Paper & pulp markets & forecasts - UNECE · Market Discussions, 21-22 October 2008. Highlights –...
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Paper & pulp markets & forecasts Dr. Peter J. Ince Forest Products Laboratory US Forest Service Joint UNECE Timber Committee and FAO European Forestry Commission Market Discussions, 21-22 October 2008
Transcript of Paper & pulp markets & forecasts - UNECE · Market Discussions, 21-22 October 2008. Highlights –...
Paper & pulp markets & forecasts
Dr. Peter J. InceForest Products LaboratoryUS Forest Service
Joint UNECE Timber Committee and FAO European Forestry Commission Market Discussions, 21-22 October 2008
Highlights – paper, paperboard & wood pulp
Markets peaking in 2008 as demand weakensDemand increased in Europe but production leveled
out as imports increasedU.S. net exports surged but Canada declined due to
relative dollar exchange valuesProfits were eroded by sharply higher costs for
energy, fibre, chemicals & transportChina’s expansion had big impact on markets but
sustained growth seems questionableBio-energy and biorefining = fibre competition
but also growth opportunity for pulp mills
-4%
-2%
0%
2%
4%
6%
2004 2005 2006 2007 2008 2009
ProductionConsumption
EU – Paper & paperboard trendsChange from one year earlier
Production leveled out as imports increasedProduction leveled out as imports increased
Source: UNECE
-2%
0%
2%
4%
6%
8%
10%
2004 2005 2006 2007 2008 2009
ProductionConsumption
CIS – Paper & paperboardChange from one year earlier
Growth slowed in production & consumptionGrowth slowed in production & consumptionSource: UNECE
-4%
-2%
0%
2%
4%
6%
2004 2005 2006 2007 2008 2009
ProductionConsumption
North America – Paper & paperboardChange from one year earlier
Decline continued, but U.S. exports increasedDecline continued, but U.S. exports increasedSource: UNECE
-10
-5
0
5
10
15
20
25
30
35
40
1977-1986 1987-1996 1997-2006
Change in Paper & Board Production (million metric tons per decade)
N. AmericaEuropeAsia
Source: FAOSTAT
Asia, Europe, and North America account for 92% of worldwide paper & paperboard output.
Over the past decade growth expanded in Europe and Asia, but production declined in North America.
China became the world’s most rapidly expanding producer and consumer of paper and paperboard.
What happened in North America, and can growth in Europe and Asia be sustained?
Growth Trends . . .Growth Trends . . .
North AmericaNorth America’’s decline in the past decade s decline in the past decade resulted from economic globalization and resulted from economic globalization and shifts in industrial production . . .shifts in industrial production . . .
Global Global ChangeChangeChange in GrowthChange in Growth
As manufacturing growth shifted from North As manufacturing growth shifted from North America to Asia and Europe, so did growth in America to Asia and Europe, so did growth in paper and paperboard output (following global paper and paperboard output (following global demands for packaging, print media & print demands for packaging, print media & print advertising).advertising).
80
84
88
92
96
100
104
108
112
116
120
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Indu
stria
l Pro
duct
ion
Inde
x
82
84
86
88
90
92
94
96
98
100
102
Pape
r & B
oard
Pur
chas
es
(mill
ion
met
ric to
ns y
ear-t
o-da
te)
U.S. Industrial Production IndexU.S. Paper & Board Purchases
Sources: U.S. Federal Reserve (G.17 Industrial Production); AF&PA (Paper and Board Purchases)
U.S. paper and board demands never fully recovered after the 2001 recession, and are receding again in 2007-2008 along with another downturn in U.S. industrial production:
30
35
40
45
50
55
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Mon
thly
out
put (
m.t.
/em
ploy
ee)
Sources: U.S. Bureau of Labor Statistics (pulp, paper & board mill employment) AF&PA (paper and paperboard production)
U.S. industry responded to demand shifts with consolidation and productivity gains. Many mills were shut down, and paper & board output per employee increased by nearly 40% just since 2001 . . .
U.S. Paper & Board Output per Mill Employee
14
16
18
20
22
24
26
1996199719981999200020012002200320042005200620072008p
Mill
ions
of M
etric
Ton
s
85
90
95
100
105
110
115
Real
Bro
ad $
Inde
x
Exports Imports
Data Sources: AF&PA, Commerce Dept. (trade statistics); Federal Reserve (dollar index);[Data include paper and paperboard products and wood pulp shipments, and exclude recovered paper]
U.S. Pulp, Paper & Board Product Trade(Tonnage) The U.S. trade gap
in pulp, paper & board peaked at around 8 million tons per year in 2002-2004.
But productivity gains and a weak dollar helped cut the trade gap in half by 2007, and the gap is nearly closing in 2008.
U.S. exports are increasing and imports declining.
Pulp, paper & paperboard prices reach high levels in 2007-2008:Since the 2001-2002 economic downturn, prices for pulp, paper and paperboard have climbed to the highest levels seen since the mid-1990s.
Global demand increased (mainly in Asia and Europe) while supply growth was limited by consolidation (mainly in North America). Higher input costs also pushed prices higher.
100
120
140
160
180
200
220
2003 2004 2005 2006 2007 2008
Pric
e In
dex
(198
2 =
100) Paperboard
Paper
Wood Pulp
Price Trends, USA – (2003 – 2008)
Source: U.S. Bureau of Labor Statistics, Producer Price Indexes; Data through July 2008
(5-year upturn in prices)
U.S. Prices have really escalated as dollar value has declined since 2003.
$
40
50
60
70
80
90
100
110
2003 2004 2005 2006 2007 2008
Pric
e In
dex
(198
2 =
100)
Paper &Board
WoodPulp
Price Trends, Europe – (2003 – 2008)
Source: EUROSTAT, Domestic Producer Price Indexes; Data through August 2008
European pulp, paper & board prices also reached high levels in 2007-2008.
€
Paper Industry Returns (ROCE) Globally . . .
-2
0
2
4
6
8
10
USA
Europe
Canada
Emerging AsiaLatin AmericaWorld Avg.
% R
OC
E
2005 2006 2007
In 2005-2007, U.S. paper industry profits were above the world average. Profits in Europe climbed to just above the world average. Profits in Canada were crushed by a stronger Canadian dollar, while profits in Asia and Latin America declined but remained well above average . . .
Source: Price Waterhouse Coopers Global Survey – 2007, 2008 Editions (Top 100 firms worldwide)
World Average
Can current marketCan current marketconditions be sustained?conditions be sustained?
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
Our answer Our answer -- Ch. 8, FPAMR (MidCh. 8, FPAMR (Mid--2008):2008):
““Pulp and paper markets peaking amid Pulp and paper markets peaking amid slowing economy, rising input costs, and slowing economy, rising input costs, and erosion of profits . . . global demand erosion of profits . . . global demand conditions weakeningconditions weakening””
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96
100
104
108
112
116
120
2003 2004 2005 2006 2007 2008
Indu
stria
l Pro
duct
ion
Inde
x
94
98
102
106
110
114
118
122
Pape
r & B
oard
Pro
duct
ion
Inde
x
EU27 Industrial ProductionEU27 Paper & Board Production Index
European paper and paperboard output is now also declining along with industrial production:
(Polynomial Trend Lines)
$20
$40
$60
$80
$100
$120
$140
$160
J-03 J-04 J-05 J-06 J-07 J-08
Dol
lars
per
Bar
reThe 2008 spike in oil prices led to sharply higher costs for fibre, fuels, and chemicals, which caused erosion of profits despite peak product prices . . .
Weekly OPEC Spot Price, Weighted by Export Volume (Dollars per Barrel)
Source: U.S. Energy Information Administration
20
25
30
35
40
45
2007 2008
Day
s of
Sup
ply,
All
Gra
dWorld market pulp inventory has jumped, another sign of weakening global demand in pulp & paper markets . . .
World Producer Pulp Inventory
Source: PPRC
These were the major concerns in 2008* related to global pulp & paper industry profitability:
Energy CostsCurrency Exchange RatesFibre SupplyTransportation Costs
Also, majority opinion was that “major consolidation” of Western European paper industry is likely within the next five years
*Results of 2008 online industry executives poll by PricewaterhouseCoopers
Another cause for concern . . . pulp producers in Europe and Asia that rely on wood imports from Russia will begin to experience a new squeeze on profits from Russia’s wood export tax, with birch pulpwood taking a €50/cu. m. hit in 2011 . . .
Source: Prof. Eduard L. Akim
Production of pulp, paper and paperboard in the Russian Federation, 19 98 -2 0 07
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
1998199920002001200220032004200520062007
1,00
0 m
.t.
Paper PaperboardChemical pulp
Sources: Goscomstat of the Russian Federation, PPB-express, and author’s data interpretation, 20 0 8.
The wood export tax aims to keep production capacity in Russia, where growth in pulp, paper and board output are leveling out . . .
27,6
10,1
4,52,1 1,6 1,2
0
5
10
15
20
25
30
China Finland Japan Balticcountries
Sweden Republicof Korea
Major importers of roundwood from the Russian Federation, million cu. m. (2007)
Source: Prof. Eduard L. Akim
China, Finland, Japan, Baltic countries and Sweden will be most directly affected by Russia’s export tax.
Mainland China Paper & Board Production (m illion m .t.)
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20
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1980
1982
1984
1986
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1992
1994
1996
1998
2000
2002
2004
2006
China’s growth in paper and board output has been reallyenormous, correlated with expansion in manufacturing.
Can China’s growth rates
be sustained inthe face of aweaker globaleconomy, higherenergy costs,higher wood input costs(Russia’s tariff),and a globalmanufacturingslowdown?
Source: FAOSTAT through 2006, with 13% growth in 2007 as reported by China Paper Association (CPA);Note that tonnage data reported by CPA (at 73.5 million m.t. in 2007) are higher than FAOSTAT data for mainland China.
Wood Pulp - Europe
30 000
35 000
40 000
45 000
50 000
55 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Production Consum ption
Source: UNECE/FAO TIMBER database, 2008
Wood Pulp - Europe
Source: UNECE/FAO TIMBER database, 2008
0
5 000
10 000
15 000
20 000
25 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Im ports Exports
Wood Pulp - North America
Source: UNECE/FAO TIMBER database, 2008
50 000
60 000
70 000
80 000
90 000
100 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Production Consum ption
Wood Pulp - North America
Source: UNECE/FAO TIMBER database, 2008
0
5 000
10 000
15 000
20 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Im ports Exports
Wood Pulp - Russian Federation
Source: UNECE/FAO TIMBER database, 2008
0
2 000
4 000
6 000
8 000
10 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Production Consum ption
Wood Pulp - Russian Federation
Source: UNECE/FAO TIMBER database, 2008
0
1 000
2 000
3 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Im ports Exports
Paper and Paperboard - Europe
Source: UNECE/FAO TIMBER database, 2008
70 000
75 000
80 000
85 000
90 000
95 000
100 000
105 000
110 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Production Consum ption
Paper and Paperboard - Europe
Source: UNECE/FAO TIMBER database, 2008
30 000
35 000
40 000
45 000
50 000
55 000
60 000
65 000
70 000
75 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Im ports Exports
Paper and Paperboard – North America
Source: UNECE/FAO TIMBER database, 2008
80 000
90 000
100 000
110 000
120 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Production Consum ption
Paper and Paperboard – North America
Source: UNECE/FAO TIMBER database, 2008
0
5 000
10 000
15 000
20 000
25 000
30 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Im ports Exports
Paper and Paperboard – Russian Federation
Source: UNECE/FAO TIMBER database, 2008
0
2 000
4 000
6 000
8 000
10 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Production Consum ption
Paper and Paperboard – Russian Federation
Source: UNECE/FAO TIMBER database, 2008
0
1 000
2 000
3 000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
1000
mt
Im ports Exports
Potential future bioenergy demand draws industry attention to competition for fibre from biofuels (-)
Integrated biorefinery and bio-energy concepts are being explored at pulp mills in Europe and North America (+)
Lastly, bioenergy development –
Two aspects related to pulp & paper . . . (with different impacts)
A popular notion is that bioenergy demands will be limited to low-grade biomass resources, such as “slash and thinnings” . . . (not competing with fibre demand)
However, if bioenergy places demands on wood fibre or land areas used for fibre production, then wood fibre competition is inevitable.
If government targets are to be met (e.g. >10% biofuel in vehicle fuels after 2020), then probably much more than just “slash and thinnings” will need to be mobilised.
The European paper industry (CEPI) has taken a position on bio-energy and biomass . . .
“Bio-energy policies should focus more on and include incentives for the mobilisation of existing biomass resources and the activation of new biomass sources whilst taking into account the existing sustainable and environmentally friendly industries.”
(Joint CEPI and AEBIOM position on national energy plans)
Current and prospective demandgrowth for wood bio-energy:
Wood Pellets (now rapidly growing)
Thermal, Electric Power and CHP (largest current uses; expanding)
Biofuels for Transport and Biorefineries(subsidized now, but huge potential)
Business concepts integrated to pulp mills are being explored in these areas(in Europe, North America and elsewhere)
http://www.energy.gov/media/Biofuels_Project_Locations.pdf
Pulp Mills
Others
√ √ Wood UsingBiorefineries:
Summary . . .
1. Pulp, paper and paperboard prices reached decadal highs in 2008, but profit margins were eroded by higher costs for energy, chemicals, fibre and transport.
2. Markets likely peaked with weakening demand in 2008.
3. Longer-term consolidation is likely if Europe or Asia follow the North American pattern . . .
4. Wood bioenergy demands and biorefining = future fibre competition and growth opportunity
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1977-1986 1987-1996 1997-2006
N. AmericaEuropeAsia
Change per decade, MM m. t.
