Global Paper Packaging Outlook

Transcription

1 Global Paper Packaging Outlook With a Focus on the Latin American Markets RISI Latin American Conference August 2018 Amanda Miranda Fantinatti Economist, Latin America, Paper Packaging

2 Amanda Miranda Fantinatti Economist, Latin America, Paper Packaging Studied economics at the University of São Paulo and earned a Master s Degree in Economics at Fundação Getúlio Vargas (FGV). Based out of RISI s São Paulo office. Primarily responsible for developing the packaging sections for the Latin American forecasts and coverage of other markets such as Africa, Oceania and the Middle East. Cover key paperboard market segments as well as downstream dynamics in converting and end use markets. Previously served as an economist for Parcitas Investimentos. Prior to that, worked at Banco Safra de Investimentos and Brevan Howard Asset Management. Teaching assistant at FGV. 2

3 Agenda Containerboard Overview o Global Scenario Recovered Paper o Latin America Boxboard Overview o Latin America 3

4 Containerboard Overview

5 Global Containerboard Demand, 2017 Asia has the largest market, followed by North America and Western Europe Middle East 2% All Other 3% North America 18% Western Europe 14% Latin America 8% Eastern Europe 7% Asia 48% 5

6 North America 6

7 The North American Market Shows Strong Growth Containerboard apparent consumption, annual percent change 6% 5% Percentage Change 4% 3% 2% 1% 0% : 2.0% : 2.8% 1% 2%

8 Demand Should Continue to Outstrip Supply in North America Through % 3% 2% 1% 0% 1% 2% 3% Change in Demand Change in Capacity Operating Rates (R) % 98% 97% 96% 95% 94% 93% 92% 8

9 North American Net Virgin Exports to Remain Flat Net Exports, Thousand Tonnes 6,000 5,000 Recycled Containerboard Virgin Containerboard 4,000 3,000 2,000 1,

10 Europe 10

11 European Market Decelerating from Peak in 2017 Slowing not too dramatic due to supportive market trends (e commerce/ substitution of plastics) 10% 7% Western Europe Eastern Europe 5.7% 4% 2.8% 1% 2% 5%

12 Containerboard, Western Europe Capacity utilization is slowly decreasing, above historical averages, supporting current price levels Thousand Tonnes 2,000 1,500 1, Demand Capacity Operating Rates (R) 97% 96% 95% 94% 93% 92% 91% % 12

13 Western Europe Will Continue to Be a Net Virgin Containerboard Importer 2,000 Net Imports in Thousand Tonnes 1, ,000 2,000 3,000 4,000 Recycled Containerboard Virgin Containerboard

14 China 14

15 China Seems Serious About Pollution, Eliminating Wastepaper Imports Facts Aim China banned mixed paper imports Strict 0.5% allowable contamination limit for its recycled paper imports Clean up the country s environment as China continues to modernize rapidly New proposal Entire ban of imported solid waste, included recovered paper before 2020 Another motive for the ban? Imported fiber supplies one third of China s containerboard production In 2017, China imported more than 20 million tonnes of recycled paper Containerboard production is capitalintensive while box production is laborintensive Choosing one s battles! 15

16 Chinese RCP Imports Million Tonnes Old Newspaper (ONP) Old Corrugated (OCC) Mixed Papers (MIX) High Grades (HGR) In 2017, China consumed 79.3 million tonnes of recovered paper (RCP), of which more than 30% was imported. Of the suppliers of RCP to China, the USA is definitely the most important

17 Chinese Containerboard Net Imports 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Recycled Containerboard Virgin Containerboard

18 China: Major Revisions to the Forecast Chinese containerboard demand growth in 2018 April forecast: +3.8% Preliminary August forecast: 2.0% Reasons Weakening economy Trade war Substitution effects 18

19 Latin America 19

20 Containerboard Demand Growth in Latin America Thousand Tonnes, Percentage Change 16,000 14,000 12,000 10,000 8,000 Domestic Production Net Imports Percentage Growth (R) 20% 15% 10% 5% 6,000 4,000 2,000 0 Avg : 5% Avg : 2.4% 0% 5% 10% 20

21 Latin American Containerboard Consumption Thousand Tonnes, Percentage of Total Consumption, ,365 33% 4,312 33% Kraftliner Recycled Liner Semichemical Medium Recycled Medium 800 6% 3,743 28% 21

22 Share of Virgin Containerboard Demand Varies by Region Latin American classifications are not as strict in the USA 70% 60% 50% 40% 30% 20% 10% 0% North America Western Europe Latin America Eastern Europe All Others 22

23 The 10 Largest Latin American Containerboard Markets by Volume, % 2% 2% 5% 3% 4% 4% 4% 7% 35% Mexico Brazil Argentina Chile Colombia Ecuador Guatemala Costa Rica Caribbean Islands Venezuela All Others 31% 23

24 The Latin American Packaging Markets Are Far from Homogeneous Latin American containerboard apparent consumption is concentrated in just a few countries 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Mexico Brazil Argentina Chile Colombia Ecuador All Others

25 Changes in Latin American Containerboard Consumption by Major Country % 4% 3% 2% 1% 0% 1% 2% Mexico Brazil Argentina Chile Colombia Ecuador All Others % Change (R) 25

26 Upside Risks: E Commerce E commerce boosting containerboard sales in the world Internet Users Who Bought Goods and/or Services Online in the Last 12 Months in Brazil % Source: Total 19% 35% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2010 By Income Minimum Wage 2017 Up to 1 MW 1 MW to 2 MW 2 MW to 3 MW 3 MW to 5 MW 5 MW to 10 MW More than 10 MW 26

27 Downside Risks: Growth Momentum Worsened; Uncertainty Mount World: Trade War Brazil: Truckers Strike 500 Paper Packaging Production in Brazil 90 Tonnes, IBÁ Packaging & Wrapping May 2018 Cardboard (R)

28 Downside Risks: Growth Momentum Worsened in Brazil and Argentina Brazilian Annual GDP Growth Expectations Survey, BCB Argentinean Annual GDP Growth Expectations Survey, BCRA Percent

29 Uncertainty in RCP Policies to Boost Exports? Latin American Net Imports and Imports Share 5,000 4,000 Brazil Net Imports Other Latin American Net Imports Mexico Net Imports Imports/APC (R) 30% 28% Thousand Tonnes 3,000 2,000 1, % 24% 22% Percent 1, % 29

30 Argentina Is the Largest Destination for Brazilian Kraftliner Exports Thousand Tonnes Argentina Belgium Italy Ecuador Chile All Others 30

31 Containerboard Supply Outlook in Latin America Thousand Tonnes, Percentage Change 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Capacity Production Operating Rate (R) 100% 95% 90% 85% 80% 75% 70% 31

32 Capacity Expansion Projects, Company Mill Country Capacity Date Grade Thousand Tonnes Papelera del NOA Rio Blanco Argentina Medium Papelera del NOA Quilmes Argentina Recycled CNT PCM Guadalupe Mexico Recycled CNT Smurfit Kappa Los Reyes Mexico 100 1Q18 Medium Grupo Gondi Tlalnepantla Mexico 54 1Q18 Recycled CNT Grupo Gondi Guadalajara Mexico 41 1Q18 Recycled CNT Empaques Nova Umán Mexico 6 1Q18 Recycled CNT Copamex Anahuac Mexico n/a n/a Recycled CNT Cocelpa Araucária Brazil 288 1Q18 Medium Grupo Gondi Monterrey Mexico 400 4Q19 Recycled CNT Agroforestal Oberá n/a Argentina 500 n/a Kraftliner Papel Prensa Buenos Aires Argentina 170 n/a CNT Klabin Ortigueira Brazil Q20 Kraftliner 32

33 Boxboard Overview 33

34 Boxboard Definition = All Paperboard Except Containerboard Boxboard as a global product can be fairly difficult to classify given the variety of subgrades that are available, some of which are regionally specific. RISI s solution? An entirely new classification system based on available trade data. Solid bleached sulfate (SBS) Folding boxboard (FBB) and white lined chipboard (WLC) Coated unbleached kraft (CUK) Coated recycled board (CRB) Uncoated recycled board (URB) 34

35 Boxboard Demand Has Grown Steadily over the Past Decade in Latin America, Outpacing Real GDP Thousand Tonnes 4,000 3,500 3,000 2,500 2,000 1,500 1, Domestic Production Net Imports Percentage Growth % 16% 14% 12% 10% 8% 6% 4% 2% 0% 2% 4% Percentage Change 35

36 Boxboard Consumption in Latin America Is Dominated by the Virgin Grades % Folding Boxboard/White Lined Chipboard (FBB/WLC) % 1,480 47% Solid Bleached Sulfate (SBS) Coated Unbleached Kraft (CUK) Coated Recycled Board (CRB) 50 2% % Uncoated Recycled Board (URB) 36

37 Mexico and Brazil Are the Largest Boxboard Consumers in the Region 4,000 3,500 Brazil Mexico Chile Colombia Argentina Venezuela All Others Thousand Tonnes 3,000 2,500 2,000 1,500 1,

38 Latin America Is a Net Importer of Boxboard Despite the Substantial Exports out of Brazil and Chile Thousand Tonnes 1,400 1,200 1, Brazil and Chile Net Imports Rest of Latin America Net Imports Imports/APC 60% 50% 40% 30% 20% 10% Percent 38

39 The Challenging Economic Scenario Has Put Several Boxboard Capacity Expansion Projects on Hold Company Mill Country Capacity Thousand Tonnes Date Grade Ibema Turvo Brazil / Idled Virgin duplex MD Papéis Limeira Brazil / Idled Coated recycled Klabin Monte Alegre Brazil Virgin duplex Cartones Ponderosa San Juan del Rio Mexico Coated recycled GreenPaper San Nicolas los Garza Mexico Uncoated recycled Gondi Group Guadalajara Mexico Coated recycled MD Papéis Lapa Brazil / Idled Boxboard Papirus Limeira Brazil N/A 2015 / Idled Boxboard CMPC Maule Chile Virgin duplex GreenPaper San Nicolas los Garza Mexico 20 1Q 18 Recycled boxboard Klabin Ortigueira Brazil Q 23 Virgin duplex 39

40 Virgin Boxboard Market Share in Latin America CMPC 29% Suzano 13% IBEMA 5% Smurfit Kappa Group 2% Carvajal 1% Rest of Market 3% Klabin 47% 40

41 Take Home Points on the Paper Packaging Outlook Global Containerboard Demand shows strong growth, at a slower pace It will take a few years for the supply side to catch up with demand Pricing power should remain firmly in seller s hand through 2019 China seems serious about pollution, eliminating wastepaper imports Trade war strategy? A lot of uncertainty surrounding China s policies Latin America Reassessment in Latin America's 2018 growth outlook We are still optimistic on growth going ahead Economic recovery should boost regional paper packaging demand growth New investments expected for the near future Copyright 2016 RISI, Inc. Proprietary Information 41

42 Thank you! Questions? For more information Outlook for Brazil s Paper Packaging Markets World Boxboard Study: Americas 42