Global Fluff Pulp Outlook

Transcription

1 Global Fluff Pulp Outlook RISI North American Conference San Francisco, USA October 218 Patrick Cavanagh Economist, Pulp

2 Presentation Overview Fluff pulp basics Demand Steady growth trends for both mature and emerging markets Supply Recent capacity expansions and closures Little announced capacity expansion, but new supply will be needed Prices Fluff pulp prices have increased steadily, even as operating rates have declined 2

3 What Is Fluff Pulp? Specialty wood pulp, that is NOT used to make paper or paperboard Fluff pulp is used primarily in absorbent hygiene products Baby diapers, feminine hygiene, adult incontinence and nonwovens/wipes Demand for fluff pulp is growing steadily at 3 4% per year Most of the fluff pulp in the world is produced in the US South (84%) Worldwide, fluff is produced at 24 pulp mills, operated by 13 companies, located in six countries 99% of fluff pulp is made using softwood fibers, utilizing the kraft process Bleached softwood kraft fluff accounted for 23% of global market BSK capacity in 217 Many fluff pulp mills can also make paper grade pulp (BSK swing mills) Fluff pulp costs more to produce and is usually priced higher than paper grade pulp Sometimes it makes more sense economically to produce paper grade (similar price, lower cost) 3

4 Demand Fundamentals Demand is driven by growth in GDP per capita and by growth in the population segments of potential absorbent hygiene product users Babies, women and senior adults are the main potential consumer groups Mature markets are relatively saturated, growth is largely driven by demographics Emerging markets are constrained by income, economic growth is correlated with fluff demand Real GDP per Capita 7, 6, 5, 4, 3, 2, 1, Mature Emerging Mature % Chg. Emerging % Chg Percent Change 4

5 Million Million Population of Babies, 2.5 Years Old Emerging Mature Population of Adults, 65+ Years Old Emerging Mature Million 2,5 2, 1,5 1, 5 Source: UN, RISI Population of Women, Years Old Emerging Emerging 58% Mature Share of Demand, Million Tonnes Mature 42% 5

6 Global Demand by End Use, 217 Feminine Hygiene 21% Airlaid/Other 13% Adult Incontinence 29% Disposable Diapers 37% Thousand Tonnes 8, 7, 6, 5, 4, 3, 2, 1, Demand by Region Eastern Europe Middle East and Africa Other Asia Latin America China Mature Markets* * Canada, Japan, Oceania, USA and Western Europe. 6

7 Fluff Consumption vs. Income Kilograms per Potential Consumer and GDP per Capita, Kilograms Fluff Pulp per Potential Consumer USA Canada Nordic Western Europe Japan Oceania China Other Asia Brazil Other Latin America Eastern Europe Middle East Africa 1, 2, 3, 4, 5, 6, Real per Capita GDP, 25 US Dollars 7

8 Supply Side Developments Traditionally, fluff pulp supply has been centered in the US South softwood fiber region Several recent capacity projects have been started up in Brazil and Sweden, including eucalyptus, NBSK Currently there is only one publicly announced capacity project, not expected until 225 New supply will be needed to keep operating rates within historical norms, likely from the US South Company Mill Country Capacity Thousand Tonnes Date Suzano Suzano Brazil Q4 Klabin Ortigueira Brazil Q2 International Paper Riegelwood United States Q2 Domtar Ashdown United States Q3 Domtar Plymouth United States Q1 Thousand Tonnes 1, 9, 8, 7, 6, 5, 4, 3, Fluff Production Operating Rate (R) 1% 98% 96% 94% 92% 9% 88% 86% Stora Enso Skutskär Sweden Q2 Klabin Ortigueira Brazil , 1, % 82% 8% 8

9 Fluff Producer Market Share, 217 Capacity by Region Stora Enso 4% Resolute 4% Klabin 4% Arauco 3% WestRock 3% Domtar 1% Five Remaining 7% International Paper 36% Thousand Tonnes 8, 7, 6, 5, 4, 3, North America Western Europe Latin America Georgia Pacific 29% 2, 1, 6.9 Million Tonnes

10 Fluff Cash Cost Curve, Fourth Quarter 217 Machine level costs, not including delivery, I, SG&A or logistics Cash Costs, US Dollars per Tonne South America North America Europe Asia 5 1, 1,5 2, 2,5 3, 3,5 4, 4,5 5, 5,5 6, 6,5 Cummulative Capacity, Thousand Tonnes 1

11 Tightness in Paper Grade Creates Negative Spread to Fluff Fluff and SBSK Net Prices, US Dollars per Tonne, Delivered to the USA 1, Fluff SBSK (R) Fluff SBSK Average Spread (R)

12 Unexpected Downtime : Hurricane Florence On September 14 th, Hurricane Florence made landfall in a key fluff producing region Four pulp mills producing fluff in the Carolinas were shuttered, accounting for 19% of global supply The effective list price for fluff increased $25/tonne in September Full impact remains unclear Company Mill Days Down Capacity / Day (s tonnes) Downtime (s tonnes) International Paper Riegelwood International Paper Georgetown International Paper New Bern Domtar Plymouth TOTAL 35 12

13 Forecast Summary Fluff pulp demand will continue to grow steadily at 3 4% per year Mature market demand will grow modestly as aging populations contribute to demand for AI products and outweigh slowing birth rates Emerging markets will account for 89% of demand growth over the next five years, driven by rapid economic growth and consumer market penetration New fluff capacity will be needed to keep the market balanced Swing capacity and conversion projects will likely fill the gap Strong global demand for paper grade pulp will work to tighten the fluff pulp market further as producers swing production to paper grade pulp Higher fluff pulp prices may motivate buyers to seek viable alternatives Northern softwood, eucalyptus, SAP 13

14 Thank you! For more information: Outlook for the World Fluff Pulp Market (218) Five year forecasts for prices, demand, supply and costs Historical data and analysis for all regions of the world Fluff conversion risk assessment for paper machines in the US South 14