The PackagingThe Packaging Revolution: Adjusting to the ... · • Worked in business and market...

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

© Copyright 2015 RISI, Inc. | Proprietary Information1

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


What We Will Talk About?

Current conditions T j ti Two-year projections Capacity changes

3 © Copyright 2015 RISI, Inc. | Proprietary Information

Current Conditions ContainerboardContainerboard

• Global snapshotDemand • Deep dive: Western Europe

• Capacity growth

Trade

S&D Balance

Profitability


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)


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

6© Copyright 2015 RISI, Inc. | Proprietary Information6

-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%


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%


World North America

Europe Far East Latin America

All Other

Europe


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)


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


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


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


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


• 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:


g- Any company selling in Turkey

ope

22 000


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


C

ope


tern Euro

95%€ 500

d) –West

90%€ 400

(Recycled

85%€ 300

rboard (

80%€ 2002010 2011 2012 2013 2014 2015 2016 2017

Containe


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


C g y

Why So Much in Recycled Containerboard?

European Demand TrendsEuropean Demand Trends

Market Concentration

World Trends (trade flows)


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


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


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


46%• Easier to secure an attractive position onthe industry cost curve

World Trends (Trade Flows)

North America – Net Exporter

Capacity Expansions

?

Capacity Expansions (Boxboard)


Not many clear opportunities for Europe

World Trends (Trade Flows)LightweightLightweight

North America – Net Importer

Less capacity buildup globally

Warning! Global market becoming more


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


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)


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


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%


World North America

Europe Far East Latin America

All Other

e


n Europe

6,000

–Western

4,000

5,000

(Virg

in) –

3,000

,

nboard (

2,0002010 2011 2012 2013 2014 2015 2016 2017

Carton


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


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


pe


ern Europ

3,000–Weste

ecycled)

2,000

board (R

1,0002010 2011 2012 2013 2014 2015 2016 2017Ca

rton

b


pe


ern Europ

95%€ 600

–Weste

90%€ 500

ecycled)

85%€ 400

board (R

80%€ 3002010 2011 2012 2013 2014 2015 2016 2017

Carton

b


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


European Main Destinations?

Emerging Europe (46%)

Americas (14%)

Asia (21%)

Africa & Middle East (16%)( )


Main Challenges for EuropeIn Europe

• Overcapacity•Active expansion in global marketsin global markets

•Net exporter of virgin boxboardvirgin boxboard

•Demand also struggling


Questions


Thank you for your attentionFor more information:

China Boxboard Study –2014 U d t

For more information:

2014 Updatewww.risi.com/chinabox

Coming Soon!g2015 World Boxboard Studywww.risi.com/worldbox


The PackagingThe Packaging Revolution: Adjusting to the ... · • Worked in business and market...

Documents

Transcript of The PackagingThe Packaging Revolution: Adjusting to the ... · • Worked in business and market...