Asset Quality and Cost Competitiveness of Asian Containerboard Mills

Transcription

1 Asset Quality and Cost Competitiveness of Asian Containerboard Mills RISI Asian Conference Shanghai, May 23, 2018 Sampsa Veijalainen Senior Product Manager, Mill Intelligence Copyright 2015 RISI, Inc. Proprietary Information

2 Sampsa Veijalainen Senior Product Manager, Mill Intelligence M.Sc. in Pulp and Paper Technology from Finland With RISI since 2011 Manager of RISI Mill Intelligence content in Asia Analyzes graphic, packaging, specialty and pulp mills for cost competitiveness 2

3 Agenda Overview of global containerboard mills Product and fiber mix Energy consumption and fossil CO 2 emissions Asset quality from a global perspective How do Southeast Asian machines compare? The Chinese containerboard market in a changing business environment Fiber and energy costs in focus going forward Summary 3

4 Containerboard Is a Global Commodity Availability and quality of local raw material varies; some regions have to rely more on imported fiber both recovered and virgin fiber is used Source: RISI 4

5 Asia Is the Largest Producing Region Fiber is the key cost driver in every region; locally energy and labor cost tend to make the difference Source: RISI 5

6 Containerboard Expanding Steadily Asia, especially China, is where most of the new capacity has come online in the last decade, but also Europe has seen its share of investment Source: RISI 6

7 Recycled Containerboard Dominates OCC is the most commonly utilized fiber material overall, virgin mills mainly use softwood kraft pulp Source: RISI 7

8 Asian Mills Focus on Recycled Products Only 20% of global capacity is virgin fiber based Source: RISI 8

9 Fuel Mix Varies Significantly by Region A mill s energy profile is affected by many factors; regional fuel cost and supply, taxation, capex, etc. Source: RISI 9

10 Fossil Fuels Have a Wide Range of CO 2 Emission Factors and Calorific Values Source: Statistics Finland 10

11 Reliance on Coal Elevates the Carbon Footprint of Asia Versus Other Regions Source: RISI 11

12 Agenda Overview of the global containerboard mills Product and fiber mix Energy consumption and fossil CO 2 emissions Asset quality from a global perspective How do Southeast Asian machines compare? The Chinese containerboard market in a changing business environment Fiber and energy costs in focus going forward Summary 12

13 Southeast Asia in Focus Southeast Asian mills account for 45% of world s containerboard capacity China is by far the largest in terms of mill count and production capacity Japan, South Korea and Indonesia are the next three largest regions Bubble size correlates with mill capacity; source: RISI 13

14 Mills in China and Other SE Asia Have Nearly Half of the World s CNT Machines Source: RISI 14

15 The Chinese Asset Base Is Not the Most Productive, Despite Being Modern Source: RISI 15

16 China Is Seeing New Capacity Being Added Across the Spectrum Source: RISI 16

17 Agenda Overview of the global containerboard mills Product and fiber mix Energy consumption and fossil CO 2 emissions Asset quality from a global perspective How do Southeast Asian machines compare? The Chinese containerboard market in a changing business environment Fiber and energy costs in focus going forward Summary 17

18 Chinese Recycled Containerboard Producers Adapting to a New Era Fiber supply New government policies have tightened the availability of imported OCC fiber Strict contamination rules for incoming material Import permits available only for mills with production capacity surpassing 50,000 tonnes per year Energy In order to curb emissions, authorities are keen to increase the share of natural gas in the country s fuel mix to replace coal Regionally, this may be a challenge for mills 18

19 Global OCC and Linerboard Price Trends Domestic OCC price has increased in China, and the linerboard price is now closer to that of other regions Source: RISI 19

20 Input Costs Have Varying Volatility due to Both Local and Global Drivers Source: RISI, CEIC, TTSA 20

21 Production Costs in China Have Increased More Rapidly Than in Other Regions Source: RISI 21

22 Chinese Mills Are Already Challenged by the Limited Fiber Supply Could Energy Be the Next Hurdle? Fiber Access to currently less-expensive, higher-quality imported grades of OCC is limited Energy Natural gas is a higher cost fuel compared to coal Switching fuels will likely require additional investment in a mill s energy assets 22

23 Mill Fiber Supply and Fuel Mix Are Key Factors Affecting Competitiveness Source: RISI, CEIC, TTSA 23

24 The Chinese Containerboard Market Is in a Developing Stage The Chinese recycled containerboard market is still rather fragmented. The five largest producers account for around 40% of capacity. The ten largest companies control 50% of the market. There is plenty of new capacity scheduled to come on line in the next few years. Depending on input cost development, mainly for domestic OCC, smaller and usually less cost-effective assets might face risk of closure or M&A activity. Increased usage of natural gas as a fuel could also cause some disruption in the market, and perhaps even affect future installations. 24

25 Modern Assets of Top Chinese Producers Populate Low End of Cost Curve 25

26 Summary Global containerboard market in a nutshell Recycled containerboard products dominate globally; virginbased grades account only for 20%. China and SE Asia mainly focus on recycled containerboard, which makes them sensitive to changes in recycled fiber prices. Fuel mix is highly characteristic of region For Asia, coal price is currently the most important variable for energy cost scenarios, but natural gas is something to monitor. Business environment is changing in China Stricter RCP import policy and environmental measures might force smaller players out of business and speed up industry consolidation. Uncertainty in China may create investment opportunity in other Southeast Asian countries. 26

27 Thank you! For more information: 27