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Global Containerboard Outlook

Gleb SinavskisEconomist, European Paper Packaging

European ConferenceMarch 2018

Gleb Sinavskis

• Previous experience in the financial services industry

• Masters in Economics from Uppsala University, Sweden

• Author/co‐author of the Paper Packaging Monitor Europe and European Paper Packaging 5‐ and 15‐Year Forecasts

Economist, European Paper Packaging

gsinavskis@risi.com 

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• Global Overview• Asia• North America• Europe• Conclusion

Agenda

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Synchronized Global Economic Growth

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Growing Global Population and Urbanization

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Rising Share of E‐Commerce in Global Retail Sales

24.6%23.2%

21.1%19.1%

17.4%16.1%

8.7%10.1%

11.6%13.1%

14.6% 15.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2016 2017 2018 2019 2020 2021

Retail E‐Commerce Sales

Percentage Change

Percentage of Total RetailSales

Source: eMarketer, June 2017

Global Containerboard Demand Growth Is Above Average in 2018‐2019Apparent Consumption, Thousand Tonnes

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

020406080100120140160180200

2011 2012 2013 2014 2015 2016 2017 2018 2019

Virgin Containerboard Recycled Containerboard Demand Growth, %

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Recycled Containerboard Capacity Growth Continues to Outpace VirginCapacity, MillionTonnes

26% 22.5%020406080100120140160180200

2011 2012 2013 2014 2015 2016 2017 2018 2019

Virgin Containerboard Recycled Containerboard

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Global Containerboard DemandAsia has the largest market, followed by North America and Western Europe

48%

18%

14%

8%

7%5%

Far East

North America

Western Europe

Latin America

Emerging Europe

All Other

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Global Virgin Containerboard Demand Is Dominated by North America41 million tonnes in 2017

17%

47%

12%

12%

6%6%

Far East

North America

Western Europe

Latin America

Emerging Europe

All Other

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Asia

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China Continues to Account for More Than 60% of Asian Demand Apparent Consumption, Thousand Tonnes

010,00020,00030,00040,00050,00060,00070,00080,00090,000

100,000

2012 2013 2014 2015 2016 2017 2018 2019

Other Countries

Japan

Thailand

Indonesia

India

Taiwan

South Korea

China

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OCC Price Volatility in ChinaUS Dollars per Tonne

140

190

240

290

340

390

440

490

Jan 2013

Apr 2

013

Jul 2013

Oct 2013

Jan 2014

Apr 2

014

Jul 2014

Oct 2014

Jan 2015

Apr 2

015

Jul 2015

Oct 2015

Jan 2016

Apr 2

016

Jul 2016

Oct 2016

Jan 2017

Apr 2

017

Jul 2017

Oct 2017

Jan 2018

OCC (1.05) Importsfrom Europe (NetPrice)

OCC, Imports fromJapan (Net)

OCC, Imports fromthe USA (Net)

OCC, Post‐Consumer(Domestic, Net Price)

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Containerboard Prices in China Increased Substantially, Driven by Escalating CostsUS Dollars per Tonne

400

500

600

700

800

900

1,000

Jan 20

13Mar 201

3May 201

3Jul 201

3Sep 2013

Nov

 201

3Jan 20

14Mar 201

4May 201

4Jul 201

4Sep 2014

Nov

 201

4Jan 20

15Mar 201

5May 201

5Jul 201

5Sep 2015

Nov

 201

5Jan 20

16Mar 201

6May 201

6Jul 201

6Sep 2016

Nov

 201

6Jan 20

17Mar 201

7May 201

7Jul 201

7Sep 2017

Nov

 201

7Jan 20

18

Kraft Top Liner, 170 g,East China

Testliner, 140 g, EastChina

High‐Strength CorrugatedMedium, 120 g, EastChina

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Monthly Imports in China in 2016‐2017 by GradeTonnes

0

50,000

100,000

150,000

200,000

250,000

Recycled Liner Recycled Medium Semichemical Medium Kraftliner

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Monthly Imports in China in 2016‐2017 by RegionTonnes

0

50,000

100,000

150,000

200,000

250,000

Jan

Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov Dec Jan

Feb

Mar

Apr

May Jun Jul

Aug

Sep

Oct

Nov Dec

Far East & Oceania North America Russia & CISSoutheastern Europe (Turkey) Western Europe Middle East

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Chinese Imports Forecast Has Significant Upward Pressure

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2012 2013 2014 2015 2016 2017 2018 2019

Chinese ImportsMillion Tonnes

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Announced Capacity Additions in China Outpace Demand GrowthChange in Million Tonnes

83%84%85%86%87%88%89%90%91%92%93%

‐1.0

‐0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2013 2014 2015 2016 2017 2018 2019

Demand Capacity Operating Rate

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Other Asian (Excl. China) Operating Rates Trending Up as Both Demand and Exports to China GrowChange in Million Tonnes

84%

85%

86%

87%

88%

89%

90%

91%

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

2013 2014 2015 2016 2017 2018 2019

Demand Capacity Operating Rate

North America

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North American Box Market Shows Strong GrowthPercentage Change of Shipments

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2011 2012 2013 2014 2015 2016 2017 2018 2019

PERC

ENTAGE CH

ANGE

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Operating Rates in North America to Stay HighChange in Thousand Tonnes, Percent

92%

93%

94%

95%

96%

97%

98%

99%

‐500

0

500

1,000

1,500

2011 2012 2013 2014 2015 2016 2017 2018 2019

Demand Capacity Operating Rates

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North American Net Exports of Containerboard Will IncreaseChange in Net Exports, Million Tonnes

‐200‐150‐100‐50050

100150200250

2014 2015 2016 2017 2018 2019

Virgin Containerboard Recycled Containerboard

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North American Prices Rose, Gap Between Domestic and Export Prices Decreased SignificantlyUS Dollars per Short Ton

380

430

480

530

580

630

680

730

Q2‐2013

Q3‐2013

Q4‐2013

Q1‐2014

Q2‐2014

Q3‐2014

Q4‐2014

Q1‐2015

Q2‐2015

Q3‐2015

Q4‐2015

Q1‐2016

Q2‐2016

Q3‐2016

Q4‐2016

Q1‐2017

Q2‐2017

Q3‐2017

Q4‐2017

Feb 2018

US East, Unbleached Kraftliner, 42lb, Open Market

China, Unbleached KraftLinerboard, 175 g+

Southern Europe, UnbleachedKraft Linerboard, 175+ g

Central/South America,Unbleached Kraft Linerboard(FAS), 42 lb

Europe

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Recycled Containerboard, Western EuropeOperating rates will remain above 94% through 2019

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1.6% 3.9% 2.7% 1.8%

91.0%

92.0%

93.0%

94.0%

95.0%

96.0%

97.0%

98.0%

99.0%

18

5,018

10,018

15,018

20,018

25,018

30,018

2015 2016 2017 2018 2019

MILLION TONNES

Demand (APC) Capacity Operating Rate

Virgin Containerboard, Western EuropeOperating rates will stay close to 98% in 2018‐2019

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3.6% 3.9% 2.1% 2.6%

87.0%

89.0%

91.0%

93.0%

95.0%

97.0%

99.0%

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2015 2016 2017 2018 2019

MILLION TONNES

Demand (APC) Capacity Operating Rate

Net Trade Trends in Western EuropeVirgin containerboard net imports to increase slowly

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‐1.0

‐0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2015 2016 2017 2018 2019

MILLION TONNES

Virgin Containerboard Recycled Containerboard

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Germany: Prices Rose to Record Levels in 2017Euros per Tonne

450

500

550

600

650

700

750

Q1‐2013

Q2‐2013

Q3‐2013

Q4‐2013

Q1‐2014

Q2‐2014

Q3‐2014

Q4‐2014

Q1‐2015

Q2‐2015

Q3‐2015

Q4‐2015

Q1‐2016

Q2‐2016

Q3‐2016

Q4‐2016

Q1‐2017

Q2‐2017

Q3‐2017

Q4‐2017

Feb 2018

Testliner 2, 140 g,Germany

UnbleachedKraftliner, 175 g+,Germany

Italy: Prices of Kraftliner Skyrocketed due to Higher Import PricesEuros per Tonne

300350400450500550600650700

Q1‐2013

Q2‐2013

Q3‐2013

Q4‐2013

Q1‐2014

Q2‐2014

Q3‐2014

Q4‐2014

Q1‐2015

Q2‐2015

Q3‐2015

Q4‐2015

Q1‐2016

Q2‐2016

Q3‐2016

Q4‐2016

Q1‐2017

Q2‐2017

Q3‐2017

Q4‐2017

Feb 2018

UnbleachedKraftliner, 175+ g,Italy

Testliner 2, 140 g,Italy

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Price Gap Between Kraftliner and Testliner IncreasesEuros per Tonne

0

50

100

150

200

250

Gap Between Kraftliner 175+ and Testliner 2 

Italy Germany

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Variable Production Costs Will Rise for KraftlinerYear‐over‐Year Percentage Change

‐5%

‐3%

‐1%

1%

3%

5%

7%

2015 2016 2017 2018 2019

Kraftliner 175+ Testliner 2

Containerboard Demand Growth in Emerging Europe Will Accelerate in 2018‐2019

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5.5

6.5

7.5

8.5

9.5

10.5

11.5

12.5

13.5

2015 2016 2017 2018 2019

MILLION TONNES

Demand (APC) Production

5.5%

Conclusions

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80%82%84%86%88%90%92%94%96%98%

100%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Western Europe Emerging Europe Far East Latin America North America

North American Operating Rates Should Remain High Through 2019And remain well above the rest of the world

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Take Home Points on Global Containerboard

• Elevated global demand growth will continue in 2018‐2019 Demand growth is solid in both emerging and developed markets

• Chinese policies are reshuffling trade flows in both PfR and recycled containerboard A lot of uncertainty surrounding China’s policies still exists

• Continued tighter supply/demand balances in virgin containerboard in the near term Higher operating rates in this segment

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For more information on RISI’s global paper packaging and containerboard coverage, visit www.risi.com.

Thank you!Questions?

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