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Fastmarkets RISI Global Paper Packaging Outlook
2020 | Fastmarkets | Global Packaging Outlook
Key issues from the seminar and conference
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Factors affecting the global paper packaging market in 2020-2021
• Shifts in the consumer product market
• A quick world tour of the economic landscape
2020 | Fastmarkets | Global Packaging Outlook 2
Multiple challenges for consumer product companies:
• Shifts in buying patterns
• Replacement of single-use plastic packaging
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E-commerce, a North American case study
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US box demand has jumped ahead of industrial production since 2014
NON-DURABLES PRODUCTION IS TRADITIONAL DRIVER OF US BOX DEMAND• Non-durables industrial production
growth can explain US box demand extremely well until 2014.
• Box demand was anemic through much of the past 20 years due to a weak nondurables sector and competition with plastics.
• Box demand has revitalized since 2014, posting its best string of growth performances since the 1990s.
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Manufacturer/warehouse
Fulfillment center
Sorting center
Parcel delivery
Consumer
E-commerce retail uses seven times more corrugated per dollar than traditional retail
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Manufacturer/warehouse
Retail store
Consumer
BRICK-AND-MORTAR LOGISTICS E-COMMERCE LOGISTICS
2020 | Fastmarkets | Global Packaging Outlook
90%Of box shipment strength since 2014 explained by e-commerce
12%Year-over-year e-commerce growth in first half of 2019
Up from 8% growth in 2018
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The e-commerce boost is alive and well E-COMMERCE BOOST EXPLAINS OVER 90% OF BOX SHIPMENTS STRENGTH SINCE 2014; STRONGEST PERCENTAGE GROWTH YET IN 2018
2020 | Fastmarkets | Global Packaging Outlook
Packaging redesign will cut into the e-commerce effect
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• Reduced usage of overboxes for protection as primary packaging shifts to e-commerce orientation
• E-commerce packaging emphasizes protection, while in-store packaging competes for consumer attention and makes theft difficult
• SIOC will shift corrugated consumption from distribution centers to CPGs
• Overboxes will continue to be used for aggregation, anonymization
• Segments with greatest exposure: electronics, equipment and hardware, toys and hobby goods
2020 | Fastmarkets | Global Packaging Outlook
Plastic products are beginning to be replaced by paper products
Single use plastic bags
Take home food containers
Beverage packs
Hot drink cups
Drinking straws
Water bottles?2020 | Fastmarkets | Global Packaging Outlook
Non-paper alternatives also exist
• Reusables top the list
• Formed fiber products for certain end uses
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A quick tour of the global paper packaging markets
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Global packaging demand growth shifted dramatically in 2018-2019
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DRIVEN BY CHINA
• Where demand fell more than 7%
GROWTH IN MOST OTHER REGIONS ALSO DECELERATED IN 2018
• Asia outside of China was the exception
• Growth increased to 3.2% in 2018 before slowing to 1% in 2019
2020 | Fastmarkets | Global Packaging Outlook
Global packaging demand growth reflects uneven economic performance in various regions
2016 2017 2018 2019 2020 2021
North America
Annual apparent consumption growth
122020 | Fastmarkets | Global Packaging Outlook
Global paper packaging demand is dominated by Asia
GLOBAL DEMAND REACHED 267 MILLION TONNES IN 2018 WITH ASIA ACCOUNTING FOR 129 MILLION TONNES
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Regional overview: Europe
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European demand growth slowed in 2019 while capacity continued to expand
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PAPER PACKAGING GROWTH, THOUSAND TONNES
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Capacity expansion in Emerging Europe will push more Western European exports outside the region
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NET EXPORTS, TOTAL EUROPE, MILLION TONNES
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Regional overview: North America
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US manufacturing confidence took a hit from mid-2018 to the end of 2019
SHARP ISM® PMI® DECLINE COINCIDED UNEXPECTED SLOWDOWN IN DOMESTIC DEMAND
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Robust capacity expansion will keep North American paper packaging operating rates depressed through 2021
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North American producers are not expected to expand their presence in the export markets
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NET EXPORTS, NORTH AMERICA, MILLION TONNES
Regional overview: Latin America
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Brazil and Mexico have a dominant share of Latin American demand
BUT EACH COUNTRY AND REGION HAS DIFFERENT DYNAMICS
• Brazil is self-sufficient
• Mexico has strong ties to the US
• Limited capacity in the rest of Latin America
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Latin American demand remains choppy
UNEVEN ECONOMIC GROWTH ACROSS THE REGION EXPORTS WILL BECOME MORE IMPORTANT AS CAPACITY EXPANDS
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Regional overview: Africa and the Middle East
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Both Africa and the Middle East rely heavily on imports to meet demand LARGE INVENTORY SWINGS ARE COMMON
DUE TO TRADE FLOWS
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Regional overview: Asia
2020 | Fastmarkets | Global Packaging Outlook
Chinese RCP policies are changing the way companies are operating around the globe
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China’s containerboard market is adjusting to new RCP policiesYear-to-year change
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DEMAND DROPPED IN 2018-2019 AND THE 2020 OUTLOOK IS GUARDED• Weak economy
• Fiber supply issues
PRODUCTION WILL FALL AND NET IMPORTS WILL CLIMB• Output constrained by fiber
• Market attractive to other Asian suppliers
• But can imports continue to climb that much?
OPERATING RATES ARE TUMBLING• Level dependent on capacity assumptions
2020 | Fastmarkets | Global Packaging Outlook
Containerboard demand growth in the rest of Asia slowed in 2019 but should rebound in 2020-2021
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EXPORT-ORIENTED ECONOMIES HURT BY SLOWER GLOBAL PERFORMANCE
INDIA AND PARTS OF SOUTHEAST ASIA EXPECTED TO REMAIN RELATIVELY HEALTHY• Supported by rising incomes and growth in
FMCG
TOTAL GAIN, 2020-2021• 1.8 million tonnes
RISKS• Slower regional/global economic growth
• Trade wars
2020 | Fastmarkets | Global Packaging Outlook
The smaller exporters to the world reaped most of the benefits from the shift in Chinese policy(net exports to world)
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Chinese boxboard producers shifted from recycled to virgin production, leading to a one-time trade disruption(net exports to world)
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What to watch in the global paper packaging markets
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1.7%Projected global packaging demand growth, 2020-2021
• WILL THE RESOLUTION OF THE TRADE DISPUTE BETWEEN THE US AND CHINA FUEL A REVIVAL IN GLOBAL MANUFACTURING ACTIVITY?
• SHIFTS IN RETAIL ARE PROVIDING A BOOST TO CORRUGATED DEMAND
• THE GROWING NUMBER OF BANS ON DISPOSABLE PLASTIC PRODUCTS ARE CREATING GROWTH OPPORTUNITIES FOR BOXBOARD AND KRAFT PAPER
• POLICY SHIFTS IN CHINA WILL CONTINUE TO ALTER GLOBAL TRADE PATTERNS
2020 | Fastmarkets | Global Packaging Outlook
Thank you!
The Impact of E-commerce on North American Paper Packaging Markets
• Exhaustive dive into US and Canadian e-commerce statistics
• Risks quantified in three vectors (economy, e-commerce market share, e-commerce linkage with corrugated) and 27 scenarios
• Effect of e-commerce on containerboard/corrugated demand, operating rates, prices, profitability
• Forecasts through 2023 for economy, e-commerce spending, containerboard, corrugated, impact of e-commerce on box/containerboard markets
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For more:www.risi.com/e-commerce_study
Derek MahlburgEmail: dmahlburg@fastmarkets.com
2020 | Fastmarkets | Global Packaging Outlook
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