how do north american mills compare in global …how do north american mills compare in global cost...

© 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:


• 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



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


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


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.


Recovered Papers, Especially OCC, Are the Most Common Containerboard Raw Material

8

Source: RISI

Historical OCC PricesUS South, China and Europe


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


Global UB linerboard capacity is estimated to be 90.9 million metric tons

94% Recycled23% Recycled

68% Recycled


55% Recycled

10

Source: RISI

Second Quarter 2016 Global UB Linerboard Cash Cost


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



Average US$313/tonne

Source: RISI

Second Quarter 2016 Global UB Linerboard Cash Cost Sorted by Cash Cost with Configuration ID


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




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


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


Global medium capacity is estimated to be 64.9 million metric tons

99% Recycled

44% Recycled

87% Recycled


61% Recycled

16

Source: RISI

Second Quarter 2016 Global Corrugating Medium Cash Cost


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



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


56% 60% 51%

41%

54%49% 43%

19

Source: RISI



Source: RISI

Comparison of Average Global UB Liner Cash CostQ2 2014 vs Q2 2016


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


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.


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?


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?


Stay Tuned…


Thank you for your attention!

For more information:

Analytical Cornerstone 4.0 www.risiinfo.com/service/mill-data-costs/


how do north american mills compare in global …how do north american mills compare in global cost...

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