Outlook for the World Paper Grade Pulp Market

Transcription

1 Outlook for the World Paper Grade Pulp Market Amsterdam, Netherlands March 2017 Kurt Schaefer Vice President, Fiber

2 For Further Details and Analysis: World Pulp & Recovered Paper 5-Year and 15-Year Forecasts World Pulp Monthly 2

3 Abbreviations and Grades BSK = Bleached softwood kraft pulp ( long fiber) NBSK (northern), SBSK (southern), radiata BHK = Bleached hardwood kraft pulp ( short fiber) BEK (eucalyptus), NBHK (northern mixed), acacia DP = Dissolving pulp Primarily textile grade ( viscose pulp) P&W = Printing & writing paper Coated and uncoated woodfree and mechanical Delivered cash cost = mill cost + delivery cost Includes: Fiber, chemicals, energy, labor, logistics Excludes: Depreciation, interest, SG&A TPY = Tonnes per year 3

4 Recent Developments Copyright 2016 RISI, Inc. Proprietary Information 4

5 In China, Pulp (and Other) Prices Have Posted a Remarkable Rebound Lately Pulp prices in the Chinese local market (RMB) 7,000 6,700 6,400 6,100 NBSK Local RMB NBSK Local US$ ex VAT NBSK Imp. Net Price US$ $900 $800 7,000 6,700 6,400 6,100 BEK Local Price RMB (LEFT) BEK Local US$ ex VAT BEK Imp. Net Price US$ $900 $800 5,800 5,800 5,500 $700 5,500 $700 5,200 5,200 4,900 $600 4,900 $600 4,600 4,600 4,300 $500 4,300 $500 4,000 4,000 3,700 $400 3,700 $400 Dec 16 Jun 16 Dec 15 Jun 15 Dec 14 Jun 14 Dec 13 Jun 13 Dec 12 Jun 12 Dec 11 Jun 11 Dec 16 Jun 16 Dec 15 Jun 15 Dec 14 Jun 14 Dec 13 Jun 13 Dec 12 Jun 12 Dec 11 Jun 11 5

6 The BSK BHK Price Spread in China Is Around Average Levels 1, Price Gap (R) China BEK Net China NBSK Net Source: RISI 6

7 APP s OKI Mill Startup Is Proceeding, with a Slow Ramp Up to 2.8 Million TPY 2 x 1.4 million TPY lines, second line starts in April? Total production in 2017: 1.5 million tonnes??? 2.8 million tonnes = 8.7% of world BHK demand Wood supply: Still conflicting accounts 7

8 Commodities Prices Are Generally Higher Since Later in 2016, Despite Stronger Dollar 8

9 A Stronger Than Expected Surge in Global Economic Activity Since Third Quarter

10 Other Factors Contributing to Spiking Pulp Prices in China and Elsewhere Weaker renminbi: The post Trump expectations of a weaker USD/RMB exchange rate Higher fiber prices feed back into paper demand in the short run, leading to stronger sales and even more fiber demand Substantial mill downtime in the US South: IP Port Wentworth (fluff), G P Alabama River (BHK/SBSK) Recovery boiler leak at CMPC Guaiba (BEK) Explosion at IP Pensacola (SBSK/fluff) So this move upward will last for a while Copyright 2016 RISI, Inc. Proprietary Information 10

11 Near Term Indicator: Producer Inventories Dropping Sharply BHK AVG BHK (04' 09'=36.5, 10' 16'=39.5) BSK AVG BSK (28.8) Source: PPPC, RISI 11

12 Fibria s 2 Million TPY Line Is About 80% Complete, and Could Start Early Target startup date: Early 4Q17 Nominal capacity of 1.95 million TPY equals 6% of world BHK market demand in 2017 Dollar denominated funding as low as 2% per year 12

13 2017 Forecast Drivers Copyright 2016 RISI, Inc. Proprietary Information 13

14 World Production of Paper and Board: Accelerating, but Very Slowly Graphic, Packaging and Specialty and Tissue; Percentage Change 8% 6% 6.5% 4% 2% 0% 2.1% 4.0% 3.0% 1.0% 0.2% 0.8% 0.9% 0.4% 0.8% 1.1% 1.7% 2% 0.6% 4% 6% 5.3%

15 Most of the Growth in the Paper Industry Is in Packaging with a Modest Effect on Market Pulp Packaging/Specialty P&W Tissue News Tissue + P&W

16 World Production of P&W Paper: Relative Stability in ? % Change from Previous Year 3% 2% 1% 0% 1% 2% 3% 4% 5% 6% 7% 5.3% 3.1% 2.8% Euro area United States China World 4.5% 3.3% 3.0% 5.2% 5.1% 5.7% 2.9% 2.0% 1.5% 3.0% 1.0% 0.3% 1.4% 1.9% 2.7% 1.8% % 16

17 Key BHK Capacity Developments 2016 Klabin Ortigueira, March: 1.1 million tonnes Alizay (France): BHK restart postponed indefinitely APP Sumatra (OKI), December: million tonnes RGE Rizhao: Small line switching to BSK ( 300,000 tonnes) APRIL Kerinci: New PM ( 250,000 tonnes market, +250,000 tonnes integrated) 2017 Fibria, 4Q17: 1.95 million tonnes Metsä Äänekoski: +100,000 tonnes, 3Q17 APRIL Kerinci: Conversion to DP ( 200, ,000 tonnes 2017 to 2019 mostly starting in 2018) 17

18 BHK Cash Cost Curve, 4Q16 Mill level costs, not including D, I, SG&A or logistics Asia Europe South America North Amer. 18

19 DP/BEK Price Spread in China US Dollars per Tonne 3,000 3,000 2,500 2,500 DP/BEK Price Spread $200 2,000 2,000 1,500 1,500 1,000 1,000 $ China Import Price DP China Import Price BEK Source: RISI 19

20 A Potentially Huge Shift from BHK to DP Production Is Coming in Asia Pre Hydrolyzing Vessel retrofits on digesters Andritz supplied PHV at a Sun Paper mill in China Until recently, conversion from paper grade pulp to DP was limited to batch digesters. New technology is now being retrofitted to continuous digesters, creating many more candidates for conversion. Large lines in Indonesia and China are likely conversions. 20

21 Key BSK Capacity Developments 2016 Klabin Ortigueira, March: 400,000 tonnes fluff/sbsk IP Riegelwood, 2Q16: 360,000 tonnes fluff/sbsk Domtar Ashdown, 3Q16: >300,000 tonnes fluff/sbsk Sodra Varo, 2H16: 275,000 tonnes RGE Rizhao mill: BSK on 300,000 tonne pulp line 2017 Domtar Plymouth: 90,000 tonnes fluff Metsä Fibre, 3Q17 4Q17: 700,000 tonnes BSK Svetlogorsk (Belarus) likely delayed, will start in 2017 (300,000 tonnes BSK) 21

22 BSK Cash Cost Curve, 4Q16 Mill level costs, not including D, I, SG&A or logistics Asia Asia NZ NZ Europe Europe South Amer. South Amer. North America North America 22

23 Near Term Prognostications First half market strength exceeds expectations The downward correction could be almost as abrupt as the upward move has been BHK availability greatly outpaces demand growth by the end of 2017 Much lower operating margins will be seen at BHK mills; closures/conversions will happen Southern BSK (SBSK/fluff) will be increasingly oversupplied as well later this year More large scale papergrade to DP conversions over the next three years 23