Global Pulp Market Outlook - events.risiinfo.com · Klabin Ortigueira Brazil BEK (Ash Collector) 6...

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Global Pulp Market OutlookNearing a Cyclical Peak or in the Midst of a Prolonged Upturn?

RISI Latin American ConferenceSão Paulo, BrazilAugust 2018

Dave FortinVice President, Fiber

• Review of recent market conditions Aggressive environmental policy changes in China Synchronized growth in the global economy Unexpected downtime continues to impact the market

• Outlook for paper and board• Planned BHK and BSK capacity expansion • Review of BHK and BSK cost curves• Pulp forecast summary

Agenda

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• New RCP import management system• Mixed paper ban in effect as of January 1, 2018• New contamination level of 0.5% took effect on March 1

Latest updates• China announced plans to inspect ALL containers from the USA in early May

• CCIC now performing pre‐inspection of ALL exports to China• China to ban ALL RCP imports by 2020!!!

Major RCP Policy Changes in China


0.5% Standard

Mixed Paper Ban

Domestic Collections

Finished P&B

Virgin Pulp

11,600

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

RCP Loss Fiber Needed Solution

RCP Fiber Loss

Other RCP

Other RCP

Mixed

0

5,000

10,000

15,000

20,000

25,000

30,000

2017 2018

China RCP Imports

The Impact of China’s RCP Import Policy ChangesRCP Imports, Thousand Tonnes

Regulatory Loss


Pulping Loss

5

New Chinese Policies Are Pushing Domestic RCP Price Levels, and Volatility, UpImported and Domestic OCC Prices, US Dollars per Tonne

© Copyright 2018 RISI, Inc. | Proprietary Information

$0

$100

$200

$300

$400

$500

$600

11 12 13 14 15 16 17 18

Imported OCC, USD/Tonne

Domestic OCC, USD/Tonne

Synchronized Growth in the Global EconomyPurchasing Managers Indices


45

46

47

48

49

50

51

52

53

54

55

12 13 14 15 16 17 18

Global

Official

Caixin

Chinese Domestic Prices for Pulp Slide LowerChina Domestic Resale and Imported Pulp Prices


$450

$550

$650

$750

$850

$950

$1,050

$1,150

3,7004,0004,3004,6004,9005,2005,5005,8006,1006,4006,7007,0007,3007,6007,900

12 13 14 15 16 17 18

NBSK Local, RMB (Left)

NBSK Local, US$ ex VAT

NBSK Import Net Price, US$

$450

$550

$650

$750

$850

$950

$1,050

$1,150

3,7004,0004,3004,6004,9005,2005,5005,8006,1006,4006,7007,0007,3007,6007,900

12 13 14 15 16 17 18

BEK Local, RMB (Left)

BEK Local, US$ ex VAT

BEK Import Net Price, US$

BSK Producers Maintain Price Premium to BHKGross Pulp Prices, Delivered to China, US Dollars per Tonne

Source: RISI.


‐100‐50050100150200250300350400450500

0

100

200

300

400

500

600

700

800

900

1,000

10 11 12 13 14 15 16 17 18

Spread BSK‐BHK (R) NBSK USD/TonneBEK USD/Tonne Average Spread

Near‐Term Conditions and Trends (1)• Pulp inventories are low across the industry Unexpected and planned downtime Differences in China between small and large buyers

• Pulp prices are high and paper prices have been rising Pace of paper price gains lagging and margins getting squeezed

• Exchange rate changes mitigating upward pressure on prices• Paper and board markets now in seasonally weak period• DP/BHK price differential remains narrow Bringing swing capacity back into paper grade, for now…


Pulp Market in the Midst of an Historical RunTotal Change in Gross NBSK Delivered to Europe, US Dollars per Tonne

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0

100

200

300

400

500

600

700

1 11 21 31 41 51Consecutive Months with Flat or Higher Prices

Mar 2016 ‐ PresentDec 1985 to Mar 1990

Dec 1993 to Nov 1995

Apr 2009 to Sep 2010

Producers Generating Near Record MarginsNet NBSK Price/Average Variable Cost of High‐Cost Producer, Delivered to Europe

11© Copyright 2018 RISI, Inc. | Proprietary Information

0.75

0.95

1.15

1.35

1.55

1.75

1.95

1 11 21 31 41 51

Mar 2016 ‐ Present Dec 1985 to Mar 1990

Pulp Price Gains Outpace Paper and BoardBEK / UWF Price Ratio, Delivered to China


0.40

0.45

0.50

0.55

0.60

0.65

0.70

Jan‐16 Apr‐16 Jul‐16 Oct‐16 Jan‐17 Apr‐17 Jul‐17 Oct‐17 Jan‐18 Apr‐18

BEK/UWF

Linear (BEK/UWF)

Strong US Dollar Increases Fiber Costs for Non‐US Pulp Consumers…SlightlyCurrency Units per Tonne, Indexed, January 2017 = 1


0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

17 18

BEK Delivered to Europe

USD

EUR

BRL

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

17 18

BEK Delivered to China

USD

RMB

BRL

Seasonality of European P&W Demand


0

500

1,000

1,500

2,000

2,500

3,000

08 09 10 11 12 13 14 15 16 17 18

DP ‐ BEK Price Spread

$200

DP‐BEK Price Spread in ChinaUS Dollars per Tonne

Source: RISI

$162/tonne


0

500

1,000

1,500

2,000

2,500

3,000

08 09 10 11 12 13 14 15 16 17 18

China Import Price DP

China Import Price BEK

Near‐Term Conditions and Trends (2)

• Large capacity additions started in 2017 ramping up in 2018 OKI mill in Indonesia estimated at around 2 million tonnes Fibria’s new line at Três Lagoas now fully ramped up Metsä Fibre’s new line in Finland expected to be running at full capacity in the third

quarter SCA Ostrand now running

• Unexpected downtime helped to offset new capacity• Suppliers are taking offsetting steps as new lines reach full capacity Fibria continues to take downtime at the Aracruz mill APP has been deliberate about new OKI tonnage and adjusted timeline for planned

maintenance downtime in 2018


Company Mill Country Grade (Comment) Days Capacity / Day Total Idle Start

— Regionwide Nordics NBSK (Exceptionally Warm Winter) — — 75 2018Q2

— Regionwide Nordics NBHK (Exceptionally Warm Winter) — — 15 2018Q2

SCA Östrand Sweden NBSK (Extended Shut for Project Helios) 22 1.2 26 2018Q2

SCA Östrand Sweden BCTMP (Extended Shut for Project Helios) 22 0.3 6 2018Q2

Rottneros Vallvik Sweden NBSK (Bleaching Plant & Recovery Boiler) — — 6 2018Q2

Fibria Aracruz Brazil BEK (Proactive Downtime) — — 50 2018Q2

Klabin Ortigueira Brazil BEK (Ash Collector) 6 3.1 19 2018Q2

Klabin Ortigueira Brazil BSK (Ash Collector) 6 1.1 7 2018Q2

— Countrywide Brazil BEK (Trucker Strike) 11 — 300 2018Q2

Canfor (Taylor) British Columbia Canada BCTMP (Extended Shut for Energy Project) — — 17 2018Q2

Alpac (Boyle) Alberta Canada BSK (Extended Maintenance Downtime) 10 0.3 3 2018Q2

Alpac (Boyle) Alberta Canada BHK (Extended Maintenance Downtime) 10 1.5 15 2018Q2

Net Total (Rated Capacity) 539

Unexpected Downtime Continues Capacity Lost to Unexpected Downtime, Thousand Tonnes


2018‐2019 Forecast Drivers


World Production of Paper and Board Accelerating, but Very Slowly


2.1%

4.0%3.0%

‐0.6%

‐5.3%

6.6%

1.1%0.3% 1.0% 0.9%

0.2%1.2% 1.7% 1.9% 1.9%

‐6.0%

‐4.0%

‐2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Graphic, Packaging, Specialty and TissuePercentage Change

Most of the Growth in the Paper Industry Is in Packaging—with a Modest Effect on Market Pulp


0

50

100

150

200

250

300

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Packaging/Specialty

P&W

Tissue

News

0

20

40

60

80

100

120

140

160

180

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Tissue + P&W

Relatively Little BHK Capacity Expansion

• Suzano (Brazil) 90,000 tonnes incremental at Maranhão mill net of

integration into tissue

• ENCE, Altri, Navigator (Iberia) 250,000 tonnes in incremental projects net of integration

into tissue

• APRIL Kerinci (Indonesia) Further conversion to DP

‐200,000‐300,000 tonnes in 2018‐2019

• Asia Symbol Rizhao (China) Beginning conversion to DP

‐200,000 tonnes in 2018‐2019?

• UPM (Kaukus and Kymi) 150,000 tonnes from debottleneck 2017‐2018

• Svetlogorsk (Belarus) Started production in November 2017

100,000 tonnes in 2018(?)

• Sun Paper Savannakhet (Laos) Start up in 2018 Q2(?)

Swing mill: 300,000 BHK / 250,000 DP

• Eldorado/PE (Brazil) Received permit to produce additional 55,000 tonnes

• Montes del Plata (Uruguay) 100,000 tonnes debottleneck

• Chenming Shouguang (China) 1.2 million tonne new line (integrated and delayed)


BHK “Cash” Cost Curve, 1Q18Machine Level Costs, Delivered Shanghai, Not Including I, SG&A or Logistics


North Amer.

South AmericaEuropeAsiaSouth Africa

Similar Story for BSK Capacity Expansion…

• UPM (Kaukus and Kymi) 50,000 tonnes debottleneck 2017‐2018

• Svetlogorsk (Belarus) 300,000 tonnes, 2018?

• SCA Östrand (Sweden) 470,000 tonnes, June 2018

• Chenming Huanggong (China) 600,000 tonnes, fourth quarter 2018

Swing mill with DP

• Resolute Saint Felicien (Canada) 30,000 tonnes, upgrades 2018

• Mondi Steti (Czech Republic) 70,000 BSK late 2018


• Oji Tasman (New Zealand) ‐180,000 tonnes, conversion to UKP, 2019

• BillerudKorsnas Gruvon (Sweden) ‐130,000 tonnes, integrated to new BM 2019

• Arauco Valdivia ‐500,000 tonnes, conversion to DP 2019

Plan to increase DP share as demand increases

• Stora Enso Enocell (Finland) ‐320,000 tonnes, conversion to DP 2019

BSK “Cash” Cost Curve, 1Q18Machine Level Costs, Delivered Shanghai, Not Including I, SG&A or Logistics

Asia Europe South America

North America NZ


• Pulp market will soften slightly in the third quarter of 2018 Pulp supply will increase as new lines ramp up Chinese pulp demand will ease due to oversupply in paper and board European demand will weaken seasonally Current high pulp prices could be vulnerable

• Pulp demand will remain strong due largely to tight fiber supplies in China

• Market conditions will tighten again in late 2018 and into 2019 as capacity expansion slows

Forecast Summary


World Pulp & Recovered Paper 5‐Year and 15‐Year Forecastswww.risi.com/forecasts

World Pulp Monthlywww.risi.com/wpm

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