outlook for global boxboard - risi · traditionally a tough market to enter percentage of folding...

Outlook for Global Boxboard

RISI Asian Conference

Shenzhen, China

May 2017

How is the market coping with new capacity and evolving trade flows?

Alejandro MataSenior Economist, European Forest Products

© Copyright 2017 RISI, Inc. | Proprietary Information

Alejandro Mata

• Bachelor’s degree in Engineering, MBA degree earned in 2007

• Worked in the business and market intelligence segment for one of Europe’s leading paper producers

• Have been analyzing and forecasting the industry since 2009

• Author of the Paper Trader Europe and Paper Packaging Monitor Europe, the European Graphic 5-Year and 15-Year Forecasts and the Packaging Paper 5-Year and 15-Year Forecasts

Economist, European Forest Products

[email protected]

© Copyright 2017 RISI, Inc. | Proprietary Information 2

3© Copyright 2017 RISI, Inc. | Proprietary Information

What’s on the Agenda for Today….

Who might be impacted?

What are the possible scenarios and…

What if the USA raises more trade barriers?

Global and regional developments

How disruptivewill China continue

to be?

Boxboard


All paperboard except containerboard

Western Europe – based on how it is constructed

United States – based on converted products

Asia – A mix (grey areas: artboard, coated white top)

RISI’s solution: An entirely new classification system based on available trade data

3 3

11

6

4

17

1

12

SOLID BLEACHED

SOLID UNBLEACHED

MULTI-PLY VIRGIN

POLY COATED SOLID RECYCLED

MULTI-PLY RECYCLED

SOLID VIRGIN RECYCLED

Bo

xbo

ard

De

man

d

(Mill

ion

To

nn

es)

Coated Virgin:

24 Million TonnesCoated Recycled:

21 Million Tonnes

Uncoated:

14 Million Tonnes

World Boxboard Demand in 2016


58.9 Million Tonnes

Boxboard Demand in Key RegionsNearly a majority of world demand comes from Asia


27.8

13.0 12.6

2.4 2.2

0.4 0.4 0.2 -

5.0

10.0

15.0

20.0

25.0

30.0

Asia NorthAmerica

WesternEurope

EasternEurope

Latin America Middle East Africa Oceania

Bo

xbo

ard

De

man

d(M

illio

n T

on

ne

s)

Large markets, fast growth

Large, mature markets

Lower consumption levels, high growth

Boxboard Demand Growth Restrained

7

China slowing

Recession in Brazil

Consumer spending down

Influence of e-commerce

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

BO

XB

OA

RD

DEM

AN

D G

RO

WTH

(M

ILLI

ON

TO

NN

ES)

Demand Change % Change



Amazon Frustration-Free Packaging

9

Boxboard Demand per Main Category

0

2

4

6

8

10

12

14

16

2010 2011 2012 2013 2014 2015 2016 2017* 2018*

Coated Recycled Board Demand (Million Tonnes)

North America Europe Asia Latin America RoW

+3.4%**+2.8%***

+1.4%** +1.4%***

-0.1%** +0.4%***

* Forecast ** CAGR 10-16 *** CAGR 16-18


+ 1.6%*

* CAGR 2016 - 2018

+ 2.3%*

+ 3.4%*

0.00 10.00 20.00 30.00

Ctd. Virgin

Ctd. Recycled

Uncoated

Boxboard Demand (Million Tonnes)

2018 2017 2016

10

Boxboard Demand per Main Category

0

2

4

6

8

10

12

2010 2011 2012 2013 2014 2015 2016 2017* 2018*

Coated Virgin Board Demand (Million Tonnes)

North America Europe Asia Latin America RoW

+6.8%**

+4.7%***

+2.8%**+2.7%***

0.7%**+1.5%***

* Forecast ** CAGR 10-16 *** CAGR 16-18


+ 1.6%*

* CAGR 2016 - 2018

+ 2.3%*

+ 3.4%*

0.00 10.00 20.00 30.00

Ctd. Virgin

Ctd. Recycled

Uncoated

Boxboard Demand (Million Tonnes)

2018 2017 2016

Capacity Growing More Than Demand


0.78

0.8

0.82

0.84

0.86

0.88

0.9

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Op

era

tin

g R

ate

Gro

wth

in

Millio

n

To

nn

es

Demand

Capacity

Operating Rate


USA & CANADA

Uncoated31%

Coated Recycled

18%

Coated Virgin51%

✓ Analysis excludes uncoated (all regions)

✓ US economy is improving- Good consumption and employment- Industrial production still weak

✓ Virgin grades dominate the market

✓ Food service sector contributing most of the growth

✓ USA becoming more attractive for exporters (virgin & recycled)


Why Are Imports Rising?

4,000

5,000

6,000

7,000

8,000

9,000

2011 2012 2013 2014 2015 2016 2017 2018

Capacity Production Demand • Better demand due to strong upturn in consumer spending (including food consumed at home)

• High prices stimulating searches for alternatives (containerboard)

• E-commerce will have a negative effect—less shelf-ready packaging needed

• Capacity closures in North America

• Production flat while demand rising = local producers losing market share to overseas suppliers

Traditionally a tough market to enter

Percentage of folding carton market integrated with boxboard supply

Riegelwood (-180,000 tonnes)


0

20

40

60

80

100

120

140

160

2012 2013 2014 2015 2016

THO

USA

ND

TO

NN

ES

US Imports Clay Coated Multi-Ply

RoW Sweden Finland China Canada

Capacity Changing Trade FlowsIncreasing

Finland Sweden China

Imports rising due to:

✓ Capacity expansions in Asia and Europe

✓ Demand slowdown in China

✓ Strong US dollar boosting prices in the United States

Decreasing

Imports rising more than 10% each year

(two-year forecast)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

MIL

LIO

N T

ON

NES

North American Exports

US SBS US CUK All Other NA Exports

Exporters under Pressure

© Copyright 2017 RISI, Inc. | Proprietary Information15

SBS producers competing with FBB and ivoryboard

Lower exports due to:

✓ Capacity closures in North America

✓ Increased pressure on SBS following capacity increases in Asia and Europe

✓ Strong dollar affecting cost competitiveness

Asia36%

Canada18%

L. Am.14%

RoW32%

US Producers No Longer Low Cost


350

400

450

500

550

600

-

2

4

6

8

10

12

14

Latin America North America Europe Asia

Mill

ion

To

nn

es

Global Virgin Cartonboard Cash Cost Comparison

✓ Global cost curve is flatter than before

✓ North American cost to produce impacted by strong US dollar

✓ North America has lost its cost competitiveness and is now more exposed to capacity increases in Europe and Asia

0.8

1.0

1.2

1.4

1.6

95 97 99 01 03 05 07 09 11 13 15 17

USD/EUR

Before

After


Asia (China)

✓ China is the largest market in Asia, accounting for 60% of overall demand and most of the growth year-over-year

✓ Growth in capacity has slowed down to a fraction of what it was a few years ago

✓ Demand is also growing more slowly, leading to very low operating rates

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2013 2014 2015 2016 2017 2018

Supply and Demand Growth in China

Demand Supply

0.0%

4.0%

8.0%

12.0%

16.0%

20.0%

0.0

0.5

1.0

1.5

2.0

2.5

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Bo

xbo

ard

De

man

d G

row

th (

Mill

ion

To

nn

es)

China Rest of Asia Percent (R)

Asia Still Growing, but More Slowly


-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

Cap

acit

y G

row

th, T

ho

usa

nd

To

nn

es

Virgin Recycled Global Demand Growth

Chinese Capacity Growth Increasingly Concentrated in Ivoryboard


✓ Growth in excess of global demand growth!

✓ Capacity expansions slowing down

✓ Virgin boxboard expansion persisted through 2015, causing operating rates for ivoryboard to decline

Asia Accounts for Half of Global Boxboard Production


✓ Asia produced an estimated 47% of global boxboard in 2016

✓ The region accounted for less than 30% at the beginning of the millennium

✓ Asia has become a trendsetter in terms of production and global market balances 0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2008 2009 2010 2011 2012 2013 2014 2015 2016

North America Western Europe Eastern Europe Asia Rest of World

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

NET

EX

PO

RTS

(M

ILLI

ON

TO

NN

ES)

China Rest of Asia

Rest of Asia Also Becoming Saturated


-4,000 -2,000 0 2,000 4,000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Asian Net Exports

Net Exports Exports Imports

Asia to become a net exporter as of 2016

Exports of Virgin Multi-Ply Leading the Way


✓ Clay coated multi-ply is the leading exported grade out of Asia

✓ Virgin multi-ply = ivoryboard

✓ Recycled multi-ply = duplex board

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2008 2009 2010 2011 2012 2013 2014 2015 2016

Clay Coated Virgin Multi-Ply Clay Coated Recycled Multi-Ply

Poly Coated Other


Europe

✓ Economic recovery underway, but uncertainties persist

✓ Virgin grades account for roughly 60% of the market

✓ Biggest challenge Europe is facing is overcapacity

✓ Operating rates will come down, but will remain above 90%

87%

88%

89%

90%

91%

92%

-400

-300

-200

-100

0

100

200

300

400

500

2012 2013 2014 2015 2016 2017 2018

Supply & Demand Growth

Demand Supply OR

Who will be impacted?

24

Many Uncertainties Prevail…

Hard

Soft

• The UK is refusing to compromise on the free movement of people

• It will be leaving the EU single market• It will be trading with the EU as if it were any other

country outside Europe, based on World Trade Organization

Rise of Trade Tariffs

Single Market?

Tariffs? Movementof People?

Customs Union

EU Budget

Full

Full

Partial

NoWTO



0 100 200 300 400 500 600 700

Coated Multi-Ply

Coated Solid Board

Poly Coated

UK Demand per Grade, 2016

Production Net Imports

✓ UK relies on imports to satisfy most of its demand requirements

✓ It imports more than 80% of its consumption needs

✓ Suppliers to the UK affected by weak pound

✓ Strong pound and post-Brexit tariffs might push production costs for end-users up, changing demand trends for the UK

✓ Possible further substitution

UK Imports Most of Its Requirements


European Exports on the Rise?

6

7

8

9

10

11

12

2011 2012 2013 2014 2015 2016 2017 2018

Mill

ion

To

nn

es

Capacity Production Demand • Improved economy and higher consumption lifting demand

• Demand growth concentrated in the food and beverage industries

• Start-ups at Husum and Kotkamills increasing the need to export more

• Operating rates will fall below 90% for virgin grades

Will Europe succeed in raising exports?

400

420

440

460

480

500

520

-

2

4

6

8

10

12

14

LatinAmerica

NorthAmerica

Europe Asia

Mill

ion

To

nn

es

Europe’s Boxboard Trade Surplus


-2

-1

0

1

2

3

4

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Net

Exp

ort

s, M

illio

n T

on

ne

s

W. Europe E. Europe Total Europe

✓ Net exports will manage to increase, although gains will not avoid a reduction in operating rates

✓ Europeans have limited possibilities in North America (mature) and Latin America (small but growing markets)

✓ Further capacity additions will increase pressure on exports

28

Western European Exports at Risk

Americas (15%)

Africa & Middle East (16%)

Asia (20%)

Emerging Europe (47%)


Ivoryboard is taking share in high-growth markets

Take Home Points on the Outlook for Global Boxboard

• Headwinds will keep global boxboard demand growth restrained in 2017-2018

• Slowing China, low commodity prices, soft consumer spending data

• The capacity overbuild in China and now Europe will continue to impact global trade

• Especially for virgin boxboard (SBS and FBB)

• Chinese ivoryboard is competing in neighboring markets, particularly with commodity grades

• US producers insulated, but pressure is building

• Export markets clearly challenged

• Import situation continues to develop


European Paper Packaging 5-Year Forecastwww.risi.com/forecasts

European Paper Packaging 15-Year Forecastwww.risi.com/forecasts

Paper Packaging Monitor Europewww.risi.com/ppme

Thank you!For more information:


outlook for global boxboard - risi · traditionally a tough market to enter percentage of folding...

Documents