Global Graphic Market Review

Transcription

1 Global Graphic Market Review How far we have come and where are we going? European Conference March 2018 Alejandro Mata Senior Economist, European Forest Products

2 Alejandro Mata Senior Economist, European Forest Products Bachelor s degree in Engineering, MBA degree earned in 2007 Worked in business and market intelligence functions for one of Europe s leading paper producers Has been analyzing and forecasting the industry since 2009 Author of the Paper Trader Europe, Paper Packaging Monitor Europe, the European Graphic 5 Year and 15 Year Forecasts and the Packaging Paper 5 Year and 15 Year Forecasts 2

3 2008: inflection point in the global graphic demand Rise of the Internet Mobile devices become mainstream Behavioural change Internet of things 3

4 GRAPHIC PAPER DEMAND CHANGE (MILLION TONNES) % 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Two periods of heavy demand losses (2001 & 2008) Economic downcycles matter Technologic disruption % Demand Change % Change Consumers Advertisers 4

5 What worked before might not work again 5

6 100,000 European Advertising Expenditures (million Euros) 140,000 Overall advertising dollars growing again since ,000 80,000 70, , ,000 Most of the internet growth coming from mobile advertising Internet advertising growing at the expense of print advertising 60,000 50,000 80,000 Speed of conversion is slowing down 40,000 60,000 30,000 40,000 20,000 10,000 20, Total Internet Print Other 6

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8 UK Facebook Users 2018 vs % % 5.6 8% 6.4 over 55s will become the secondbiggest demographic of Facebook users this year % to to to to to

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10 Technology Disruption To Continue Paper maps With step by step directions on GPS Navigation Systems, paper maps are hardly necessary anymore. Standalone GPS devices Same goes for GPS devices. Your phone can perform all the same functions, plus text someone that you've arrived. 10

11 Paperwork Cloud services will make contracts, medical forms, and other paper documents redundant 11

12 Bills Replaced by online payment methods and apps. 12

13 Reference books Internet of things making dictionaries and encyclopedias are no longer necessary. 13

14 Textbooks Paper textbooks are expensive, heavy, and often obsolete due to new discoveries. Higher education is already changing. 14

15 GRAPHIC PAPER CAPACITY CHANGE (MILLION TONNES) % 98% 96% 94% 92% 90% 88% 86% 84% 82% Capacity coming down, but not fast enough Operating Rates still below 90% Smaller demand reductions helping to tighten the market towards the end of the forecast The China Effect % Capacity Change OR 15

16 CHANGE (MILLION TONNES) CHANGE (MILLION TONNES) Demand Supply Demand Supply CHANGE (MILLION TONNES) CHANGE (MILLION TONNES) Demand Supply Demand Supply 16

17 3500 The China Effect OCC Post consumer Economic growth engine transitioning from investment towards consumption Risk of overinvesting is lower RMB PER TONNE OCC, 16.7 ONP, 5.2 MIX, 5.7 Fiber crisis (mixed paper grades import ban) Higher raw material prices Lack of fibers partly responsible for capacity closures Imports currently rising HGR, 0.9 Tightening global market conditions OCC Post consumer 17

18 Tightening Of Global Market Conditions Printing & Writing Operating Rates Newsprint Operating Rates 96% 100% 94% 92% 95% 90% 90% 88% 86% 85% 84% 82% 80% 80% % Asia China EU Global NA Asia China EU Global NA 18

19 Graphics Becoming More Global 19

20 Exports Are On The Rise In Europe 550, , ,000 Weakening of the euro Global demand decline, the USA in particular, and capacity closures in EU Net exports rising due to: Improving global market conditions Sustained weakness in the euro vs USD Changing market conditions in China making them focus more on local markets 400, ,000 Most of the increases concentrated on Newsprint Coated Woodfree Coated Mechanical 300,000 20

21 USD PER TONNE Global Newsprint Prices Weakening of the euro China Germany USA France US prices above European prices since weakening of the euro in 2014 China prices skyrockets due to capacity closures and global tightness in the market Limited fiber supply and higher prices for domestic recovered papers behind price increases in China European prices currently rising 21

22 The Rise Of Trade Protectionism Globally Copyright 2017 RISI, Inc. Proprietary Information 22

23 The UWF Case (Cut Size) 23

24 Newsprint Trade Barriers Rising In The USA Estimated US Market Share in 2017 Newsprint SC Ume Directory Ume Other Ume US Domestic 33% 18% 3% 47% Canada 67% 58% 94% 51% Europe 0% 24% 3% 2% Might open opportunities for Europeans, who already benefit from higher exports to the USA due to existing tariffs (Ume) Tariffs on Newsprint and Certain Other Uncoated Mechanical Paper from Canada Could Have Big Impact on US Availability and Prices Copyright 2017 RISI, Inc. Proprietary Information 24

25 European Markets Are Improving? Copyright 2017 RISI, Inc. Proprietary Information 25

26 Buyer or Seller? Market Pulp Up between 20% and 45% since January 2017 Driven costs up for non integrated paper producers Impacting Woodfree producers in Europe Graphic Paper Market Up between 5% and 15% since January 2017 Increases are cost and market driven Margins under pressure = capacity closures Paper buyers under pressure = closures Copyright 2017 RISI, Inc. Proprietary Information 26

27 Average Cash Cost for non integrated producers is: Above semi integrated producers Above integrated producers Copyright 2017 RISI, Inc. Proprietary Information 27

28 Demand Decline Is Slowing: Change in European Graphic Demand (Million Tonnes) % -1% -2% -3% -4% European Demand % Change However... PMI s heading south in February Retail sales growth cools down -2.5 Million Tonnes Percent -5% Secular demand factors still in place Copyright 2017 RISI, Inc. Proprietary Information 28

29 Exports Are On The Rise In Europe US Mills Have Advantage European Graphic Exports FOREIGN CURRENCY PER US DOLLAR European and Other Offshore Mills Have Advantage Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Euro stronger than anticipated EU producers less supported than before from currency fluctuations 29

30 Not Necessarily A strong euro can Lower global cost competitiveness, as exports become more expensive overseas Reduce the impact of rising prices of imported raw materials Time to Panic?!? 30

31 Something Else Is Happening In Europe Supply & Demand Changes (Thousand Tonnes) Newsprint Umec Cmec UWF CWF Capacity closures and conversions picked up since 2015 Most of the changes occurring in Newsprint and Umed All other grades at risk of further market imbalances going forward Market conditions might force more companies out 1400 Demand Capacity 31

32 100% 95% 90% 85% 80% 75% Western European Operating Rates Generally, operating rates are expected to keep rising thanks to capacity rationalization Newsprint Umec Cmec UWF CWF Operating rates are rising thanks to capacity closures Largest increases reported in Uncoated Mechanical and Newsprint Good demand Sufficient capacity reductions Only minor increases in Coated Mechanical and Uncoated Woodfree CWF is the only exception Lack of capacity closures Demand declining fast 32

33 Enjoy the Ride!! 33

34 Thank you! For more information: European Graphic Paper 5 Year Forecast Paper Trader Europe 34