how do north american mills compare in global …how do north american mills compare in global cost...
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© Copyright 2016 RISI, Inc. | Proprietary Information
How Do North American Mills Compare in Global Cost Competitiveness?
Ryan Burgess, Product Manager
RISI Analytics
International Containerboard Conference
Chicago, Illinois USA
November 3, 2016
Content
Global Containerboard Cost Competitiveness
• Overview of cash cost structure for global kraft and recycled linerboard, semichemical and recycled medium
• Cost competitiveness of mills in Latin America, Europe, Asia, Africa, Oceania and North America over time
Natural expense categories
Historical cost drivers
• Changes due to fluctuating recovered fiber prices and exchange rates
• Information based on manufacturing cash cost analysis
© Copyright 2016 RISI, Inc. | Proprietary Information 2
Estimating Cash Costs Methodology
• Mill and machine level cash manufacturing costs estimated for non-converted, ready-to-deliver rolls at mill gate
No indirect costs (capital costs, depreciation, corporate overhead, etc.)
• A mass and energy balance is calculated for existing mills to determine consumption for each mill process
• Consumptions are multiplied by regional average market prices, excluding transfer prices
Cost = (Consumption) X (Price)
• Data gathered from a variety of available sources, including:
© Copyright 2016 RISI, Inc. | Proprietary Information
• Company reports and websites
• Pulp and paper directories
• Magazine articles
• Technical literature
• Consultants
• Mill visits
• Surveys and interviews
• Equipment Suppliers
3
Most containerboard is produced in densely populated areas, where recovered paper is locally available or imported, whereas virgin fiber based mills may have more remote locations, close to the fiber supply
Source: RISI, Google Maps
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© Copyright 2016 RISI, Inc. | Proprietary Information
Average Capacity vs. Technical Age
Source: RISI
5
Global Containerboard Capacity, 1990-2025
0
20,000
40,000
60,000
80,000
100,000
120,000
1990 1995 2000 2005 2010 2015 2020 2025
Tho
usa
nd
To
nn
es
Asia/Oceania EMEA North America Latin America
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China will be the largest producing country for the foreseeable future.
China went from accounting for 4% of world capacity in 1990 to 27% in 2010 and will represent well over 30% by 2025.
Source: RISI
Second Quarter 2016 Global Containerboard Cash CostSorted by World Region
© Copyright 2016 RISI, Inc. | Proprietary Information
Asia Avg US$316/tonne North America Avg US$316/tonne
Afr
ica
Avg
US$
26
9/t
on
ne
Europe AvgUS$322/tonne
Lati
n A
me
rica
Avg
US$
31
4/t
on
ne
Oce
ania
Avg
US$
26
4/t
on
ne
7Source: RISI
© Copyright 2014 RISI, Inc. All rights reserved.
© Copyright 2016 RISI, Inc. | Proprietary Information
Recovered Papers, Especially OCC, Are the Most Common Containerboard Raw Material
8
Source: RISI
Historical OCC PricesUS South, China and Europe
© Copyright 2016 RISI, Inc. | Proprietary Information 9
0
50
100
150
200
250
3001
995
Q1
199
6 Q
1
199
7 Q
1
199
8 Q
1
199
9 Q
1
200
0 Q
1
200
1 Q
1
200
2 Q
1
200
3 Q
1
200
4 Q
1
200
5 Q
1
200
6 Q
1
200
7 Q
1
200
8 Q
1
200
9 Q
1
201
0 Q
1
201
1 Q
1
201
2 Q
1
201
3 Q
1
201
4 Q
1
201
5 Q
1
201
6 Q
1
US
Do
llars
per
To
nn
e
US OCC China OCC Germany OCC
Source: RISI
Capacity UB Liner by World Region Second Quarter 2016
42.4M
1.3M16.8M
23.8M
4.9M1.8M
Asia
Africa
Europe
North America
Latin America
Oceania
© Copyright 2016 RISI, Inc. | Proprietary Information
Global UB linerboard capacity is estimated to be 90.9 million metric tons
94% Recycled23% Recycled
68% Recycled
66% Recycled32% Recycled
55% Recycled
10
Source: RISI
Second Quarter 2016 Global UB Linerboard Cash Cost
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621 mills, 822 machines
11
Source: RISI
295
300
305
310
315
320
Asia Europe North America Latin America
318
312 312
305
Q2 2016 Global UB Linerboard Average Cash Costby World Region
Second Quarter 2016 Global UB Linerboard Cash Cost
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Average US$313/tonne
Source: RISI
Second Quarter 2016 Global UB Linerboard Cash Cost Sorted by Cash Cost with Configuration ID
© Copyright 2016 RISI, Inc. | Proprietary Information 13
Source: RISI
US South - $93/MTGermany - $140/MTBrazil - $144/MTChina - $184/MT
BRL – 3.5112/USDEUR – 0.8855/USDRUB – 65.8835/USDCNY – 6.5319/USDAUD – 1.3411/USD
100
150
200
250
300
350
400
Integrated Semi-Integrated Recycled
313
368
311
157
227
183
Q2 2016 Global UB Linerboard Cash Costby Configuration
Second Quarter 2016 Global UB Linerboard Cash Cost
© Copyright 2016 RISI, Inc. | Proprietary Information
Average US$313/tonne
14
Source: RISI
0
100
200
300
400
US$
/FM
T
Materials,etc.
Labor
Energy
Chemicals
Fiber
Global Unbleached LinerboardCost Category by Region, Second Quarter 2016
© Copyright 2016 RISI, Inc. | Proprietary Information
63%
53% 48% 46%56%50%57%
15
Source: RISI
Capacity Corrugating Medium by World Region, Second Quarter 2016
34.8
0.8M
14.0M
10.6M
4.1M0.6M
Asia Africa
Europe North America
Latin America Oceania
© Copyright 2016 RISI, Inc. | Proprietary Information
Global medium capacity is estimated to be 64.9 million metric tons
99% Recycled
44% Recycled
87% Recycled
92% Recycled95% Recycled
61% Recycled
16
Source: RISI
Second Quarter 2016 Global Corrugating Medium Cash Cost
© Copyright 2016 RISI, Inc. | Proprietary Information 17
Source: RISI
643 mills, 874 machines
Sorted by Cash Cost with Configuration ID
285
290
295
300
305
310
315
Asia Europe North America Latin America
304
298
304
315
Q2 2016 Global Medium Average Cash Costby World Region
Second Quarter 2016 Global Corrugating Medium Cash Cost
© Copyright 2016 RISI, Inc. | Proprietary Information
Average US$303/tonne
18
Source: RISI
0
100
200
300
400
US$
/FM
T
Materials, etc.
Labor
Energy
Chemicals
Fiber
Global Corrugating MediumCost Category by Region, Second Quarter 2016
© Copyright 2016 RISI, Inc. | Proprietary Information
56% 60% 51%
41%
54%49% 43%
19
Source: RISI
Second Quarter 2014 Global UB Linerboard Cash Cost
© Copyright 2016 RISI, Inc. | Proprietary Information 20
Source: RISI
Comparison of Average Global UB Liner Cash CostQ2 2014 vs Q2 2016
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Q2 2016
Q2 2014
0
200
400
600
Asia Europe LatinAmerica
NorthAmerica
318 312 305 312
383 404 394319
Global Unbleached Linerboard Cash CostQ2 2014 vs Q2 2016
Q2 2016 Q2 2014
-17% -23% -23% -2%
21
Source: RISI
Second Quarter 2014 Global UB Linerboard Cash Cost Sorted by World Region, with Configuration ID
© Copyright 2016 RISI, Inc. | Proprietary Information
Asia Europe North AmericaLatin America
US South - $112/MTGermany - $168/MTChina - $205/MTBrazil - $212/MT
22
Source: RISI
0.00
100.00
200.00
300.00
400.00
500.00 Fiber Chemicals Energy Labor Matls, etc.
© Copyright 2016 RISI, Inc. | Proprietary Information
Global Manufacturing Costs, 2014 Q2 vs. 2016 Q2Globally, cash cost per ton is down 15% and fiber costs are down 14%.
-17% -2%-23%-23%
23
LatinAmerica
OceaniaNorthAmerica
EuropeAsiaAfrica
20162014 20162014 20162014 20162014 2016201420162014
Source: RISI
Well, What Changed?
© Copyright 2016 RISI, Inc. | Proprietary Information
Currency 2014 Q2 2016 Q2 Change
BRL/USD 2.5452 3.5112 38.0%
EUR/USD 0.7999 0.8855 10.7%
RUB 47.8352 65.8835 37.7%
RMB 6.1464 6.5319 6.3%
AUD 1.1690 1.3411 14.7%
OCC Cost 2014 Q2 2016 Q2 Change
US South $112/MT $93/MT -17.0%
Germany $168/MT $140/MT -16.7%
Brazil $212/MT $144/MT -32.1%
China $205/MT $184/MT -10.2%
Stronger US Dollar Lower Recovered Paper Costs
24
Source: RISI
Conclusions
• Global containerboard market steady Asia currently producing at costs relatively close to North
America
Globally, average cost of recycled mills on par with integrated mills
Regional competitiveness heavily influenced by recovered fiber prices and exchange rates
• Recent trends Recovered paper prices trending slightly upward, but still
relatively low
Strengthening US dollar?
Further expansions and conversions?
© Copyright 2016 RISI, Inc. | Proprietary Information 25
Stay Tuned…
© Copyright 2016 RISI, Inc. | Proprietary Information 26
Thank you for your attention!
For more information:
Analytical Cornerstone 4.0 www.risiinfo.com/service/mill-data-costs/
© Copyright 2016 RISI, Inc. | Proprietary Information 27
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