Global Graphic Paper Market Outlook

Transcription

1 Global Graphic Paper Market Outlook Trade Battles, Rising Costs, Declining Demand RISI Latin American Conference São Paulo, Brazil August 2018 John Maine VP, Global Graphic Paper Copyright 2018 RISI, Inc. Proprietary Information

2 John Maine VP Global Graphic Papers Co Founder of Resource Information Systems, Inc. With RISI for 39 years Developed RISI P&W models Works with more than 200 graphic paper clients worldwide Assisted by local economists in RISI regional offices Directs numerous single and multi client studies on graphic paper Copyright 2018 RISI, Inc. Proprietary Information 2

3 Some Definitions Graphic Paper Newsprint Uncoated Mechanical (Ume) Directories, paperback books, newspaper inserts, low end magazines/catalogs Uncoated Woodfree/Freesheet (UWF or UFS) Office copy paper, envelopes, offset printing, direct mail, books, forms, carbonless, tablets, stationery, specialties Coated Mechanical (Cme) Magazines, catalogs, newspaper inserts Coated Woodfree/Freesheet (CWF or CFS) High end magazines and catalogs, commercial printing, brochures, photo printing, menus, posters, displays, direct mail Tonnes = metric ton (2,205 lbs); tons = short ton (2000 lbs) Copyright 2018 RISI, Inc. Proprietary Information 3

4 Graphic Paper Demand Copyright 2018 RISI, Inc. Proprietary Information 4

5 Global Demand for Printing & Writing Papers Started Declining in 2008, Newsprint in to 2020 Newsprint: 5.6% per year P&W: 1.5% per year Million Tonnes P&W Demand Newsprint Demand (R) Copyright 2018 RISI, Inc. Proprietary Information 5

6 Global P&W Demand Declining Steadily, with the Largest Hit in the Mechanical Grades Percentage Change in Global Demand by Grade Average Coated Freesheet 1.0% 1.3% 2.3% 3.2% 1.0% 1.7% Coated Mechanical 6.1% 3.6% 5.2% 6.2% 1.6% 4.5% Uncoated Freesheet +0.2% 1.0% 0.7% 0.9% +0.4% 0.4% Uncoated Mechanical 0.7% 3.9% 5.8% 1.5% 4.7% 3.3% Printing & Writing 1.0% 1.8% 2.3% 2.2% 0.8% 1.8% Copyright 2018 RISI, Inc. Proprietary Information 6

7 P&W Demand in Emerging Markets to Partially Offset Decline in Developed World for Thousand Tonnes, Percentage per Year 1,903 ( 3.4%) 109 (0.6%) 1,772 ( 3.3%) 84 (1.3%) 709 (0.5%) Three year Total Global Growth: million tonnes Three year Average Percentage Change: 1.0% 224 (1.4%) 122 (1.7%) 87 ( 2.6%) 7 Copyright 2018 RISI, Inc. Proprietary Information 7

8 Global Newsprint Demand Dropping 1.2 Million Tonnes per Year Thousand Tonnes, Percentage per Year, ,084 ( 7.6%) 226 ( 6.1%) 828 ( 10.2%) 27 ( 4.3%) 991 ( 3.5%) Three year Total Global Growth: million tonnes Three year Average Percentage Change: 5.6% 83 ( 3.0%) 74 ( 5.3%) 79 ( 8.6%) 8 Copyright 2018 RISI, Inc. Proprietary Information 8

9 US P&W Demand Declined 7% in 2017, an Accelerated Drop from Prior Trends Apparent Consumption, Thousand Tons, Seasonally Adjusted Coated Freesheet Coated Mechanical Uncoated Freesheet Uncoated Mechanical ,190 2,885 8,590 3,384 % Change 2.5% 11.5% 0.3% 12.5% ,067 2,658 8,228 3,228 % Change 2.9% 7.9% 4.2% 4.6% 2017 % Change 3, % 2, % 7, % 2, % 2018, Six month % Change 5.4% 0.1% 0.8% 6.0% RISI Forecast for , % 2, % Big Improvement in , % 2, % Copyright 2018 RISI, Inc. Proprietary Information 9

10 North American Demand for Multi purpose Cut Size Business Papers 6,000 5,000 Trend since 2006: 3.3% Very poor demand in the last two years, big improvement in % 2% Thousand Tonnes 4,000 3,000 2,000 1,000 0 North American Demand % Change (R) 0% 2% 4% 6% 8% 10% Copyright 2018 RISI, Inc. Proprietary Information 10

11 Combined North American Demand for UFS Offset and Uncoated Mechanical Superbright 32% of uncoated offset printing above 75 ISO brightness is now done on superbright uncoated mechanical papers Thousand Tonnes 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, UFS Offset UGW Superbright Superbright Share (R) Average Rate of Growth 1.3% Average Rate of Decline 6.1% % 35% 30% 25% 20% 15% 10% 5% 0% Superbright Share Copyright 2018 RISI, Inc. Proprietary Information 11

12 Latin American Market Outlook Copyright 2018 RISI, Inc. Proprietary Information 12

13 Latin American Demand for Newsprint Continues to Fall, but Printing & Writing Stabilized in 2017 and Will Return to Growth Thousand Tonnes 6,100 5,900 5,700 5,500 5,300 5,100 4,900 4,700 4, %/year P&W Demand 3.0%/year Newsprint Demand (R) ,400 2,200 2,000 1,800 1,600 1,400 1,200 1, Copyright 2018 RISI, Inc. Proprietary Information 13

14 Latin American Demand for Uncoated Freesheet Recovering 1 2% per Year Coated Freesheet Coated Mechanical Uncoated Freesheet Uncoated Mechanical Printing & Writing Demand by Grade Thousand Tonnes, Percentage Change ,164 9% 696 6% 3,476 6% % 5,573 7% 1,042 10% % 3,401 2% % 5,283 5% 1,034 1% 619 1% 3,417 +1% % 5,295 +0% 1,037 +0% % 3,471 +2% % 5,359 +1% 1,046 +1% % 3,541 +2% % 5,448 +2% 1,051 +0% 639 0% 3,601 +2% % 5,520 +1% Copyright 2018 RISI, Inc. Proprietary Information 14

15 Printing & Writing Demand Declines in Brazil and Mexico Have Stopped, Growth Has Returned Thousand Tonnes 2,600 2,400 2,200 2,000 1,800 Brazil Mexico 1,600 1,400 1, Copyright 2018 RISI, Inc. Proprietary Information 15

16 Printing & Writing Demand in the Smaller Latin Countries Is Growing (Except Argentina and Venezuela) Thousand Tonnes Other Latin America Argentina Columbia Chile Peru Venezuela Bolivia Ecuador Copyright 2018 RISI, Inc. Proprietary Information 16

17 Latin America Continues to Import a High Percentage of Its Demand Despite Low Costs and Ample Fiber 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ctd. Freesheet Newsprint Net Imports as a Percentage of Demand Unc. Mechanical Ctd. Mechanical UWF Imports rising due to new capacity in Asia Unc. Freesheet Copyright 2018 RISI, Inc. Proprietary Information 17

18 Global Uncoated Freesheet Machine Startups, Tonnes Company Mill Country Capacity Date Comments Ittihad Paper Abu Dhabi United Arab Emirates 325,000 Q Non integrated machine Sun Paper Yanzhou, Shandong China 200,000 Q Heavyweight grades including CFS and specialty Shandong Chenming Shouguang, Shandong China 510,000 Q Voith PM9 to focus on cut size Shandong Chenming Shouguang, Shandong China 500,000 Q Machine converted from newsprint, four cut size sheeting lines ordered Shandong Bohui Shandong China 500,000 Q Previously announced containerboard machine, now capable of swinging to UWF, financing not approved Shandong Bohui Shandong China 600, Financing not approved, project in question, 154,000 tons of capacity to be shut on 12 small machines Malaysia Newsprint Industries Mentakab Malaysia 250,000 Q Conversion from newsprint machine Total 2,885,000 Copyright 2018 RISI, Inc. Proprietary Information 18

19 Global Uncoated Freesheet Machine Shuts/Conversions, Tonnes Company Mill Country Capacity Date Comments Flambeau Park Falls USA 77,000 Q PM3 shut PCA/Boise Wallula USA 70,000 Q Convert PM3 to liner Georgia Pacific/Koch Camus USA 215,000 Q PM20 shut International Paper Selma USA 213,000 Q Convert to liner Copamex Anahuac Mexico 185, Convert to packaging UPM Nordland Germany 200,000 Q Convert to glassine paper Nippon Fuji Japan 86, Shut PM2 and PM12 Nippon Yufutsu Japan 130,000 Q Shut mill Total 1,176,000 Copyright 2018 RISI, Inc. Proprietary Information 19

20 Trade Issues Copyright 2018 RISI, Inc. Proprietary Information 20

21 Producers in the USA and Some Countries in Europe and Asia Resorting to Tariff Protection to Stem the Tide of Imports Anti dumping duties (ADD) For imports dumped into the US market at prices lower than the importer s home market Countervailing duties (CVD) Adjusts for government subsidies received by the importer Copyright 2018 RISI, Inc. Proprietary Information 21

22 Update of Key Graphic Paper Tariffs into the USA Coated Freesheet in Sheets from China and Indonesia, 2010 In place since 2010, no recent changes SC Ume from Canada, 2015 US DOC announced that all Canadian SC tariffs set back to zero and refunded retroactively back to August 2015 ($60 million for Resolute) after petition by Verso, the sole US producer, to drop the tariffs. Verso to receive $42 million from Canadian mills in the settlement. WTO ruling in favor of Canadian mills also announced, but did not cause the DOC to drop tariffs. Uncoated Freesheet Cut Size Paper, 2015 Suzano and April saw cuts in their tariff with March 2018 review Otherwise no changes since 2015 Newsprint and Certain Other Ume from Canada, 2018 Final tariffs reduced August 3 rd, to 20.3% for Catalyst, 9.8% for Resolute, 9.6% for Kruger, 0.8% for White Birch, and 8.5% for all others, down from previous peak levels of 28 32%. Harm determination due in September. Copyright 2018 RISI, Inc. Proprietary Information 22

23 Tariffs on US Imports of Coated Sheets from China and Indonesia Since 2010 CVD ADD Combined APP Indonesia 17.94% 20.13% 38.07% APP China 19.46% 7.6% 27.06% Sun Paper China % % % All Other China 19.46% % % Copyright 2018 RISI, Inc. Proprietary Information 23

24 Global ADD/CVD Duties on Cut Size Copy Paper Brazil is facing tariffs on exports to USA, Australia, Mexico and Pakistan ADD Dates Status Australia Austria 21.6% 2018 Preliminary Finland 16.9% 2018 Preliminary Russia 4.2% 2018 Preliminary Slovakia 17.4% 2018 Preliminary South Korea 34.2% 2018 Preliminary China 3.1% to 34.4% 2017 In place Indonesia 12.6% to 45.1% 2017 In place Brazil 2.9% 2017 In place Thailand 13.4% to 23.2% 2017 In place Pakistan Japan 39.1% 2018 In place Brazil 35.9% 2018 In place China 21.9% 2018 In place Thailand 2% 2018 In place Indonesia 10.62% to 20.66% 2018 In place ADD CVD Dates Status USA Australia Paper 222% 2015 In place Suzano 17% 2015 In place Portucel 8% 2015 In place APRIL Indonesia 2% 4% 2015 In place APP Indonesia 17% 109% 2015 In place Asia Symbol 84% 7% 2015 In place APP China 149% 7% 2015 In place UPM China 149% 177% 2015 In place Sun Paper China 149% 177% 2015 In place India Indonesia n/a Under investigation Thailand n/a Under investigation Singapore n/a Under investigation Mexico Brazil 38% 2013 Copyright 2018 RISI, Inc. Proprietary Information 24

25 US Imports of Cut Size Copy Paper from Five Tariff Target Countries Imports, Thousand Tonnes Portugal Indonesia China/Hong Kong Brazil Australia Five Country Import Share 25% 20% 15% 10% 5% Import Share of Demand * 0% * Estimated from five months of actual data. Copyright 2018 RISI, Inc. Proprietary Information 25

26 US Imports of Cut Size Copy Paper from Non Tariff Target Countries Imports, Thousand Tonnes All Others Israel Germany Finland Thailand France Import Share * * Estimated from five months of actual data. 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Import Share of Demand Copyright 2018 RISI, Inc. Proprietary Information 26

27 North American Demand for Cut Size Copy Paper Import share stable at 13 14% compared with 24% peak before tariffs Thousand Tons per Month Import Domestic Import Share (R) 30% 25% 20% 15% 10% 5% 0% Import Share, Percent 27 Copyright 2018 RISI, Inc. Proprietary Information 27

28 Paper Supply and Demand Balance Copyright 2018 RISI, Inc. Proprietary Information 28

29 Announced Major North American P&W Shuts, Mill Date of Closure Capacity in Tonnes Coated Kruger, Wayagamack, Quebec 2018/2019 Shift part of PM4 to packaging SAPPI, Somerset, Maine ,000 CFS/Shift to packaging UPM/Blandin, Grand Rapids, MI January ,000 CME Uncoated PCA, Wallula, WA Q ,000 UFS to specialties Flambeau, Park Falls, WI Jan ,000 UFS Georgia Pacific, Camas, WA Q ,000 UFS International Paper, Selma, AL Q ,000 UFS to white top liner Copyright 2018 RISI, Inc. Proprietary Information 29

30 Uncoated Freesheet Capacity Closures Picking Up Speed in North America Thousand Tonnes, Percentage Change Tons Percentage Change % 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% Copyright 2018 RISI, Inc. Proprietary Information 30

31 Uncoated Freesheet Operating Rates Conversions and shuts already announced for will keep North American operating rates at 92 93%; major Asian capacity expansions will keep operating rates there low despite demand growth 99% 97% 95% 93% 91% 89% 87% 85% 83% 81% 79% 77% 75% N. America W. Europe Asia Brazil Copyright 2018 RISI, Inc. Proprietary Information 31

32 Coated Woodfree Operating Rates North American market tightens after massive capacity shuts 100% 98% 96% 94% 92% 90% 88% 86% 84% 82% 80% N. America W. Europe Asia Brazil Copyright 2018 RISI, Inc. Proprietary Information 32

33 Coated Mechanical Operating Rates US operating rates at 100% through first half of % 97% 95% 93% 91% 89% 87% 85% 83% 81% 79% 77% 75% N. America W. Europe Asia Copyright 2018 RISI, Inc. Proprietary Information 33

34 Industry Financial Outlook Copyright 2018 RISI, Inc. Proprietary Information 34

35 Global Increase in Market Pulp Costs Is Squeezing Non Integrated Paper Mills US Dollars per Tonne (US List Price, China Pre discount Price) $1,450 $1,350 $1,250 $1,150 $1,050 $950 $850 $750 $650 $550 $450 NBSK, USA MBHK, USA NBSK, China BEK, China % +44% +54% +63% Copyright 2018 RISI, Inc. Proprietary Information 35

36 Five Year Trend of Declining Costs in North America Has Reversed 6% 5% 4% 3% 2% 1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Percentage Change in Mill Cash Costs in US Dollars for Average of All Existing North American Mills Note: Excludes any tariff costs for Canadian mills. UFS Offset CFS Rolls Ume 36 Copyright 2018 RISI, Inc. Proprietary Information 36

37 US Prices to Remain Higher Than Rest of World, but the Gap Is Narrowing US Dollars per Ton $250 $200 $150 $100 $50 $0 $50 $100 $150 Difference Between Paper Prices in the USA vs Europe $200 LWC 40 lb. Cut Size Copy Paper Newsprint $ Copyright 2018 RISI, Inc. Proprietary Information 37

38 20 lb/75 gsm Copy Paper Prices Prices rising globally but still below past peaks; Brazilian price in Reals has doubled since 2012 US Dollars per Tonne $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 USA Europe Brazil in USD/Tonne Brazil in BRL/Tonne (R) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 BRL per Tonne Copyright 2018 RISI, Inc. Proprietary Information 38

39 US Graphic Paper Prices Prices approaching previous peaks due to rising costs and tight markets USD/cwt $58 $56 $54 $52 $50 $48 $46 $44 $42 $40 $38 $36 $34 SC A Ctd. No lb Ctd. No lb. Unc. Offset 50 lb. Cut Size Copy Copyright 2018 RISI, Inc. Proprietary Information 39

40 Price to Mill Cash Cost Margins Average for all existing North American mills; profits are near their peak and will decline over the coming two years Price/Mill Cash Costs UFS Copy Paper Ume SC A Newsprint (excludes tariffs) CFS 60 lb. rolls Cme/LWC 40 lb Note: SC, UME and newsprint margins before impact of tariffs on Canadian mills. Copyright 2018 RISI, Inc. Proprietary Information 40

41 Thank you for your attention! For more information: World Graphic Paper 5 Year Forecast Global Cut Size Uncoated Freesheet Study Outlook for India s Paper and Packaging Markets Copyright 2018 RISI, Inc. Proprietary Information 41