fastmarkets risi mena containerboard market outlook...east asian averages 5 0 10 20 30 40 50 60 70...

Fastmarkets RISI MENA Containerboard Market Outlook

Abdulla ZaidEconomist, Paper Packaging

Forces shaping the containerboard industry

2019 | Fastmarkets | MENA Containerboard Market Outlook 1

All forecasts and statistics contained in this presentation are based on public information and Fastmarkets RISI proprietary market analysis.

Agenda

• Paper packaging overview• Containerboard trends• Recycled demand outlook• Recycled supply outlook • Market overview and costs


2019 | Fastmarkets | MENA Containerboard Market Outlook

Paper packaging growth outlook

Containerboard: 56%Boxboard: 30%

Kraft and specialty paper: 14%

3

Substitution effect

Income effect-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

CAG

R (2

014

-201

8)

Consumption (thousand tonnes)

Boxboard

Kraft and specialty paper

Early movers

Infancy

Expansion

Saturated

ContainerboardPaper packaging grades

Where are we in the business cycle?• Deceleration in the global economy• Containerboard demand slowing • Markets becoming oversupplied



Growth potential is strong

Kilo

gram

s pe

r cap

ita

Containerboard regional demand

12 kg lower than global, Latin American and Far

East Asian averages5

0

10

20

30

40

50

60

70

80

90

100

0 10,000 20,000 30,000 40,000 50,000 60,000

Kilo

gram

s pe

r cap

ita

GDP per capita

North America Latin AmericaEurope Sub-Saharan AfricaOceania Far East AsiaWorld MENA

Substitution effect

Income effect


Demand outlook is different within MENAContainerboard regional demand

1. Israel: 48 kg / person2. UAE: 41 kg / person3. Saudi Arabia: 26 kg /

person...

12. Egypt: 9 kg / person

6

Substitution effect

Income effect

0

5

10

15

20

25

30

35

40

45

50

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

Kilo

gram

s pe

r cap

ita

GDP per capita

Saudi Arabia United Arab Emirates

Egypt GCC

North Africa Other Middle East

Substitution effect

Income effect

Top performers


MENA containerboard substrates KraftlinerFurnish not less than 80% chemical pulp

526,000 tonnes, 12% of total containerboard demand

Semichemcial mediumContains semichemical pulp, neutral sulphite semichemical pulp

215,000 tonnes, 5% of total containerboard demand

Recycled mediumProduced using mostly recycled fibers

1.5 million tonnes, 35% of total containerboard demand

7

12%

47%5%

35%

Kraftliner Recycled liner Semichemical medium Recycled medium

Recycled linerFurnish less than 80% chemical pulp

2 million tonnes, 47% of total containerboard demand


70%

72%

74%

76%

78%

80%

82%

84%

86%

88%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thou

sand

tons

Kraftliner Recycled liner Semichemical medium Recycled medium Recycled share

An accelerating trend to replace virgin with recycled

Milli

on to

nnes

Containerboard demand and substrates

Total tonnage growth in apparent consumption

between 2019 and 20218

A deep dive into recycled demand outlook


Imports still provide headwinds for domestic producers of recycled linerboard

32%


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thou

sand

tonn

es

Imports Domestic production Imports share (R)

Imports share of demand

Import waves in 2012 and 2016

Expected import wave in 2020: Imports share of demand = 40%

10

Imports and domestic production as shares of demand

Europe dominates the MENA imports market for recycled linerboard

90%


0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Thou

sand

tonn

es

Asia Rest of world Europe

European share of imports

11

European exports account for an average of 91% of MENA imports from 2008-2018

Asian exports maintained an average of 7%

The lion’s share of MENA recycled liner imports in 2016 came from Spain

48%


Spanish share of European imports

Spanish recycled liner exports to MENA reached 330,000 tonnes in 2016, or 48% of European LNR exports to MENA

Polish recycled liner exports to MENA peaked in 2016 at 61,000 tonnes, or a 9% share

12

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Thou

sand

tonn

es

Spain Poland Italy Belgium Germany Turkey Rest of Europe

Brace yourselves for another import wave


Weak European demand and growing capacity signal acceleration in recycled liner net exports

6.4%


-400

-200

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thou

sand

tonn

es

Change in European capacity Change in European demand Change in European net exports

European capacity-demandgap growth (2019-2021)

European capacity will grow faster than demand (2.8% vs 3.3%) annually

Weak European demand should widen demand-capacity gap and increase recycled liner net exports

A portion of the European exports will find its way to the MENA markets

14

Musical chairs dynamic: unloading excess recycled liner tonnage during weak European demand environment


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0

100

200

300

400

500

600

700

800

900

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

2008

= 1

.0

Thou

sand

tonn

es

European recycled liner exports to MENA European recycled liner market condition index (R)

When growth music stops

European market condition index gives indication of market strengthening and weakening (2008 = 1.0)

Weak recycled liner demand and oversupply in Europe are the catalyst of MENA market volatility

15

Excess MENAimports

Algeria and Saudi Arabia absorbed most of the European recycled exports

Less than 15,000 tonnes / year15,000–50,000 tonnes / year50,000–100,000 tonnes / yearMore than 100,000 tonnes / year


GCC-TSAIP antidumping investigation and results: reshaping MENA trade outlook


Grades under investigation HS Code Definition Result: GCC antidumping duties?

Kraftliner48041100 Kraftliner, uncoated, unbleached, rolls/sheets No

48041900 Kraftliner, uncoated, bleached, rolls/sheets No

Kraft and specialty paper

48043100 Kraft paper uncoated, unbleached, wt nov 150 g/m², NESOI No

48043900 Kraft paper, uncoated, bleached, wt nov 150 g/m², NESOI No

48044100 Kraft paper/paperboard, uncoated, unbleached, wt 150 g/m² or ov, nov 225 g/m², rolls/sheets, NESOI No

Semichemical medium 48051100 Semichemical fluting paper (corrugating medium), uncoated, rolls/sheets YES

Recycled medium

48051910 Fluting paper of recycled liner board weighing150 g/m² or less

YES, except fluting paper of recycled liner board weighed less than 105 g/m²

48051920 Fluting paper, NESOI, weighing over 150 g/m², uncoated, in rolls/sheets, YES

48051990 Other fluting paper YES

Testliner48052400 Testliner, uncoated, wt nov 150 g/m², rolls/sheets, spec ch48-

note3YES, except testliner paper of recycled liner

board weighed less than 105 g/m²

48052500 Testliner, uncoated, wt ov 150 g/m², rolls/sheets, spec ch48-note4 YES

17

Final dumping margin as a percentage of the CIF value


Country Company Final dumping margin

SpainSociedad Anonima Industrias Celulosa Aragonesa (SAICA) 24.6%

Other companies 31%

Poland All companies 34%

18


Resurfacing:Supply outlook & market overview

European imports are the main driver in MENA production volatility

68.8%


60%

65%

70%

75%

80%

85%

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thou

sand

tonn

es

Capacity Production Operating rates (R)

Average operating rate (2019-2021)

Capacity growth is expected to surpass demand, leading to lower operating rates

Imports are expected to increase its share of demand from 31% in 2018 to 41% in 2020, providing further downward pressure on operating rates

20

Recycled containerboard production, capacity and operating rates

Tight demand capacity gap, pushing for capacity expansion

5.3%


0

100

200

300

400

500

600

700

800

900

1,000

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thou

sand

tonn

es

Thou

sand

tonn

es

Capacity Demand Imports (R)

Capacity growth (2018-2021)

Capacity expansion fuelled by

• Growing future demand potentials

• GCC antidumping duties

21

Recycled containerboard Imports, demand and capacity


0

50

100

150

200

250

300

350

400

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

US

dolla

rs p

er to

nne

Total fiber Chemicals Energy Labor Other Cash cost to Dubai, UAE Cash cost to Port Said, Egypt

Recycled medium

Cost of production: how competitive are the MENA producers?

22

Recycled linerboard

Take home points

Containerboard demand growth is slowingDeceleration in the global economy

01


02

03

04

European market sets the tone in MENAMusical chairs: MENA markets witnessed waves of excess importsGCC-TSAIP imposed antidumping duties on Spanish and Polish producers

Tight capacity-demand gap opening door for capacity expansionOperating rates are expected to decline due to imports growth

MENA producers are competitive in the global marketGCC has an advantage in energy costs, while labor costs are lower in North Africa

23

Thank you


MIDDLE EAST & NORTH AFRICA PAPER PACKAGING OUTLOOKrisi.com/MENApackaging /

fastmarkets risi mena containerboard market outlook...east asian averages 5 0 10 20 30 40 50 60 70...

Documents