North American Pulp and Paper Outlook · Global economy growing moderately, risks heightened 2019 |...
Transcript of North American Pulp and Paper Outlook · Global economy growing moderately, risks heightened 2019 |...
North American Pulp and Paper Outlook
2019 | Fastmarkets | RISI Outlook Presentation 1
SEPTEMBER 2019ROD YOUNGChief Economist
Global economy growing moderately, risks heightened
2019 | Fastmarkets | Macroeconomic Outlook
1.6 %2.3 %
2.9 % 2.6 %
1.1 %1.8 %
2016 2017 2018 2019 2020 2021
USA1.9 %
2.5 %
1.8 %
1.1 % 0.9 %1.4 %
2016 2017 2018 2019 2020 2021
Europe
6.7 %6.9 %
6.6 %
6.2 %6.0 % 6.1 %
2016 2017 2018 2019 2020 2021
China
-0.9 %
1.1 % 0.9 % 0.8 %1.7 %
2.8 %
2016 2017 2018 2019 2020 2021
Latin America
Annual real GDP growth
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US job growth continues
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Employment change Six-mo. mov. avg. (employment change) 24-mo. mov. avg. (employment change)
2019 | Fastmarkets | Macroeconomic Outlook 3
Monthly employment change, total non-farm, thousands; six-month moving average; 24-month moving average
Dollar regained strength in 2018, remains strong
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Trade weighted US dollar index: broad, goods, 1997=100
2019 | Fastmarkets | Macroeconomic Outlook
Chinese GDP trending lower, 2019 a slowdown
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Real GDP growth, annual percentage change
2019 | Fastmarkets | Macroeconomic Outlook
Global P&W demand dropped 2.5% in 2018
2.5Million tonnes of demand decline in 2018
2019 | Fastmarkets | RISI Outlook Presentation
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World P&W demand %ch
12%Smaller global market in 2018 versus 2010
1.6Millions tonnes of average demand declines in 2011-2017 and 2012-2014
Is global graphic paper demand accelerating down?TONNAGE DECLINES STILL NOT SHRINKING DESPITE GREATLY DIMINISHED MARKETS
72019 | Fastmarkets | RISI Outlook Presentation
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Printing & writing
Tonnage decline % of 2010 demand level40%
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Tonnage decline % of 2010 demand level
P&W Demand Growth in 2019-2021
2019 | Fastmarkets | RISI Outlook Presentation 8
Thousand Tonnes, Percentage Per Year
-6.58Million Tonnes
-2.3%Average Percent Change
Three-Year Total Global Growth
-7.2%
-1.8% -3.6% -4.0%-6.9%
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NORTH AMERICA
0.1%-0.6%
0.5% 0.9%
-1.0%
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LATIN AMERICA
-5.3%-4.6% -4.8% -4.6% -4.7%
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OCEANIA
1.6%
-1.8%-0.6% -0.5%
-1.5%
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ASIA
0.2% 0.4%0.9% 0.9%
0.6%
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AFRICA
3.2%
-7.4%-1.2% 0.5% 0.3%
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MIDDLE EAST
-1.6%-4.5% -4.0% -3.4%
-5.4%
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EUROPE
Global ADD/CVD duties on cut size copy paper
2019 | Fastmarkets | RISI Outlook Presentation 9
ADD DATES
Australia
Austria 21.6% 2018
Finland 16.9% 2018
Russia 4.2% 2018
Slovakia 17.4% 2018
South Korea 34.2% 2018
China 3.1% to 34.4% 2017
Indonesia 12.6% to 45.1% 2017
Brazil 2.9% 2017
Thailand 13.4% to 23.2% 2017
Pakistan
Japan 39.1% 2018
Brazil 35.9% 2018
China 21.9% 2018
Thailand 2% 2018
Indonesia 10.62% to 20.66% 2018
ADD CVD DATES
USA
Australia Paper 222% 2015
Suzano 17% 2015
Navigator (1) 1.75% 2015
APRIL Indonesia (2) 2% 4% 2015
APP Indonesia 17% 109% 2015
Asia Symbol 84% 7% 2015
APP China 149% 7% 2015
UPM China 149% 177% 2015
Sun Paper China 149% 177% 2015
India
Indonesia $855/tonneminimum price 2018
Thailand $855/tonneminimum price 2018
Singapore $855/tonneminimum price 2018
Mexico
Brazil 38% 2013
1) Navigator tariff changed from 8% to 37%, then back down to 1.75% in October 2018.
2) APRIL Indonesia ADD revised up from 2% in March 2019.
Despite tariffs, cut size imports back near peak market share in USA
22.5%Offshore share of US cut size in 2014
2019 | Fastmarkets | RISI Outlook Presentation
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US cut size demand by source
Domestic supply Offshore imports Offshore import share (R.)
12.9%Offshore share of US cut size in 2018
Effect of tariffs on US cut size imports
IMPORTS FROM NON-TARIFF COUNTRIES
112019 | Fastmarkets | RISI Outlook Presentation
IMPORTS FROM FIVE TARIFF TARGET COUNTRIES
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Portugal IndonesiaChina/Hong Kong BrazilAustralia Five-country import share
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Israel South Korea FinlandThailand Colombia All othersImport share
2019 estimated based on 5 months of US customs data.
Indonesia shifting US exports to rolls after tariff hike
50%Share for rolls for Indonesian exports to USA in 2019
2019 | Fastmarkets | RISI Outlook Presentation
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Cut size Offset rolls Other (rolls or sheets) Rolls share of total (R.)
2019 estimated based on 5 months of US customs data.
Global coated paper machine shuts/conversions, 2019-2020
COMPANY MILL COUNTRY CAPACITY (TONNES/YR)
DATE COMMENTS
Arctic Paper Grycksbo Sweden -45,000 CFS Q1 2019 Shut PM7
Feldmuehle Uetersen Germany -80,000 CFS Q1 2019 Shut PM2
Lecta Condat France -230,000 CFS 2019 Convert a PM to specialty
Stora Enso Oulu Finland -1,080,000 CFS End of 2020 Shut PM6, convert PM7 to kraftliner
Arjowiggins Bourray, Besse-sur-Braye France -348,000 CFS 2019 Q1 Mill closure
UPM Plattling Germany -155,000 CME 2019 Q3 Shut PM10
ND Paper Biron USA -103,000 CME Q3 2019 Shift PM25 to packaging
New-Indy Catawba USA -310,000 CME n/a Potential conversion to packaging
Verso Luke USA -408,000 CFS 2019 Q3 Shut by June 30th
Nippon Paper Ind. Fuji Japan -33,000 CME 2019 Shut PM11
APP Tijwi Kimia Indonesia -245,000 CFS 2019 Convert to packaging
Hokuetsu Niigata Japan -161,000 CFS 2019 Close by end of June
Nippon Paper Ind. Yufutsu Japan -88,000 CFS 2020 Mill shut
Daio Paper Mishima Japan -150,000 CFS 2019 Conversion to kraft papers and paperboard
Global totals -601,000 CME-2,835,000 CFS-3,436,000 total
2019 | Fastmarkets | RISI Outlook Presentation
Note: There are currently no major coated paper capacity expansions occurring globally.
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Global uncoated woodfree prices
HOW LARGE OF A GLOBAL PREMIUM CAN THE USAMAINTAIN?• Brazilian prices can jump above US
levels due to currency swings, premium versus offshore imports.
• US and European prices have historically been close, but wide gap has re-opened due to tighter US market.
• Asian gap with US prices at all-time peak of more than $300/tonne in early 2019.
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US 20 lb copy paper W. Europe A4-B
Brazil domestic cut size Southeast Asia 70 gsm UWF
2019 | Fastmarkets | RISI Outlook Presentation
2-5%Mexican USD P&W prices down 2-5% y-o-y in 3Q19
152019 | Fastmarkets | RISI Outlook Presentation
Signs that printing & writing profitability has peakedMARKETS HAVE ALREADY STARTED TO WEAKEN• Weak demand, more capacity startups and falling costs for fiber in Asia
• US producers forced to roll back some of 2019 UWF price hike despite G-P closure
AFTER SPIKING, MILL COST INFLATION IS ABATING• Pulp prices in decline
• Energy down sharply, albeit starting to recover
RISE IN IMPORTS• Global oversupply will increase competition
• Stronger US dollar and some tariff reductions
REDUCED CONVERSION OPPORTUNITY• Less room for new containerboard machines, global economic risks
5-15%Brazilian P&W prices down 5-15% in first half of 2019
Next moves for US printing & writing prices will be down
US PRICES 5-12% ABOVE YEAR-AGO LEVELS IN EARLY 2019• No room for any further gains even
with major capacity closures.
• Prices for most grades have already begun to erode.
• Any potential recession likely to trigger larger demand declines and result in price drops.
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SC-A Ctd. No. 5 40 lb Ctd. No. 3 60 lb. Unc. offset 50 lb. Cut size copy
162019 | Fastmarkets | RISI Outlook Presentation
North American containerboard producers are taking economic downtime to address slower demand growth
2019 | Fastmarkets | Global Containerboard and Boxboard Outlook 17
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Robust capacity expansion will keep North American containerboard operating rates depressed
2019 | Fastmarkets | Global Containerboard and Boxboard Outlook 18
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Slow growth in North American boxboard demand and supply
2019 | Fastmarkets | Global Containerboard and Boxboard Outlook 19
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Change in demand Change in capacity Operating rates
Snapshot of 2018 Asian containerboard demand and supplyChinese demand fell an estimated 3% in 2018• Deceleration in economic growth• Some substitution from paper to plastics• E-commerce working to reduce its packaging footprint• Significant uncertainty in the level of decline
Rest of Asia saw fairly steady growth at 3.8% in 2018• Compared to average of 4.0% per year in 2016-2017
Chinese output tumbled while net imports soared• Chinese production fell an estimated 5% or 2.5 million tonnes• Net imports jumped almost 1.1 million tonnes• Rest of Asia supplied much of this, with net imports climbing 800,000 tonnes
Entering 2019, demand conditions have been sluggish• Economic weakness and effects of lingering US-China trade war
2019 | Fastmarkets | Global Containerboard and Boxboard Outlook 20
Chinese RCP policies are changing the way companies are operating
Constrained fiber supplies driving up imports and reducing production• RCP imports fell from 25.7 million tonnes in 2017 to 17.0 million tonnes in 2018.• Expected to fall to 10-12 million tonnes in 2019 and then 5-6 million tonnes in 2020 before
total ban goes into effect in 2021.
Large companies are making investments in light of the new policies• Numerous projects in the works in Vietnam, Malaysia, Laos and India
Previously planned projects apparently being delayed• Due to economic weakness and effects of lingering US-China trade war
2019 | Fastmarkets | Global Containerboard and Boxboard Outlook 21
The smaller exporters to the world reaped most of the benefits from the shift in Chinese policy(net exports to world)
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North America Western Europe BrazilSouth Africa Oceania
2019 | Fastmarkets | Global Packaging Outlook 22
China’s containerboard market adjusting to new RCP policiesYear-to-year change
2019 | Fastmarkets | Global Containerboard and Boxboard Outlook 23
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Production Net imports Demand Operating rate
DEMAND WILL DROP AGAIN IN 2019 AND THEN MOVE UP IN 2020• Weak economy
• Dictated by fiber balance
PRODUCTION WILL FALL AND NET IMPORTS WILL CLIMB• Output constrained by fiber
• Market attractive to other Asian suppliers
• But can imports continue to climb that much?
OPERATING RATES ARE TUMBLING• Level dependent on capacity assumptions
The North American tissue market has been strong recently
• The AfH sector in particular benefitted from the strong economy, low gasoline prices and changing lifestyle of younger generations.
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2019 | Fastmarkets | Global Tissue Market Outlook 24
Average growth accelerated from 1.5% to 1.95% per year
US tissue import growth, 2009-2018
• Canada continues to be the main US import source for tissue, but China has taken second place ahead of Mexico and Indonesia.
• However, imports tariffs will restrict imports from China; the first five months of 2019 show decreases in the volume of Chinese tissue imported by the USA.
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2019 | Fastmarkets | Global Tissue Market Outlook 25
Expected growth in US tissue consumption by business sector
• At-Home retailer labels will show the strongest growth, while At-Home branded volume growth will remain moderate.
• AfH growth will rise above average At-Home growth.
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Growth of 5.9% per year
Growth of 2.3% per year
2019 | Fastmarkets | Global Tissue Market Outlook 26
Minor growth of 0.4% per year
Major tissue capacity changes in North America, 2018-2021
2019 | Fastmarkets | Global Tissue Market Outlook
2018• Georgia-Pacific, Augusta, GA, USA -31,000 t/a• Sofidel America, Circleville, OH, USA (2 x NTT) 140,000 t/a• Kimberly-Clark, Fullerton, CA, USA -60,000 t/a• First Quality Tissue, Anderson, SC, USA (TAD PM) 64,000 t/a
113,000 t/a2019
• Soundview Paper, Elmwood Park, NJ, USA (closure after two fires) -110,000 t/a• Clearwater Paper, Shelby, NC, USA (NTT PM) 64,000 t/a• Irving Consumer Products, Macon, GA, USA (TAD PM) 64,000 t/a• Cascades Tissue Group, Scarborough and Whitby, ON, Canada (mill closures) -61,000 t/a• Soundview Paper, Elmwood Park, NJ, USA (restart of PM11) 60,000 t/a• Georgia-Pacific Corp., Crossett, AR, USA (closure of the oldest PM) -30,000 t/a• Georgia-Pacific Corp., Palatka, FL, USA (TAD PM) 72,000 t/a• Sofidel America, Inola, OK, USA 60,000 t/a
119,000 t/a2020-2021
• First Quality Tissue, Lock Haven, PA, USA 64,000 t/a• Sofidel America, Inola, OK, USA 60,000 t/a• Georgia-Pacific, Naheola, AL, USA (replacement) 8,000 t/a• Kruger Tissue, Brompton, Sherbrook, QC, Canada (TAD PM) 70,000 t/a
202,000 t/a 27
Net capacity change* and tissue operating rate in North America
• The outlook is surprisingly good despite the number of projects, but a lot depends on how much tariffs on imports from China change the net trade balance.
• We assume a conservative decline in net imports in this forecast (trend change).
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2019 | Fastmarkets | Global Tissue Market Outlook 28
A lot of new capacity coming on stream that will affect 2019-2020; utilization rate will head south but only slightly if no further closures occur
* Based on committed projects only.
Pulp markets recently completed an historical run…
2019 | Fastmarkets | World Pulp Outlook 29
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Producer inventories reach a record high
2019 | Fastmarkets | World Pulp Outlook 30
Source: PPPC, Fastmarkets RISI.
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Produce inventories, days of supply
BHK Average BHK (2004-10 = 36.4, 2011-18 = 42.7) BSK Average BSK (29.7)
Domestic pulp prices in China searching for a bottom
2019 | Fastmarkets | World Pulp Outlook 31
* Reflects net renminbi domestic resale price converted to US dollars, excluding VAT and logistics costs.
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BHK cash cost curve from Mill Intelligence
LATIN AMERICAN PRODUCERS DOMINATE THE LOW END OF THE COST CURVE• Latin American producers benefit
from low-cost wood and the exchange rate
• Higher-cost facilities tend to be much smaller and located in Asia and the Northern Hemisphere
2019 | Fastmarkets | World Pulp Outlook 32
■ Africa ■ Asia ■ Europe ■ Latin America ■ North America
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2019 | Fastmarkets | World Pulp Outlook
Pulp market could remain weaker for longer
2019 | Fastmarkets | World Pulp Outlook 34
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Shipment/capacity adj. Shipment/capacity ratio (R)
China and Other Asia: RCP imports Million tonnes
OTHER ASIA CATCHING UP WITH CHINA
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352019 | Fastmarkets | Outlook for Global RCP Markets
OCC prices in different regions
CHINESE PAPER COMPANIES FACING HIGH RECYCLED FIBER COSTS• Before July 2017, one set of OCC prices
• Now, two sets of prices: Chinese price and prices outside of China
• Sharp drop in US and European OCC prices
• Low OCC import prices in Southeast Asia
• Domestically collected OCC became quite expensive in China due to the overall recycled fiber shortage issue in 2018
• Recent decline in OCC prices globally because of the weak paper packaging markets and reduction in Asian RCP purchases
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362019 | Fastmarkets | Outlook for Global RCP Markets
China’s investments in recycled pulp
ANNOUNCED AND ESTIMATED RECYCLED PULP PROJECTS
372019 | Fastmarkets | Outlook for Global RCP Markets
• Nine Dragons
• Fairmont, USA: About 220,000 tonnes per year (started up already)
• Biron, USA: 650,000 tonnes per year
• Rumford, USA: About 400,000 tonnes per year
• India: 500,000 tonnes
• Lee & Man
• Myanmar: 680,000 tonnes per year
• Malaysia: 550,000 tonnes per year
• Sun Paper: Laos: 400,000 tonnes per year
• Jingxing Paper: Malaysia: 550,000 tonnes per year
• Shanying
• Wickliffe, USA: 120,000 tonnes per year
• Malaysia: 550,000 tonnes per year
• Other