RISI Global Tissue Outlook Tissue Is in a Very Dynamic Phase Worldwide

Transcription

1 RISI Global Tissue Outlook Tissue Is in a Very Dynamic Phase Worldwide RISI Asian Conference Shenzhen, China May 217 Esko Uutela Principal, Tissue Copyright 217 RISI, Inc. Proprietary Information

2 Esko Uutela Principal, Tissue Educational background in forestry, economics and business studies In consulting business and information services for the forest industry since 1976 Cooperating with RISI since 27 Developed global tissue databases and forecasting models Previous experience in graphic papers, packaging papers and recovered paper Assisted by RISI Asian, European and American colleagues and consultants Produced more than 2 single- and multiclient tissue studies Copyright 217 RISI, Inc. Proprietary Information 2

3 Agenda Recent Global Trends American Outlook European Outlook Asian Outlook Market Dynamics Summary of Global Outlook Concluding Remarks Copyright 217 RISI, Inc. Proprietary Information 3

4 RECENT GLOBAL TRENDS Copyright 217 RISI, Inc. Proprietary Information 4

5 World Tissue Consumption by Region Market is dynamic: China has passed Western Europe in market size, while Asia Far East is and Eastern Europe soon will be larger than Japan. China has been the largest producer country since 215. Japan 5.5% E. Europe 5.4% Asia Far East 5.9% N&M East 4.1% Africa 2.1% Oceania 1.2% N. America 25.% L. America 11.1% W. Europe 18.3% China 21.3% Global Consumption: 36.3 Million Tonnes (216p) Copyright 217 RISI, Inc. Proprietary Information 5

6 Thousand Tonnes Relative Growth, Percent per Year Growth in the Global Tissue Market Relatively stable growth until the Great Recession in 29 Volume growth was slightly above 1. million tonnes per year Recovery took a few years, but 215 was a good year due to China, North America and Western Europe Preliminary data suggest that 216 was also strong 1,5 Volume Growth Relative Growth 6 5 1, Copyright 217 RISI, Inc. Proprietary Information 6

7 Thousand Tonnes Regional Volume Growth of Tissue Consumption, , 5, 4, 3, 2, Latin America shows the second-largest volume growth More than one-third (36%) of global growth in China! 1, Total Global Growth: 15.3 Million Tonnes (959, Tonnes per Year) Copyright 217 RISI, Inc. Proprietary Information 7

8 Kilograms per Person per Year Per Capita Consumption of Tissue in Different World Regions, Copyright 217 RISI, Inc. Proprietary Information 8

9 AMERICAN OUTLOOK Copyright 217 RISI, Inc. Proprietary Information 9

10 Growth Rate, Percent per Year North American Tissue Business Exceptionally Strong in Sound economy helped growth, particularly in the AfH sector 4. Average growth accelerating from 1.5% to 1.75% per year Copyright 217 RISI, Inc. Proprietary Information 1

11 Volume Share, % of Consumer Tissue Retailer Label Share Up in the USA, Down in Canada Major fight going on between private labels and brands in the USA, with brand owners increasingly using special price promotions, while in Canada brands continue to rebound through "half-price" actions USA Canada Copyright 217 RISI, Inc. Proprietary Information Copyright 216 RISI, Inc. Proprietary Information 11

12 Million Tonnes Expected Growth in US Tissue Consumption by Business Sector At-Home retailer labels will show strong growth of about 64, tonnes in , while At-Home branded volume growth will remain moderate Minor growth of.2% per year Market Volume Growth of 6.% per year Growth of 2.2% per year 1.. AH Brands Retailer Labels AfH Copyright 217 RISI, Inc. Proprietary Information 12

13 Major Tissue Capacity Changes in North America, * 216 First Quality Tissue, Anderson, SC (new TAD PM) 64, t/a Von Drehle Corp., Natchez, MS, USA (NTT PM) 32, t/a St. Croix Tissue (APP), Baileyville, ME, USA 126, t/a Clearwater Paper, Neenah, WI, USA -29, t/a 193, t/a 217 Orchids Paper Products, Barnwell, SC, USA (NTT PM) 32, t/a Resolute Forest Products, Calhoun, TN, USA (NTT PM) 6, t/a Kruger Products, Crabtree, QC, Canada 2, t/a Little Rapids Corporation, Shawano, WI, USA (replacement) 1, t/a 122, t/a * In metric tons Copyright 217 RISI, Inc. Proprietary Information 13

14 Major Tissue Capacity Changes in North America, * 218 Sofidel America, Circleville, OH, USA (2 x NTT) 14, t/a ST Tissue, Franklin, VA, USA 45, t/a Irving Consumer Products, Fort Edward, NY, USA 64, t/a First Quality Tissue, Anderson, SC, USA (TAD PM) 64, t/a 313, t/a 219 Clearwater Paper, Shelby, NC, USA (NTT PM) 64, t/a First Quality Tissue, Lock Haven, PA, USA 64, t/a First Quality Tissue, Anderson, SC, USA (ATMOS PM)??? 68, t/a 196, t/a Potential Projects Kruger Tissue, Memphis, TN or Canada (TAD PM) 65, t/a Resolute Forest Products, Calhoun, TN, USA (second NTT PM) 6, t/a Sofidel America, OK (?), USA 7, t/a * In metric tons 195, t/a Copyright 217RISI, Inc. Proprietary Information 14

15 Thousand Tonnes Capacity Utilization, Percent Net Capacity Change* and Tissue Capacity Utilization in North America This year is looking good as some projects have been delayed, but any new expansion adding to the committed capacity would change the current outlook from rather stable to negative; potential closures could help 4 3 A lot of new capacity coming on stream that will affect ; utilization rate will head south if no further closures occur Capacity Change Capacity Utilization *Based on committed projects only Copyright 217 RISI, Inc. Proprietary Information 15

16 Thousand Tonnes Expected Volume Growth of Latin American Tissue Demand by Main Country, Brazil is projected to recover in ??? Copyright 217 RISI, Inc. Proprietary Information 16

17 Thousand Tonnes Capacity Utilization, Percent Net Capacity Change* and Tissue Capacity Utilization in Latin America Project delays and stronger demand could help a lot, but the current outlook is not encouraging for new investments Capacity Change Capacity Utilization * Based on committed projects only Copyright 217 RISI, Inc. Proprietary Information 17

18 EUROPEAN OUTLOOK Copyright 217 RISI, Inc. Proprietary Information 18

19 Growth Rate, %/a Western European Tissue Market Showing Variation from Year to Year Southern Europe finally returning to its pre-recession level Very long-lasting recession, but positive recovery in 215 Copyright 217 RISI, Inc. Proprietary Information 19

20 Growth Rate, %/a Eastern European Tissue Market Growth Negatively Affected by the Political Tension The Russia-Ukraine conflict has taken a toll on the tissue sector Recent growth disappointing, but 216 showed improvement Copyright 217 RISI, Inc. Proprietary Information 2

21 Thousand Tonnes Volume Growth of W. European Tissue Markets by Main Country, In the next few years, volume growth will be largest in the UK, followed by France, Germany and Italy Copyright 217 RISI, Inc. Proprietary Information Copyright 216 RISI, Inc. Proprietary Information 21

22 Thousand Tonnes Volume Growth of E. European Tissue Markets by Main Country, Poland is expected to show the largest growth, followed by Russia, despite its current economic problems, Romania and Ukraine Copyright 217 RISI, Inc. Proprietary Information Copyright 216 RISI, Inc. Proprietary Information 22

23 Thousand Tonnes Capacity Utilization, Percent Net Capacity Change* and Tissue Capacity Utilization in Western Europe until 219 Capacity closures helped the industry in , but new projects thereafter cut the trend. Current outlook is rather stable, but capacity utilization will remain below 9% in Capacity Change Capacity Utilization * Based on committed projects only Copyright 217 RISI, Inc. Proprietary Information 23 84

24 Thousand Tonnes Capacity Utilization, Percent Net Capacity Change* and Tissue Capacity Utilization in Eastern Europe until 219 New investments from late 214 onward and slowed demand growth caused capacity utilization to decline; no immediate change is expected Capacity Change Capacity Utilization * Based on committed projects only Copyright 217 RISI, Inc. Proprietary Information 24

25 ASIAN OUTLOOK Copyright 217 RISI, Inc. Proprietary Information 25

26 Main Asian Tissue Markets, 216 China dominant, Asia Far East now larger than Japan Japan 15% N&M East 11% Asia Far East 16% China 58% Total Market Size: 13.4 Million Tonnes Copyright 217 RISI, Inc. Proprietary Information 26

27 Growth Rate, Percent per Year Recent Growth Rates of Chinese Tissue Consumption The Chinese tissue market has been in a very strong growth phase, but now showing stronger growth than the economy Recently, growth has been slowing, but 215 was an exception Average growth: 8.% per year /1 3/2 4/3 5/4 6/5 7/6 8/7 9/8 1/9 11/1 12/11 13/1214/13 15/14 16/15 Copyright 217 RISI, Inc. Proprietary Information 27

28 Tissue Exports, Thousand Tonnes Chinese Tissue Export Growth, Chinese tissue exports exploded in and went to nearly every corner of the world with Asia Far East, North America and Japan being the largest buyers, followed by Oceania. Growth waned in 215, but resumed in 216, although not to 214 level. 1, Average growth rate, %/a Asia Far East North America Japan Oceania Middle East Western Europe Africa Latin America Eastern Europe Copyright 217 RISI, Inc. Proprietary Information 28

29 Growth Rate, Percent per Year Expected Growth Rates of Asian Tissue Consumption, Strong growth in major markets, with Japan, South Korea and Taiwan the exceptions; India to gradually take off, China slowing 1 8 Average Growth: 5.3% per year Copyright 216 RISI, Inc. Proprietary Information 29

30 Thousand Tonnes per Year Chinese Investments Exploding, but Closures and Project Delays Expected There is a real investment peak with too much capacity being built, but currently also a wave of capacity closures in the industry 2,5 2, 1,5 1, , -1,5 Effective Capacity Change* New Projects Closures Net Capacity Change * PM start-up/learning curves considered Copyright 217 RISI, Inc. Proprietary Information 3

31 Thousand Tonnes Capacity Utilization, Percent Net Capacity Change* and Capacity Utilization in the Asian Tissue Industry Overcapacity is obvious, although project delays may help 2,5 2, 1,5 1, 5 Capacity Change Capacity Utilization *Based on committed projects only, learning curves considered Copyright 217 RISI, Inc. Proprietary Information 31

32 MARKET DYNAMICS Copyright 217 RISI, Inc. Proprietary Information 32

33 Thousand Tonnes World Top 1 Tissue Producers and Comparison of Their Production Volumes in 26 and 216 After recent major investments, Indonesia and Turkey have joined the top producers list 1, 8, 6, 4, 2, China Japan Germany Mexico France Copyright 217 RISI, Inc. Proprietary Information Copyright 216 RISI, Inc. Proprietary Information 33

34 Installed Capacity, Thousand Tonnes Main Volume Increases in Global Tissue Production in China is its own category in expansion and emerging countries are well represented in this ranking; the USA and Germany are the only developed world countries to reach the top 1 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Copyright 217 RISI, Inc. Proprietary Information 34

35 Installed Capacity, Thousand Tonnes The Top 1 World Tissue Suppliers Based on Installed Capacity, End 216 Several companies have expanded strongly through acquisitions and/or organic companies: APP and SCA in particular, but also Hengan, Sofidel, CMPC and WEPA 5, 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 Copyright 217 RISI, Inc. Proprietary Information 35

36 Installed Capacity, Thousand Tonnes Main Volume Increases in Installed Tissue Capacity by Company, China APP and SCA have been the absolutely most aggressive players in the past 1 years while North Americans have used a more defensive and margin-focused strategies 3, 2,5 2, 1,5 1, 5 Copyright 217 RISI, Inc. Proprietary Information 36

37 New Players Entering the Tissue Sector North America Atlas Holdings Soundview Paper and Putney acquisitions Dunn Paper Mill acquisitions from Clearwater Paper Resolute Forest Products Atlas Paper Holdings acquisition and Calhoun, Tennessee tissue PM investment Europe Abris Capital Partners Pehart Tec acquisition in Romania The Navigator Co. acquisition of AMS Star Paper and forthcoming Cacia mill tissue investment in Portugal Latin America Suzano Pulp and Paper integration of Mucuri and Imperaritz pulp mills with tissue PMs in Brazil Near and Middle East Itihad Investments acquisition of Crown Paper Mill and expansion planned in the UAE Copyright 217 RISI, Inc. Proprietary Information 37

38 New Players Entering the Tissue Sector China Shandong Chenming diversification into tissue Sun Paper diversification into tissue Lee & Man diversification into tissue Shanghai Taison Group acquisition of Well Mind Paper in Chongqing and Guizhou Chitianhua Paper with tissue PM investments, plus greenfield tissue mill construction in Jiangxi Max Fortune consumer products company diversifying to tissue with Garven Sanitary Products mill, but project hit with major delays Asia Far East Meghna Group diversification into tissue in Bangladesh Africa Faderco diversification into tissue in Algeria Ethos Capital acquisition of Nampak Tissue and renaming as Twinsaver, plus forthcoming expansion investment Copyright 217 RISI, Inc. Proprietary Information 38

39 Why Is Tissue Attracting Investors? Tissue business is characterized by continuous growth and much less cyclical variation than many other businesses not only in the paper branch but overall as tissue is a daily necessity whose use is of "habitual nature". In most regions, tissue companies reach acceptable EBITDA margins, at least until now, and investors see this as a relatively safe way to earn money when bank interest rates are close to zero, if not negative. Graphic paper producers are worried about the future of their mill sites, and in many cases subsidies are available for maintaining existing or creating new business continuation of the business is important. Pulp producers also see the downward trend in the graphic paper business, and as tissue is the second main end use for market pulp, integration is interesting also for cost reasons (integrated pulp, steam and other energy from the pulp mill). Tissue has relatively low investment cost compared to other options. Copyright 217 RISI, Inc. Proprietary Information 39

40 Growth Rate, Percentage per Year Long-Term Growth Trends in the Global Tissue Market International trade in tissue shows higher growth rate than tissue consumption, a clear sign of business globalization. Parent roll trade has accelerated in recent years Tissue Consumption Total Tissue Trade Parent Roll Trade Copyright 217 RISI, Inc. Proprietary Information Copyright 216 RISI, Inc. Proprietary Information 4

41 Thousand Tonnes Top 1 Tissue Parent Roll Exporters, Copyright 217 RISI, Inc. Proprietary Information 41

42 Thousand Tonnes Top 1 Tissue Parent Roll Exporters, Copyright 217 RISI, Inc. Proprietary Information 42

43 SUMMARY OF GLOBAL OUTLOOK Copyright 217 RISI, Inc. Proprietary Information 43

44 Thousand Tonnes Relative Growth, Percent per Year Anticipated Growth in the Global Tissue Market Tissue consumption benefitting from improving global economic growth, but there are also uncertainties ahead 1,8 1,6 1,4 1,2 1, Volume Growth Relative Growth Copyright 217 RISI, Inc. Proprietary Information 44

45 Thousand Tonnes Capacity Utilization, Percent Net Capacity Change* and Capacity Utilization in the Global Tissue Industry Major capacity closures could improve outlook, but only marginally. Global overcapacity is the name of the game! 3,5 3, 2,5 2, 1,5 1, 5 Capacity Change Capacity Utilization * Based on committed projects only Copyright 216 RISI, Inc. Proprietary Information 45

46 Concluding Remarks China's growth is slowing and also cutting average global growth to 3.5% per year, which is still good, although down from 4.% earlier. China will continue to be the main driving force of global tissue industry expansion, although overcapacity is a threat in nearly every region. Project delays will be common. North American developments are characterized by steady and encouraging growth, with many new developments and technological and raw material considerations, but also continuing fights between brands and private labels. Latin America is suffering from economic instability. Brazil is in a deep recession, but recovering, and Venezuela is a catastrophe as long as everything is controlled by the current government. However, Mexico is back on a growth track again. Copyright 217 RISI, Inc. Proprietary Information 46

47 Concluding Remarks The Western European tissue business had a rather quiet phase, but is now seeing some more positive developments, and many new plans are currently moving forward. Investments are concentrated in certain sub-regions, the Iberian Peninsula in particular, and this is likely to cause export pressures outside Europe; regional overcapacity is obvious. The global trading pattern of tissue is in a continuous move, with international trade growing more than tissue consumption. The tissue business is becoming increasingly dynamic and global. Cost-competitiveness based on low-cost hardwood pulp and energy through integration seems to be a major benefit. But there are clouds on the skyline with the new political trends toward protectionism and populism. Free trade agreements could be reconsidered, and this could change the current trends of continuing internationalization in the global tissue business. Copyright 217 RISI, Inc. Proprietary Information 47

48 Thank you for your attention! For more information: Outlook for World Tissue Business World Tissue Business Monitor US Tissue Monthly Data Copyright 217 RISI, Inc. Proprietary Information 48