European Packaging Paper

Transcription

1 European Packaging Paper An outlook for the next two years RISI European Conference, Berlin 29 February 2 March, 2016 Alejandro Mata Economist, European Forest Products

2 Alejandro Mata Economist, European Forest Products Bachelor s hl degree in Engineering, MBA degree earned in 2007 Worked in business and market intelligence functions 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 amata@risi.com Europe,, the European Graphic 5 Year and 15 Year Forecasts and the Packaging Paper 5 Year and 15 Year Forecasts 2

3 Enhancement Visual appearance Enhancement Value creation Brand awareness Transportation Performance Protection Avoid waste Functionality 3

4 Only a graphic phenomenon? Digital Revolution 4

5 ! Amazing facts about e commerce in Europe EU + International ordinary parcels EU27 15% of all EU 28 consumers purchased cross border in 2014 Convenience Fast deliveries Resource optimization

6 Tracking and preserving Smart packaging Augmented ed Reality NFC enabled abed 6

7 What else matters? 7

8 Weak euro vs. US dollar to keep favoring European competitiveness abroad Low oil prices will continue, although their impact on the economy is still unclear y Geopolitical situation (Brexit and more) 8

9 How is global containerboard doing? Beyond Global demand growth slowing down Containerboard Growth concentrated in emerging markets Implications for European markets Repercussions on trade flows Europe s cost competitiveness Dem mand Tr rade S&D Balance Profitability Overview of capacity changes 9

10 Global Perspective (Containerboard) Slowdown in the USA Driven by low oil prices Lower exports (impacting i virgin grades) 1+ million tonnes last year into recycled containerboard High US prices vs. all other Economic instability Brazil, Argentina, Venezuela Strong demand elsewhere Higher imports needed (mainly virgin) Capacity increases in Europe Replacing imports (virgin) Net exports to increase (recycled) Recycled fiber costs rising Substantial growth (excluding China) Capacity in China still growing Low operating rates vs. global Brazilian recession China s transformation Currency fluctuations 10

11 Demand 3.9% 9%up in % up in 2016 Trade 6,000 5,000 Net imports higher in 2015 Overseas suppliers 4,000 increasing market share Imports to come down Conversions 3,000 Capacity Significant changes recently 2,000 Capacity Demand Production Dem mand 1.5% in 2016 Su upply ances Bal 90% 11

12 Operating rates Rising due to Strong demand in 2015 Will come down due to Capacity conversions Lower imports to help mitigatethe the loss Production costs Slightly higher for 2016 (fiber) Margins to remain fairly stable to slightly down Production Cost Operating Rate % 95% 90% 85% 80% 75% 70% Dem mand 1.5% in 2016 Su upply ances Bal 90% Copyright Copyright RISI, RISI, Inc. Inc. Proprietary Proprietary Information Information 12

13 Turkish Import Duties Turkey imposing ADD 20% (CIF value) for US imports of unbleached kraft ftlinerboard, 175 g and less Started in July 2015 Companies affected: IP, RockTenn US exports down about 50% since August US redirecting exports to: Latin America and Emerging Europe Other southern EU countries (Italy and Spain) Consequences for Europe? Higher imports from Russia into Turkey Lower prices in southern Europe 13 13

14 Demand 2.4% 4%up in % up in 2016 Trade Net exports rising due to Capacity additions Weak euro Global changes Capacity Significant changes recently 23,000 Capacity 22,000 Demand 21,000 20,000 19,000 18,000 17,000 16,000 15,000 Production Dem mand 2.0% in 2016 Su upply Balances 90% 14

15 Operating rates Higher in 2014/2015 due to healthy demand and higher exports Will come down due to Capacity additions Added pressure from Asia (low operating rates) Production Cost Operating Rate 100% 95% 90% 85% 400 Production costs 80% Higher for 2016, linked to recovered paper prices % Margins for producers most likely to come down % Dem mand 2.0% in 2016 Su upply Balances 90% 15

16 Why So Much in Recycled Containerboard? European Demand Trends Market Concentration World Trends (Trade Flows) Copyright Copyright RISI, RISI, Inc. Inc. Proprietary Proprietary Information Information 16

17 Major Capacity Changes (Containerboard) Stracel 270,000 (FR) Conversion (LWC) Aviretta 200,000 (DE) Conversion (SC) Varkaus Kraft and White Top 390,000 (FI) Conversion from UWF EcoPaper 280,000 (RO) Pro Gest 550,000 (IT) Conversion (Newsprint) Hamburger White top & Brown Testliner 450,000 (DE or TK) Schoellershammer 250,000 (DE) Husum Kraft ftwhite Top 300,000* (SE) Conversion (CWF) Kipas Lightweight 400,000 (TK) Modern Karton 400,000 (TK) Parenco 385,000 (NL) Conversion (Newsprint) Leipa White top testliner 450,000 (DE) Conversion (Newsprint) Virgin Recycled Two New Machines in 2018 Heinzel 450,000 (AT) Conversion (Umec) Mondi 300,000 tonnes (Slovakia) white testliner BillerudKorsnäs 500,000 tonnes (DE)?? 17

18 European Demand Trends Containerboard 4% Printing & Writing 4% Cartonboard 3% Newsprint 12% Tissue 6% Containerboard is the largest segment of all paper & board Size Matters 18

19 European Demand Trends Containerboard Cartonboard Newsprint P&W

20 Market Concentration Top 5 Next 5 Other 74% 22% Kraftliner Clear(er) leadership Overall steeper industry cost curve Top players dominating the cost curve 4% Top 5 Next 5 Other 16% 38% 46% Recycled Containerboard No clear leadership Smaller gap between the first and fourth quartiles on the industry cost curve Easier to secure an attractive position on the industry cost curve 20

21 World Trends (Trade Flows) North America Net Exporter? Capacity Expansions (Boxboard) Not many clear opportunities for Europe 21

22 World Trends (Trade Flows) Lightweight North America Net Importer Less capacity buildup globally Warning! Global market becoming more competitive 22

23 Global Cash Cost Curve 300 Recycled Linerboard 300 Recycled Medium Europe Asia Latin America North America 0 Europe Asia Latin America North America Fiber Chemicals Energy Labor 23

24 How is global cartonboard doing? Beyond Global demand growth slowing down Cartonboard Growth concentrated in emerging markets Implications for European markets Repercussions on trade flows Europe s cost competitiveness Dem mand Tr rade S&D Balance Profitability Increasing threat from Asia 24

25 Global Perspective (Cartonboard) Slowdown in the USA Virgin grades 65% of the market Demand relatively flat Imports expected to rise in Exports also to come under pressure Capacity increases in Europe Demand growing invirgingrades grades Capacity expansions (virgin) Exports under pressure Tremendous growth in capacity Capacity expansion mainly in Economic instability China (at least as fast as Brazil, Argentina, Venezuela demand in 2016 and 2017) Strong demand elsewhere Low operating rates vs. global Small market overall Brazilian recession China s transformation Currency fluctuations 25

26 Demand 1.5% 5%up in % up in 2016 Trade Net exports rising due to conversions from graphics Weak euro Western European net exports mainly to Emerging Europe 7,000 6,000 5,000 4,000 3,000 Capacity Demand Production Capacity Significant changes recently 2, Dem mand 1.4% in 2016 Su upply ances Bal 90% 26

27 Operating rates Rising due to 1,100 Production Cost Operating Rate 100% Increasing exports Better domestic demand 1,000 95% Will come down due to Capacity conversions % Competition from Ai Asian producers % Production costs Higher for 2016 (fiber) Margins to come under severe pressure due to OR % 75% 70% Dem mand 1.4% in 2016 Su upply ances Bal 90% 27

28 Global Cash Cost Curve Latin and North America Virgin Cartonboard 600 have abundant virgin fibers Main exporting regions 300 will be: 200 North America Europe 100 Asia 0 Europe Asia Latin America North America Fiber Chemicals Energy Labor 28

29 Demand 0.8% 8%up in , % up in 2016 Capacity Demand Production Trade Net exports not expected to change much due to sluggish demand worldwide 3,000 Capacity Rising: incremental capacity at existing mills Some conversions to virgin being considered 2,000 1, Dem mand 0.5% in 2016 Su upply ances Bal 90% 29

30 Operating rates Trending down due to 700 Production Cost Operating Rate Increasing pressure from 95% Asia on exports side 600 Capacity rising faster than demand in Europe 90% Production costs 500 Rising mainly due to prices for recovered paper 80% Margins for producers to 400 come slightly down 75% 100% 85% % Dem mand 0.5% in 2016 Su upply ances Bal 90% 30

31 European Boxboard Trade Balance European exports in 2014 were about 10 million tonnes 31

32 Europe s Main Destinations? Emerging Europe (46%) Americas (14%) Asia (21%) Africa & Middle East (16%) 32

33 What Is at Risk? Emerging Europe (46%) Americas (14%) Asia (21%) North America Net exporter of virgin boxboard Africa & Middle East (16%) 33

34 Demand Supply Balances 1.5% in % Demand Supply Bala nces 2.0% in % 90% Demand Supply Su pply Balances Balances 1.4% in % in % 34 Demand

35 Conversions What s driving them? Higher margins Growing markets 35

36 Is the grass greener on the other side? Containerboard 4% Printing & Writing 4% Graphics: Demand declining since 2007, and in many regionsinthe in world Despite significant amount of closures, more will be needed in the coming years Lower margins for producers Cartonboard 3% Tissue 6% Newsprint Packaging: 12% Demand still growing, globally and in Europe The industry will sooner or later absorb the wave of increases Higher margins for producers 36

37 Packaging gvs. Graphics Profitability: Prices/Total Cost Kraftliner Testliner Boxboard CWF Newsprint

38 Questions? 38 38

39 Thank you! For more information: European Graphic Paper 5 Year Forecast World Boxboard Study 39