Global Containerboard OutlookGlobal Containerboard Outlook · Title: Microsoft PowerPoint - Ken...

Global Containerboard OutlookGlobal Containerboard Outlook

Ken Waghorne VPKen Waghorne, VPPaper Packaging Practice

June 2015

© Copyright 2015 RISI, Inc. All rights reserved.1

Today’s Agenda

• Regional Containerboard MarketsRegional Containerboard Markets– Asia– Europe– Europe

• Western• Eastern• Eastern

– North AmericaLatin America– Latin America

– Rest of World

• Global Summary

2© Copyright 2015 RISI, Inc. All rights reserved.2

Asian Demand for Containerboard Far Surpasses Other Regions (2014)

70

80

W ld T t l

50

60World Total

152 MM TonnesUp 19% from 2009

40

50China

20

30

8%

0

10 47% 21% 19%8%

5%

Asia Total Europe North America Latin America All Other3


Asian Demand Increased 31 Million Tonnes During the Last 10 Years, and Recycled Grades Captured All the Growthy p

Consumption in 2014: Consumption in 2004: 40 7 Milli T

1%

72.0 Million Tonnes 3%

40.7 Million Tonnes

8%14%

91%83%

Kraftliner Recycled Semichem.4© Copyright 2015 RISI, Inc. All rights reserved.4

While China Dominates the Discussion of the Asian Markets, the Other Countries Have Recorded Significant Growthg

70

80

60

70

s

China

South Korea

40

50

on T

onne

s

Japan

India

20

30

Mill

io Indonesia

Thailand

Rest of Asia

0

10Rest of Asia

5

02003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


The Chinese Industry Was Slow to Recognize the Maturing Chinese Market, Creating Disruptions in the Marketg p25.0%

Demand Growth

15 0%

20.0% Capacity Growth

10.0%

15.0%

5.0%

10.0%

0.0%


Most Countries Outside of China Are Expected to Grow at Faster Growth Rates Than China in 2015-2016

PakistanRest of Asia

MalaysiaSingapore

PhilippinesPakistan

IndonesiaThailand

Hong KongMalaysia

South KoreaTaiwan

India

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

ChinaJapan

7

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%Average Annual Growth


Asian Containerboard Markets Outside China Will Likely Remain Balanced Compared to China in 2015-2016p

Growth, Million Tonnes and Operating Rate (%)

95 0%97.5%100.0%

4 04.55.0

China

95 0%97.5%100.0%

4 04.55.0

Rest of Asia

87.5%90.0%92.5%95.0%

2.53.03.54.0

87.5%90.0%92.5%95.0%

2.53.03.54.0

80.0%82.5%85.0%87.5%

1.01.52.02.5

80.0%82.5%85.0%

1.01.52.0

75.0%77.5%

0.00.5

10 11 12 13 14 15 1675.0%77.5%

0.00.5

10 11 12 13 14 15 16

8

Demand Capacity Operating Rate (Right)


Net Imports into the Asian Market Will Grow Just 100,000 Tonnes in 2015-20161 80

1 40

1.60

1.80ChinaRest of Asia

1.00

1.20

1.40

0.60

0.80

0.20

0.40

-0.20

0.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 20162007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Looking Closely: Western Europe

2009 2014

20%35%

19%4%36%

21%

6%

34%5%

40%

4%

41%

36%

R l d 72% i 2001 77% i 2014

%

38%

40% 41%

• Recycled: 72% in 2001, 77% in 2014

• By 2016 recycled will be 78%

38%

2001 • In 2016 demand will still be below the pre-crisis period

2001

10 © Copyright 2015 RISI, Inc. All rights reserved.

Recycled Medium Testliner Kraftliner Semichemical Medium

Looking Closely: Emerging Europe2009 2014

21%35%

17%8%40%

19%33% 9%

35%

8%

35%

40%

14%

34%

35% 35%

• Recycled: 67% in 2001, 75% in 2014

• By 2016 recycled will be 76%

34%

2001 • By 2010 demand was above pre-crisis period2001

11 © Copyright 2015 RISI, Inc. All rights reserved.

Recycled Medium Testliner Kraftliner Semichemical Medium

In Both Regions, Capacity Expansion

Emerging Europe

Should Exceed Demand Growth Western Europe

1 5

2.0Emerging Europe

1 5

2.0Western Europe

1.0

1.5

1.0

1.5

0.50.5

0.00.0

-0.510 11 12 13 14 15 16

-0.510 11 12 13 14 15 16

Demand Capacity


Recycled Grades Flowing from Left to Right• Within Europe: From Western to Emerging Europe

Western Europe, Net Exports Emerging Europe, Net Imports

g g• Outside Europe: To the Middle East and Africa

2,500

3,000Trade Surplus Trade Deficit

1,500

2,000

1,000

1,500

0

500

07 08 09 10 11 12 13 14 15 16 07 08 09 10 11 12 13 14 15 1607 08 09 10 11 12 13 14 15 16


Virgin Grades Flowing from Right to Left

• Within Europe: From Emerging Europe to Western EuropeOutside Europe: North America Is an Important Supplier to

Western Europe, Net Imports Emerging Europe, Net Exports

• Outside Europe: North America Is an Important Supplier to Western Europe

1,200

1,400

g g

Trade SurplusTrade Deficit

800

1,000

400

600

200

400

07 08 09 10 11 12 13 14 15 160

07 08 09 10 11 12 13 14 15 16


European Profitability Still Good Relative to Graphic Paper1 751.75

KraftlinerTestlinerNewsprint

1.50p

UWFCWF

1.25

1.00

0.752001 2003 2005 2007 2009 2011 2013 2015


2001 2003 2005 2007 2009 2011 2013 2015

The Last Decade Was Difficult for North American Producers as Outsourcing Hurt Manufacturingg

Consumption in 2014, 29 2 Million Tonnes

Consumption in 2004, 31 4 Million Tonnes 29.2 Million Tonnes 31.4 Million Tonnes

48%

17%21%

48%

35%52%

27%

Kraftliner Recycled Semichem.


North American Containerboard Producers Have Learned to Keep Capacity in Line with Demandp y

100%3.0

90%

95%

1 0

2.0

Tonn

es

85%

90%

0.0

1.0

atin

g R

ate

h, M

illio

n T

80%-1.0 Ope

ra

Gro

wth

Production

70%

75%

-3.0

-2.0 CapacityOperating Rate

03 04 05 06 07 08 09 10 11 12 13 14 15 1617


Profit Margins (Prices/Variable Costs) in North America Are at the Highest Sustained Level in More Than a Decade

2.50

2.00

2.25

1 50

1.75

1.25

1.50

Southern Kraftliner

0.75

1.00Southern Kraftliner

Recycled Liner

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1518


North America Is Well Positioned to Meet Future Growth in Global Kraftliner Demand

32%6.0Share (R)

26%

29%

4.0

5.0

ctio

n

es

Exports

23%3.0

e of

Pro

duc

illio

n To

nn

20%2.0 Shar

eMi

14%

17%

0.0

1.0

03 04 05 06 07 08 09 10 11 12 13 14 15 1619


Brazil and Mexico Have the Largest Markets in Latin America, But Robust Growth Extends Throughout the Region g g

16Argentina

12

14g

ChileRest of Latin AmericaMexicoBrazil

8

10

n To

nnes

Brazil

4

6Mill

io

0

2

20

02003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


Latin American Capacity Expansion Tailed Off in 2014, But So Did Demand

95%

100%

0.6

0.7Production Capacity Operating Rate

85%

90%

0.4

0.5

ateon

nes

75%

80%

0.2

0.3

pera

ting

Ra

h M

illio

n To

65%

70%

0.0

0.1 Op

Gro

wth

55%

60%

-0.2

-0.1

03 04 05 06 07 08 09 10 11 12 13 14 15 1621


Brazil Is the Only Net Exporter in Latin America, and Sells Throughout the WorldKraftliner Exports, Thousand Tonnes

400450

250300350

150200250

050

100

02008 2009 2010 2011 2012 2013 2014 2015f 2016f

Argentina Other South America Central & North AmericaEurope Africa Rest of Worldu ope ca est o o dTotal Exports


The Rest of Latin America Relies on Imports to Meet Demand, Mainly from the United States

3.43.6

2.83.03.2

Tonn

es

2.22.42.6

rts,

Mill

ion

1.61.82.0

Net

Impo

r

1.01.21.4

03 04 05 06 07 08 09 10 11 12 13 14 15 1603 04 05 06 07 08 09 10 11 12 13 14 15 1623


Africa and the Middle East Are Both Markets with Growing Containerboard Demand, While Oceania Is Much More Mature

0.350

0.400

nnes Africa

Middle East

0 250

0.300

0.350

Mill

ion

Ton Middle East

Oceania

0 150

0.200

0.250

al G

row

th,

0.100

0.150

age

Ann

ua

0.000

0.050

Demand 2010- Capacity 2010- Demand 2014- Capacity 2014-

Aver

a

2013p y

2013 2016p y

2016


Net Imports into Africa Will Grow in 2014-2016, But Conditions Will Remain Challenging in the Middle Eastg g

1 4

1.6

Middle East

1.2

1.4

es

Middle East

Africa

0.8

1.0

on T

onne

0.4

0.6

Mill

io

0.0

0.2

03 04 05 06 07 08 09 10 11 12 13 14 15 1603 04 05 06 07 08 09 10 11 12 13 14 15 1625


Oceania Is a Net Exporter of Mainly Virgin Containerboard, But Is Not Expected to Add to Supply in 2014-2016pp y

0 1

0.0

-0 3

-0.2

-0.1

Tonn

es

-0.5

-0.4

0.3

ts, M

illio

n T

-0.7

-0.6

Net

Impo

rt

-0.9

-0.8

03 04 05 06 07 08 09 10 11 12 13 14 15 16

N

03 04 05 06 07 08 09 10 11 12 13 14 15 1626


Bottom Line: Developing Markets Will Continue to Provide All Growth in Global Containerboard Demand

15%180Developed Economies

9%

12%

120

150 Developing EconomiesGlobal Growth (R)

6%90

0%

3%

30

60

-3%

0%

0

30

03 04 05 06 07 08 09 10 11 12 13 14 15 1627


Profit Margins (Prices/Variable Costs) in North America Are Well Above Those in Other Regionsg2.50

Southern Kraftliner US Recycled Liner

2.00

2.25Southern Kraftliner US Recycled Liner

European Testliner Chinese Kraft Top

1.75

1.25

1.50

0.75

1.00

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1528


Take Home Points on Global Containerboard

The Asian market remains one of the fastest growing• The Asian market remains one of the fastest growing markets in the world– Despite the dramatic slowdown in Chinese demandp

• Europe is oversupplied at the moment– New capacity from conversions from graphic paper

• Latin America will remain a growing net importer of containerboard

E ith d l i i t f B il– Even with a gradual increase in exports from Brazil• North American producers continue to have capacity

available for sale to the export marketavailable for sale to the export market– But lower profitability for exports could reduce

willingness to sell into export markets


Thank you for your attention!

Much of the information in this presentation is updated regularly in the following:

World Containerboard 5-Year Forecast

i i /f twww.risi.com/forecasts


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