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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
© Copyright 2015 RISI, Inc. All rights reserved.3
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
© Copyright 2015 RISI, Inc. All rights reserved.5
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%
© Copyright 2015 RISI, Inc. All rights reserved.6
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
© Copyright 2015 RISI, Inc. All rights reserved.7
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)
© Copyright 2015 RISI, Inc. All rights reserved.8
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
© Copyright 2015 RISI, Inc. All rights reserved.9
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
© Copyright 2015 RISI, Inc. All rights reserved.12
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
© Copyright 2015 RISI, Inc. All rights reserved.13
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
© Copyright 2015 RISI, Inc. All rights reserved.14
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
© Copyright 2015 RISI, Inc. All rights reserved.15
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.
16© Copyright 2015 RISI, Inc. All rights reserved.16
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
© Copyright 2015 RISI, Inc. All rights reserved.17
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
© Copyright 2015 RISI, Inc. All rights reserved.18
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
© Copyright 2015 RISI, Inc. All rights reserved.19
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
© Copyright 2015 RISI, Inc. All rights reserved.20
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
© Copyright 2015 RISI, Inc. All rights reserved.21
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
22© Copyright 2015 RISI, Inc. All rights reserved.22
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
© Copyright 2015 RISI, Inc. All rights reserved.23
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
© Copyright 2015 RISI, Inc. All rights reserved.24
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
© Copyright 2015 RISI, Inc. All rights reserved.25
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
© Copyright 2015 RISI, Inc. All rights reserved.26
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
© Copyright 2015 RISI, Inc. All rights reserved.27
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
© Copyright 2014 RISI, Inc. All rights reserved.28
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
29© Copyright 2015 RISI, Inc. All rights reserved.29
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
30© Copyright 2015 RISI, Inc. All rights reserved.30