Characteristics of the Corrugating Business in Europe RISI European Conference Barcelona, March 5, 2017 Tero Eerikäinen Analyst, Mill Intelligence
Tero Eerikäinen Analyst, Mill Intelligence M.Sc. in Paper and Printing Technology from Finland Analyst in RISI s Mill Intelligence team With RISI since 2012 teerikainen@risi.com Responsible for analysis of corrugated board assets and cost benchmarking of pulp and paper mills in EMEA area 2
Content Corrugating asset quality analysis Typical locations of containerboard and corrugating plants Integration strategies of containerboard and corrugating Key cost drivers of corrugating Cost competitiveness of integrated vs. independent corrugators 3
Corrugated board production in Europe in 1996 2016 Shipments from 29 billion m 2 to 46 billion m 2 Average growth of 2% per year in 1996 2016 Number of manufacturing plants decreased 0.5% per year on average in 1996 2016 Production amount per plant increased more than 2% per year during 1996 2016 Source: FEFCO 4
Lower basis weights and lighter products The new lightweight containerboard capacity in Europe enables future decreases in corrugated board basis weights Source: FEFCO 5
Most containerboard and corrugating plants are located near high population density regions Containerboard mills are based slightly outside of the city area Corrugated plants are located in the proximity of big cities Source: RISI, Google Maps, National Geographic 6
Corrugated board manufacturing strategies Over 20% of Europe s corrugated board production occurs in France and Spain The top seven companies control 75% of the Spanish market The top three producers account for almost half of the French corrugated board manufacturing capacity Source: RISI, FEFCO 7
Containerboard and corrugating business in France Containerboard production is over 85% recycled fiber based There is 440,000 tonnes of surplus containerboard capacity The average distance from a corrugated board plant to the closest containerboard mill is about 70 km On average a corrugated board plant produces 85 million m 2 Source: RISI, FEFCO 8
Containerboard and corrugating business in Spain Nearly all containerboard production is recycled fiber based There is a shortage of 150,000 tonnes of containerboard capacity The average delivery distance to the closest corrugated board plant is 110 km On average a corrugated board plant produces about 60 million m 2 Source: RISI, FEFCO 9
Corrugated board sheet manufacturing cost curve Fast and steep changes in manufacturing costs Recent containerboard price rise means higher manufacturing costs The French plants produce more than the Spanish, even though their production costs are nearly even Source: RISI 10
Manufacturing cost fluctuations in corrugated board sheets in the Spanish market Wide gap between high cost and low cost corrugated board sheet producers Majority of the production capacity operates near the average manufacturing cost curve Source: RISI 11
Containerboard is the key cost driver of corrugated board sheet manufacturing Source: RISI 12
Corrugated board sheets are more expensive to deliver than containerboard rolls Economical delivery distance is around 100 300 km Source: RISI 13
Fierce competition within a 200 km radius Several plants share the same market area within a short radius distance Competition for both raw materials and clients Source: RISI, Google Maps 14
Case: Integrated vs. Independent Manufacturing cost curve of corrugated board sheets with two different integration strategies Independent players usually experience a slight delay in raw material cost changes An integrated player is exposed to immediate price changes in its containerboard raw materials Source: RISI 15
Integrated players manufacturing costs are stable Integrated producers = bright columns Independent producers = shaded columns Source: RISI 16
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