million tonnes) in 2018
• Slower economic growth
• Plastic substitution in light of steep rise in prices in 2017
Outside China & Hong Kong SAR, demand growing 3.8%
China/Hong Kong SAR
60%
Southeast Asia13%
India10%
Japan8%
South Korea4%
Other Asia5%
21
Imbalance between duplex and ivoryboard
2019 | Fastmarkets | Global Boxboard Outlook
Changes 19 – 21: China
-3.0 -2.0 -1.0 0.0 1.0 2.0
Ivory
boa
rdC
oa
ted
du
ple
x
Million tonnes
Capacity
Demand
65%
70%
75%
80%
85%
90%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Ivoryboard Coated duplex
• Ivoryboard weakening due to
capacity outgrowing demand
• Duplex market might tighten
due to upcoming capacity
reductions
22
2019 | Fastmarkets | Global Boxboard Outlook
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2012
2013
2014
20
15
2016
2017
2018
2019
2020
2021
Mill
ion
to
nn
es
China net imports Rest of Asia net imports
Asian boxboard net imports• Asia is a net importer of boxboard.
Balance has changed little over the
past ten years
• Oversupply led China to become a
major net exporter, mostly to other
Asian markets
• Chinese exports (ivoryboard) will
increase due to capacity additions
outpacing demand growth
• Investment by Chinese companies
in Other Asia (coated duplex) to
increase Chinese imports
23
Higher imports of coated duplex
2019 | Fastmarkets | Global Boxboard Outlook
• CBO imports will rise
from 6% of the total to
more than 40% in the
coming years
• Closures (environmental
reasons) and fiber
restrictions causing lower
production of coated
duplex board
• Imports of all other
boxboard grades to
remain relatively flat to
slightly down
0
1
2
3
4
5
6
7
8
9
10
0.0
0.2
0.4
0.6
0.8
1.0
1.2
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion
to
nn
es
Mill
ion
to
nn
es
Chinese coated duplex board imports and production
Other CBO CBO production
24
Chinese exports linked to capacity and pulp prices
2019 | Fastmarkets | Global Boxboard Outlook 25
• Exports also have an
inverse relationship with
pulp prices
• Lower market pulp
prices usually boost
Chinese exports
• With pulp prices trending
down, we can expect
China to export more
• Pulp prices as an
indicator of Chinese cost
competitiveness
2017 was a strong year; demand has
since weakened
2019 | Fastmarkets | Global Boxboard Outlook 26
Market conditions are changing rapidly
2019 | Fastmarkets | Global Boxboard Outlook
Coated boxboard Europe
Strong exports helping to
tighten the market since
2016
Industry reached its peak in
late 2017/early 2018
Since then, demand has
weakened considerably
Capacity additions have
contributed to the collapse
in operating rates since
201886%
87%
88%
89%
90%
91%
92%
-400
-300
-200
-100
0
100
200
300
400
500
600
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Th
ou
sa
nd
to
nn
es
Demand Capacity OR
27
2019 | Fastmarkets | Global Boxboard Outlook
2016
2018
KotkamillsFolding boxboard
400,000 (FI)
HusumFolding boxboard
400,000 (SE)
DobrushVirgin cartonboard
200,000 (BLR)
KamaFolding boxboard
220,000 (RU)
GruvönVirgin cartonboard
550,000 (SE)
2019
2020
COMPANY MILL COUNTRY CAPACITY DATE
Sappi Maastricht Netherlands 150,000 2018-2021
BillerudKorsnӓs Gruvӧn Sweden 550,000 2019
Bellesbumprom Dobrush Belarus 200,000 2020??
Kipas Sӧke Turkey 720,000 Q2 2019
Kama Krasnokamsk Russia 220,000 2020
European capacity starts, 2018-2020
KipasVirgin and recycled
cartonboard/ linerboard
720,000 (TK)
A few additional noteworthy changes
• Iggesund cancelling 100,000 tonne capacity increase in Sweden (SBS)
• Stora Enso not going forward with Oulu conversion to CUK (450,000
tonnes)
28
Non-durable goods driving coated boxboard
2019 | Fastmarkets | Global Boxboard Outlook
60
65
70
75
80
85
90
95
100
105
110
Nondurables industrial production Coated boxboard demand
Demand growth, 2018-2021
Strong correlation between
production of nondurable
goods and coated
boxboard demand
Production of durable
goods (consumer
electronics, toys, jewellery)
are also packed in coated
boxboard
Index, 2015=100
29
2019 | Fastmarkets | Global Boxboard Outlook
Virgin boxboard doing betterEuropean boxboard grades
0.0 1.0 2.0 3.0 4.0 5.0 6.0
Virgin
Re
cycle
dU
nco
ate
d
Million tonnes
35%
27%
39%
0
1
2
3
4
5
6
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mill
ion tonnes
Virgin Recycled Uncoated
• Demand for virgin boxboard (CBB, CBU, CBV, CBP) has
grown 1.5% per year since 2005, more than twice as fast
as coated recycled board
• Coated recycled board exposure to underperforming
industry segments (dry foods, household chemicals)
resulting in slower demand growth
• The recovery in the European economy and the
reactivation in construction since 2015 lifted uncoated
boxboard demand
30
2019 | Fastmarkets | Global Boxboard Outlook
Industrial production
0
20
40
60
80
100
120
140
160
180
200
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
2016
201
7
201
8
Manufacturing Tobacco products
Prepared meals Pharmaceuticals
• Manufacturing of tobacco products in
clear decline, affecting demand for
folding boxboard and solid bleached
board
• Pharmaceuticals and manufacturing of
prepared meals doing better than
overall manufacturing
• FBB is the most common substrate for
pharmaceutical packaging; WLC can
also be used, although less
• Prepared meals can use a wide array
of coated and uncoated grades
Index, 2015=100
31
Capacity clearly outgrowing demand growth
2019 | Fastmarkets | Global Boxboard Outlook
85%
86%
87%
88%
89%
90%
91%
92%
93%
94%
95%
96%
-100
-50
0
50
100
150
200
250
300
350
400
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Th
ou
sa
nd
to
nn
es
Demand Capacity OR
Folding boxboard
Capacity increasing faster
than demand through
most of the forecast
Exports not increasing
sufficiently to offset
upcoming capacity
increases
Operating rates to trend
down in 2020
32
Recycled board growing at slower pace
2019 | Fastmarkets | Global Boxboard Outlook
86%
87%
88%
89%
90%
91%
92%
93%
-150
-100
-50
0
50
100
150
200
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Th
ou
sa
nd
to
nn
es
Demand Capacity OR
Recycled boxboard
No major changes in
capacity foreseen
Exports trended down in
2019 despite Chinese
import fiber restrictions
Demand to recover from
2021 onward
Weak demand and lack
of capacity curtailments
will bring operating rates
down
33
2019 | Fastmarkets | Global Boxboard Outlook
Coated virgin boxboard prices United States
Imports of multi-ply from Europe and Asia affecting
domestic SBS markets
Sappi conversion at Somerset mill
Europe
Prices rose by €30-35/tonne in January and February
2019
Prices under pressure due to weaker demand, rising
capacity and lower market pulp and wood prices
500
600
700
800
900
1,000
1,100
1,200
2013:1 2014:3 2016:1 2017:3 2019:1
Eu
ros p
er
ton
ne
USA Germany China
Asia
Oversupply (weak demand in 2018) drove prices back
down
Downtime and increased market concentration
supporting higher paper prices
34
Strengthening
of the USD
2019 | Fastmarkets | Global Boxboard Outlook
Coated recycled boxboard prices United States
Strengthening of the USD lifting prices (in euro terns)
between 2014 and 2015
Removal of capacity in 2017 and 2018 (PaperWorks
& Graphic Packaging International) tighten the market
Europe
Prices under pressure due to demand weakness and
low PfR prices
300
400
500
600
700
800
900
2013:1 2014:3 2016:1 2017:3 2019:1
Eu
ros p
er
ton
ne
USA Germany China
Asia
Chinese fiber restrictions behind price increases
between 2016 and 2018
Prices moved down from June 2018 onwards due to
demand weakness and ample supply
Announced capacity closures kept prices from
declining more
35
Strengthening
of the USD
Chinese fiber
restrictions
Take home points Boxboard demand growth is slowing down
We estimate 6.5 million tonnes of lost opportunities by 202101
2019 | Fastmarkets | Global Boxboard Outlook
02
03
04
Asia demand decelerating
However, big imbalances between markets. Ivoryboard
weakening due to capacity overshooting demand
Coated duplex tightening due to capacity curtailments (PfR
import ban)
North America becoming an attractive market for
exporters
Domestic producers under pressure, especially in SBS
Cupstock markets tighter than bleached folding cartons
Europe becoming more oversupplied
New capacity entering the market amid weak domestic
consumption will drag operating rates down
36
Thank you
PAPER PACKAGING MONITOR
EUROPE
www.risi.com/ppme
2019 | Fastmarkets | Global Boxboard Outlook 37