european containerboard outlook - fastmarkets risi...burgo avezzano mill italy 200 2018 2 recycled...

European Containerboard Outlook

Gleb Sinavskis, Economist, European Paper Packaging

[email protected]

Gleb SinavskisEconomist, European Paper Packaging

Conducts economic analysis of paper packaging markets in Europe, including analysis on industry supply/demand balances, trade dynamics and cost/price developments, forecasting and econometric modeling. He is the author of regular reports such as the Paper Packaging Monitor Europe and the European Paper Packaging Forecast.

Gleb is a frequent presenter at industry events and was involved in a number of ad-hoc client projects during his time at Fastmarkets RISI. Previously, Gleb worked in the financial services industry. Before that, he had an internship at the United Nations, where he has assisted in the desk research. He has MSc in Business and Economics from Uppsala University and BSc in Economics from Mälardalen University in Sweden.

2019 | Fastmarkets | European Containerboard Outlook 2019 2

October 18 – US imposes record $7.5 billion tariffs on EU goods following the WTO Airbus ruling

• 25% tariffs on a number of agricultural and food product exports from different EU countries

• Includes different types of cheese, yogurt & dairy products, fresh and dried fruits, fruit juices, olive oil, meat products, butter, biscuits, seafood, coffee, whiskey, wine and liqueurs, etc.

• Some types of tools from Germany and clothing from the UK are included as well.


First responses

• European Wine Companies Committee (CEEV) estimates that with € 3,76 billion in 2018, the US market represented the 33% of the total EU wine exports in value and the 28% in volume. “The disruption caused by retaliatory tariffs will result in significant reduction of business activity as loss of market share in the US for our French, German, Spanish and UK operators that would take long to recover.” said Ignacio Sánchez Recarte, Secretary General of CEEV.

• SWA (Scotch Whiskey Association) Chief Executive Karen Betts said: “We estimate that 25% tariff on Single Malt Scotch Whisky will see exports to the US drop by as much as 20% in the next 12 months, as Scotch Whisky will become less competitive in the US market. In time, consumer choice will diminish and Scotch Whisky companies will start to lose market share. In Scotland and throughout our UK supply chain, we expect to see a dropping-off in investment and productivity. Ultimately, jobs could be at risk.” Scotland exported about $1.3 billion of Scotch to the US in 2018, 33% of which was single malt.

• “It is completely unacceptable that the small and medium-sized German tool manufacturers are now drawn into this conflict of the subsidized aircraft industry,” said Michael Kleinbongartz, Chairman of the Association of German Tool Manufacturers FWI. The USA is the most important export market with 8.5% share of the exports of the German tool industry. Experts believe that due to the punitive tariffs in the US, German tools, despite their high quality, are virtually unsalable. “This will hit some companies hard, especially at the present time, where the economy in Germany is weakening as well,” fears FWI Director Stefan Horst.


Containerboard supply is outpacing demand in Western Europe

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Recycled containerboard is expecting a lot of capacity

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Kraftliner capacity to increase in late 2020

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Many projects in the pipeline in Western Europe

Company Location Country Capacity Year Quarter Grade

Heinzel Laakirchen Mill Austria 450 2017 4 Recycled

Leipa Schwedt Mill Germany 450 2018 2 White top and brown recycled

Burgo Avezzano Mill Italy 200 2018 2 Recycled

International Paper Madrid Mill Spain 380 2018 3 Recycled

BillerudKorsnäs Gruvön Mill Sweden 550 2019 2 White liners, virgin cartonboard

Pro-Gest Mantova Mill Italy 400 ? Recycled

Wizpaper Wizernes Mill France 180 2019 3 Recycled

Burgo Verzuolo Mill Italy 600 2019 4 Recycled

Hamburger Spremberg Germany 500 2020 H2 Recycled

Progroup Sandersdorf-Brehna Germany 750 2020 H2 Recycled

Stora Enso Oulu Finland 450 2020 H2 Virgin


Emerging Europe has a lot of projects as well

Company Location Country Capacity Year Quarter Grade

Schumacher Myszkow Poland 250-300 2019 2 Recycled

Bukoza Hencovce Slovakia 70 2019-2020? White top kraft top testliner

Mondi Ruzomberok Slovakia 300 2020 H2 White top kraft top testliner

Varaka Kagit (Albayrak Group) Balikesir Turkey 300 2019 1 Recycled

Kipas Kagit Söke Turkey 720 2020 2 Virgin and recycled cartonboard and white top linerboard

Hamburger Kutahya Turkey 480 2020-21 Recycled

Kipas Kagit Söke Turkey 480 ? Recycled

Arkhangelsk Novodvinsk Russia 80-90 2019 2 Kraftliner

L-Pack Lipetsk Russia 180 2019 2 Recycled

Ilim Group Bratsk Russia 110 2019 4 Kraftliner

OBF Sokol Russia 162 2019 4 Recycled

Ilim Group Ust Ilimsk Russia 600 2021 H2 Kraftliner


Western European RCCM exports outside Europe are rising


Western European virgin containerboard exports grow as well


Italian imports – crucial European battleground…

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2013 2014 2015 2016 2017 2018Kraftliner Semichemical fluting Recycled containerboard


…with US suppliers having high share in unbleached kraftliner…

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…similar to the Spanish market

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The gap between US domestic and export prices is historically high (USD/tonne)

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Absolute difference is record-high

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Price gap with Southern European export prices


US kraftliner export prices to Southern Europe are low


For high-cost recycled liner machines Italian prices are already very low...


... especially when including the transportation cost


Variable production cost development

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2015 2016 2017 2018 2019 2020 2021Testliner 2 Kraftliner 175+


Conclusions


European containerboard summary

• CAPACITY WILL CONTINUE TO OUTPACE DEMAND IN THE NEAR TERM

• MANY NEAR-TERM DOWNSIDE RISKS TO DEMAND

• LOW PFR PRICES WILL PROVIDE SUPPORT FOR RCCM PRODUCER MARGINS


Thank you!Thank you!


european containerboard outlook - fastmarkets risi...burgo avezzano mill italy 200 2018 2 recycled...

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