New Global Pulp Market Outlook · 2018. 10. 9. · NBSK Local, US$ ex VAT NBSK Import Net Price,...

© Copyright 2018 RISI, Inc. | Proprietary Information

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

RISI North American Forest Products Conference October 2018

David FortinVP, Fiber Economic Analysis

• Review of recent market conditions Shocks to both the demand and supply side of the market

• Outlook for the global pulp market Outlook for demand via paper and board production Planned pulp capacity expansion Review of BHK and BSK cost curves Pulp forecast summary

Agenda

© Copyright 2018 RISI, Inc. | Proprietary Information 2

• China’s aggressive import policy changes impact global fiber and paper market

• Synchronized growth in the global economy• Dramatic increase in pulp prices

Shocks to Both Supply and Demand

3

Recent Market Conditions


• 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, 2018

Latest updates• China inspecting ALL containers from the USA since early May• CCIC now performing pre‐inspection of ALL exports to China• 25% tariff on RCP imports since late August• 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

6

Chinese Policies Have Resulted in Increased Domestic RCP Price Levels and VolatilityImported and Domestic OCC Prices, US Dollars per Tonne


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 Rebound QuicklyChina Domestic Resale and Imported Pulp Prices


$400

$500

$600

$700

$800

$900

$1,000

$1,100

2,700

3,200

3,700

4,200

4,700

5,200

5,700

6,200

6,700

7,200

7,700

12 13 14 15 16 17 18

NBSK Local, RMB (Left)NBSK Local, US$ ex VATNBSK Import Net Price, US$

$400

$500

$600

$700

$800

$900

$1,000

$1,100

2,700

3,200

3,700

4,200

4,700

5,200

5,700

6,200

6,700

7,200

7,700

12 13 14 15 16 17 18

BEK Local, RMB (Left)BEK Local, US$ ex VATBEK 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

• Unexpected downtime continues to impact the market

• Mixed messages from near‐term indicators• Putting the latest price run in context

Shocks to Both Supply and Demand

10

Recent Market Conditions (Cont’d)


Supply Disruptions Completely Offset the Wave of Recently Started Capacity• 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 counterbalance 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) — — 45 2018Q3Fibria Aracruz Brazil BEK (Proactive Downtime) — — 50 2018Q3AV Group Terrace Bay Canada NBSK (Lightning Strike) — — 10 2018Q3

Fibre Excellence Tarascon France SBSK (Upgrades to Environmental Controls) 30 0.8 23 2018Q3Södra Cell Mönsterås Sweden NBSK (Unexpected Shut) — — 20 2018Q3

Hyogo Pulp Tanigawa Japan USK (Boiler Explosion) 33 0.7 23 2018Q3Domtar Plymouth USA FLF (Hurricane Florence) 5 0.9 4 2018Q3

IP Riegelwood USA SBSK/FLF (Hurricane Florence) 17 2.0 18 2018Q3

IP Georgetown USA FLF (Hurricane Florence) 8 0.9 7 2018Q3

IP New Bern USA FLF (Hurricane Florence) 9 0.9 8 2018Q3

Canfor Northwood Canada NBSK (#5 Recovery Boiler Repair) 7 0.9 6 2018Q3

Third Quarter Net Total (Rated Capacity) 230

Year to Date Unexpected Downtime 1,257

Unexpected Downtime Continues at a Lower Rate Capacity Lost to Unexpected Downtime, Thousand Tonnes


Near‐Term Conditions and Trends• Pulp inventories are low across the industry Unexpected and planned downtime Differences in China between small and large buyers Some recent signs of normalization

• Paper and board markets entering seasonally strong period• 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• 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

14© Copyright 2018 RISI, Inc. | Proprietary Information

0

100

200

300

400

500

600

700

1 11 21 31 41 51

Mar‐16 ‐ PresentDec‐85 to Mar‐90

Dec‐93 to Nov‐95

Apr‐09 to Sep‐10

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


0.75

0.95

1.15

1.35

1.55

1.75

1.95

1 11 21 31 41 51

Mar 2016 to Present Dec 1985 to Mar 1990

Meanwhile, Paper Producer’s Margins SqueezedBEK/High Quality Virgin Parent Roll Price Ratio, Delivered to USA


0.3

0.35

0.4

0.45

0.5

0.55

0.6

Jan‐2016 Apr‐2016 Jul‐2016 Oct‐2016 Jan‐2017 Apr‐2017 Jul‐2017 Oct‐2017 Jan‐2018 Apr‐2018 Jul‐2018

BEK/Parent Roll

Linear (BEK/Parent Roll)

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

BRL

USD

EUR

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

17 18

BEK Delivered to China

BRL

USD

RMB

• Solid growth in end‐use markets supports pulp consumption growth

• Limited growth in supply for both BSK and BHK

• Market grows tighter


A Dearth of Supply and Strong DemandPulp Outlook 2018‐2020

World Production of Paper and Board Accelerating, but Very SlowlyPercentage Change in Production of Graphic, Packaging, Specialty and Tissue Paper


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% 1.7%

‐8.0%

‐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 20

Most of the Growth in the Paper Industry Is in Packaging—with a Modest Effect on Market PulpProduction of Paper and Board by Grade, Thousand Tonnes


0

50

100

150

200

250

300

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

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 20

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, 2018‐2019

• Asia Symbol Rizhao (China) Beginning conversion to DP ‐200,000 tonnes, 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 second quarter of 2018 Swing mill: 300,000 tonnes BHK / 250,000 tonnes

DP

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

tonnes

• Montes del Plata (Uruguay) 100,000 tonnes from 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 from 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 tonnes BSK, late 2018


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

• BillerudKorsnäs Gruvön (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


Global Wood Pulp Market Grows TighterMillion Tonnes


0.8

0.82

0.84

0.86

0.88

0.9

0.92

0.94

0.96

0.98

0

10

20

30

40

50

60

70

80

90

11 12 13 14 15 16 17 18 19 20

Market Pulp ConsumptionMarket Pulp CapacityShipment/Capacity Ratio (R)

• Pulp market will reach a relative balance in the fourth quarter of 2018 Pulp supply will increase as new lines ramp up Chinese pulp demand will ease due to oversupply in paper and board Demand will strengthen seasonally

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

• Market conditions will tighten again into 2019 as capacity expansion slows and demand tracks higher with continued economic growth

• Risks revolve largely around negative impacts on global economic growth from the simmering trade war

Forecast Summary


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

World Pulp Monthlywww.risi.com/wpm

Thank you!For more information:


New Global Pulp Market Outlook · 2018. 10. 9. · NBSK Local, US$ ex VAT NBSK Import Net Price,...

Documents

Transcript of New Global Pulp Market Outlook · 2018. 10. 9. · NBSK Local, US$ ex VAT NBSK Import Net Price,...