fastmarkets risi global boxboard outlook · 2019-03-09 · 2019 | fastmarkets | global graphic...

Fastmarkets RISI Global Boxboard Outlook

2019 | Fastmarkets | Global Graphic Outlook March 2019

Forces shaping the boxboard industry

11

At the top of the business cycle?


• Deceleration in the global economy• Boxboard demand slowing • Markets growing oversupplied

2017 was a strong year, 2018 not so much

2

Consumer board


What can I do to support the environment?

Plastic or paper?

Are these products good enough for my

family?Do I really need it?How can I

save more on groceries?

Did I liked this product last

time?

Price

Known brands are predictable

3

Voice of the customer is getting louder

2019 | Fastmarkets | Global Graphic Outlook March 2019 4

Social media: The great influencer


E-commerce is changing the way products are packed


The rise of the discount retailer

010203040506070

Milli

on S

QM

2018

2023

Sales area of EU grocery channels

Discounters▪ In Europe, discounters generate 22% of all FMCG sales

▪ Private labels becoming the “smart” choice

▪ Discounters are good at satisfying basic needs

▪ They have a higher proportion of processed foodthan hypermarkets and supermarkets

Mill

ion

squa

re m

eter

s

1,250 football fields



• Perception of private labels is not the same as 10 years ago (generic)

• After trying them, consumers often keep buying private labels, even when income increases

• Most consumers believe private labels offer excellent value for money

• Rise of private labels will cause more expenditure on branding

• Could increase use of packaging (plastic??)

The rise of the private label

0%5%

10%15%20%25%30%35%

Global EU NA LATAM APAC

2015

2016

Value share growth

Source: Nielsen

8


However, this might go against the current movement away from single-use plastics

9


Consumer board manufacturers already offer solutions, although plastics

(mostly PE) are still used for barrier properties

Elopak launches Pure-Pak® cartons made with Natura

Life™ by Stora Enso

100% recyclable and can be recycled through existing

channels

An opportunity for fiber-based packaging?

10


-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Current Previous

The bottom line is… growth is weaker

Milli

on to

nnes

Change in demand, global boxboard

No, 2018 is not a mistakeDemand growth was basically zero

Lost opportunities between 2018 and 2020

11


China in particular

10.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020M

illion

tonn

es

Current Before

Demand declined 6% in 2018▪ No growth is expected for 2019▪ Growth only resuming in 2020 (+2.7%)

What is driving the demand losses in China?▪ Ongoing economic slowdown▪ Imported fiber restrictions▪ Higher prices

0.0 0.5 1.0 1.5 2.0 2.5

Nor

th A

mer

ica

Euro

peAs

iaR

est o

f wor

ld

Million tonnesPrevious Current

Most of the losses are in Asia

- 240,000 tonnes

- 1.7 million tonnes

- 355,000 tonnes

- 210,000 tonnes

China boxboard demand

12

Despite weak demand in 2018…

Despite weak demand, operating rates increased to 86% in 2018 thanks to the removal of capacity


79.0%

80.0%

81.0%

82.0%

83.0%

84.0%

85.0%

86.0%

87.0%

88.0%

89.0%

90.0%

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

Thou

sand

tonn

es

Capacity Demand OR

Global market balancesGlobal boxboard demand and capacity changes

-2.0 -1.0 0.0 1.0

Nor

thAm

eric

aEu

rope

Asia

Res

t of

wor

ld

Million tonnes

Capacity changes in 2018

13

Asia is by far the largest region in the world


70%

75%

80%

85%

90%

95%

100%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

North America Asia Europe

Global boxboard operating rates

North America leading the way thanks to the removal of capacity

Europe tightening, although still below the USA

Overcapacity keeping operating rates low in Asia

21%

24%45%

10%

NORTH AMERICA

EUROPE

ASIA

REST OF WORLD

14


Two large net exporting regions:

• Asia has grown less reliant on imports to satisfy domestic demand. However, things are changing

• The reduction in North American net exports could also mean an increase in imports

• Europe is slowly becoming a larger player in overseas markets

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Asia North America Europe

Net trade as proportion of productionChina is changing global trade patterns once again (fiber import ban since 2017)

15

CUK prices above SBS for the first time in history


Demand growth returning to historical average


91.5%

92.0%

92.5%

93.0%

93.5%

94.0%

94.5%

95.0%

95.5%

96.0%

96.5%

-200

-150

-100

-50

0

50

100

150

200

250

300

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

Boxboard North America

Clear tightening of the market since 2017

Capacity reductions playing an important role

Conversion works at Sappi reversing the trend

Demand slowing during the second half of the year

Demand for liquid packaging and food service grades growing less than 1% in 2019 and 2020

17

Tightening driven by demand


92%

93%

93%

94%

94%

95%

95%

96%

96%

97%

97%

-300

-200

-100

0

100

200

300

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

Virgin boxboard

Strong demand for CUK, aided by closure at GPI Santa Clara mill (formerly CBR)

CUK influenced by beverage carriers and food service board

Demand growth slowing during second half of 2018, affecting overall growth in 2019 as well

Sappi conversion eroding operating rates

18


900

950

1,000

1,050

1,100

1,150

1,200

1,250

1,300

Jan2013

Jul2013

Jan2014

Jul2014

Jan2015

Jul2015

Jan2016

Jul2016

Jan2017

Jul2017

Jan2018

Jul2018

Jan2019

USD

per

tonn

e

CUK SBS

CUK prices above SBS in the USA• Historical premium for SBS close to US$60/tonne

• Currently, CUK prices almost US$90/tonne above SBS Factors behind higher CUK pricesFar more concentrated supply for CUK (2 vs 8)

Perception that brown products are more environmental friendly

CUK increasing popularity within food service board

Factors holding SBS prices downImports of multi-ply from Europe and Asia affecting domestic SBS markets

Sappi conversion at Somerset mill

Producers implemented another $50/tonne increase in February

SBS prices dropped $20/tonne in February

19

Tightening driven by capacity


90%

90%

91%

91%

92%

92%

93%

93%

94%

-150

-100

-50

0

50

100

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

Recycled Boxboard

Capacity closures leading the tightening of the market

Demand expected to decline 6.3% this year, partly due to conversions

Weak domestic demand and higher imports causing capacity to drop 11% between 2017 and 2018

20

China fiber import bans changing industry landscape




Boxboard Asia

Consumption of paper and board still constrained

High paper prices contributing to the accelerated decline in 2018

Investment has decelerated

Removal of more than 1.6 million tonnes in 2018 driving operating rates above 80%

China fiber import ban changing the landscape

75%

76%

77%

78%

79%

80%

81%

82%

-2,000

-1,000

0

1,000

2,000

3,000

4,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

22


Production affected due to lack of fiber

Production costs to increase, leading to higher paper prices

Exports will decline as Chinese competitiveness dwindles

Demand to be affected by higher prices

Global markets will remain tighter than they have beenOh Sheet!

23

Demand growth returning to historic average


Boxboard China

Demand declining almost 1 million tonnes in 2018

Production dropping more than 1.2 million tonnes due to weak demand, capacity closures and downtime (lack of fiber)

China’s exports retreating (lack of competitiveness in global markets)

Capacity dropping 9% due to bankruptcies and forced closures (mostly duplex)

75%

76%

77%

78%

79%

80%

81%

82%

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

24


0

100

200

300

400

500

600

0

2

4

6

8

10

12

14

16

18

North America Europe Asia China

Cas

h co

sts,

EU

R/F

MT

Milli

on to

nnes

Global cash cost comparison 2017 vs 2018

Capacity 2018 2017

17%

Chinese producers are less competitive in global markets

China went from being one of the lowest to the highest cost producer in the world

• North America, on the other hand, reduced its average cash costs significantly

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Thou

sand

tonn

es

Chinese boxboard net imports

25

2017 was a strong year; demand has since weakened



80.0%

82.0%

84.0%

86.0%

88.0%

90.0%

92.0%

94.0%

96.0%

98.0%

100.0%

10 11 12 13 14 15 16 17 18 19 20

Operating rates

Now Before

European demand growth slowing downAfter a strong first half of the year, demand clearly slowed down during the second half

0.0

0.1

0.2

0.3

0.4

0.5

0.6

2015 2016 2017 2018 2019 2020

Milli

on to

nnes

Demand Capacity

• Demand growth affected by weakness in economic growth

• Additional factors such as Brexit and trade disputes not helping

• Capacity still growing more than demand

• Exports taking some of the added capacity

27


1.5-2%


84%

85%

86%

87%

88%

89%

90%

91%

92%

93%

-300

-200

-100

0

100

200

300

400

500

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

Virgin boxboard

Good performance on food service board

Capacity is set to increase

Strong growth on exports to keep operating rates rising, although slower than before

28

Recycled board growing at slower pace

1-1.5%


89%

90%

90%

91%

91%

92%

92%

93%

93%

-150

-100

-50

0

50

100

150

200

2012 2013 2014 2015 2016 2017 2018 2019 2020

Thou

sand

tonn

es

Demand Capacity OR

Recycled boxboard

No major changes in capacity foreseen

Exports rising slightly, but most increases will not be seen here

Producer’s margins improving

29


20162018

KotkamillsFolding boxboard

400,000 (FI)

HusumFolding boxboard

400,000 (SE)

DobrushVirgin cartonboard

200,000 (BLR)

KamaFolding boxboard

220,000 (RU)

GruvönVirgin cartonboard

550,000 (SE)

20192020

COMPANY MILL COUNTRY CAPACITY DATE

Sappi Maastricht Netherlands 150,000 2018-2021

BillerudKorsnӓs Gruvӧn Sweden 550,000 2019

Bellesbumprom Dobrush Belarus 200,000 2019??

Kipas Sӧke Turkey 720,000 Q2 2019

Kama Krasnokamsk Russia 220,000 2020

European capacity starts, 2018-2020

KipasVirgin and recycled

cartonboard/ linerboard

720,000 (TK)

A few additional noteworthy changes• Iggesund postponing 100,000 capacity increase in Sweden (SBS)• Stora Enso pending decision regarding Oulu conversion (450,000 tonne CUK and

400,000 tonne kraftliner)

30


600

700

800

900

1000

1100

1200

1300

2013 2014 2015 2016 2017 2018 2019

Euro

s pe

r ton

ne

Asia Germany US

Global virgin boxboard prices

Strengthening of the USD

Higher market pulp prices

AsiaPrices coming down due to demand weakness (higher paper prices?)

Weaker exports not helping either

More capacity under way will keep downward pressure on prices

EuropePrices went up by €30-35/tonne in January and February

Increase announced by producers was for up to €85/tonne

North AmericaCUK prices rising by an additional $50/ton while SBS dropping $20/ton

31


200

300

400

500

600

700

800

900

2013 2014 2015 2016 2017 2018 2019

Euro

s pe

r ton

ne

Germany US Asia

Global recycled boxboard prices

Strengthening of the USD

Chinese fiber restrictions

AsiaLatest increases due to PfR price volatility

Prices rising as consumption returns after buyers delayed purchases before the holidays to make sure prices indeed hit bottom (declining still in Q4 2018)

EuropePrices will remain flat due to demand weakness

PfR prices are expected to remain under downward pressure due to China’s imported fiber ban

North America• Higher operating rates have allowed prices to

move up by $150/ton in 2018

• Tight market conditions are the driving force behind the increases

32

Take home points

Boxboard demand growth is slowing downWe estimate 2.5 million tonnes of lost opportunities by 2020

01


02

03

04

33

Asia clearly underperforming the rest of the worldChinese demand declining by almost 1.0 million tonne in 2018Fiber import ban affecting competitiveness of Chinese producersChinese exports trending down, also because of weak global demand

CUK prices in North America above SBSThis will drive demand back to SBS in the coming monthsVirgin boxboard market balances affected by conversions of capacity

European demand returning to its average growth of 1.5-2% per yearNew capacity entering the market will keep operating rates flat to down

33

Thank you

PAPER PACKAGING MONITOR EUROPEwww.risi.com/ppme


http://www.risi.com/ppme

fastmarkets risi global boxboard outlook · 2019-03-09 · 2019 | fastmarkets | global graphic...

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