Global Containerboard Outlook

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Gleb Sinavskis, Economist, European Paper Packaging

1

Asia

North America

Europe

Conclusion

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Asia (Far East)

Chinese containerboard production goes down

2019 | Fastmarkets | Global Containerboard Outlook March 2019 4

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

2015 2016 2017 2018 2019 2020

China Other Asia

Net imports in China will grow, Other Asia to fill a big part of the gap

-2,000

-1,800

-1,600

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

2017 2018 2019 2020

China

Virgin Recycled0

200

400

600

800

1,000

1,200

2017 2018 2019 2020

Other Asia

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Chinese apparent consumption dragging the whole region down

2019 | Fastmarkets | Global Containerboard Outlook March 2019 6

-3.5%

-2.5%

-1.5%

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

-2,000

-1,500

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

2015 2016 2017 2018 2019 2020

China Other Asia Total Asian APC growth, %

Chinese prices were declining in the second half of 2018

300

400

500

600

700

800

900

1,000

1,100

Kraft top, East China 170 g Testliner, East China 140 g Corrugated medium, East China 120 g

2019 | Fastmarkets | Global Containerboard Outlook March 2019

North America

2019 | Fastmarkets | Global Packaging Outlook March 2019

North American capacity is growing faster than demand

2019 | Fastmarkets | Global Containerboard Outlook March 2019 10

0

200

400

600

800

1,000

1,200

1,400

1,600

2015 2016 2017 2018 2019 2020

Demand Capacity

Net exports from North America will rise

2019 | Fastmarkets | Global Containerboard Outlook March 2019 11

-200

-100

0

100

200

300

400

500

600

700

800

2015 2016 2017 2018 2019 2020

Recycled Virgin

The gap between US domestic and export price to Southern Europe is increasing again

300

400

500

600

700

800

900

Aug

2010

Oct

201

0D

ec 2

010

Feb

2011

Apr 2

011

Jun

2011

Aug

2011

Oct

201

1D

ec 2

011

Feb

2012

Apr 2

012

Jun

2012

Aug

2012

Oct

201

2D

ec 2

012

Feb

2013

Apr 2

013

Jun

2013

Aug

2013

Oct

201

3D

ec 2

013

Feb

2014

Apr 2

014

Jun

2014

Aug

2014

Oct

201

4D

ec 2

014

Feb

2015

Apr 2

015

Jun

2015

Aug

2015

Oct

201

5D

ec 2

015

Feb

2016

Apr 2

016

Jun

2016

Aug

2016

Oct

201

6D

ec 2

016

Feb

2017

Apr 2

017

Jun

2017

Aug

2017

Oct

201

7D

ec 2

017

Feb

2018

Apr 2

018

Jun

2018

Aug

2018

Oct

201

8D

ec 2

018

Feb

2019

US East domestic price Export to Southern Europe

2019 | Fastmarkets | Global Containerboard Outlook March 2019

The gap between US domestic and export price to Southern Europe increased again

Apr 2

009

Jul 2

009

Oct

200

9Ja

n 20

10Ap

r 201

0Ju

l 201

0O

ct 2

010

Jan

2011

Apr 2

011

Jul 2

011

Oct

201

1Ja

n 20

12Ap

r 201

2Ju

l 201

2O

ct 2

012

Jan

2013

Apr 2

013

Jul 2

013

Oct

201

3Ja

n 20

14Ap

r 201

4Ju

l 201

4O

ct 2

014

Jan

2015

Apr 2

015

Jul 2

015

Oct

201

5Ja

n 20

16Ap

r 201

6Ju

l 201

6O

ct 2

016

Jan

2017

Apr 2

017

Jul 2

017

Oct

201

7Ja

n 20

18Ap

r 201

8Ju

l 201

8O

ct 2

018

Jan

2019

-300

-200

-100

0

100

200

300

2019 | Fastmarkets | Global Containerboard Outlook March 2019

What export price is too low for US mills?

2019 | Fastmarkets | Global Containerboard Outlook March 2019

There is still some room between North American export prices in Europe and North American mill cash costs

2019 | Fastmarkets | Global Containerboard Outlook March 2019

European kraftliner capacity is competitive versus North America when taking transportation into account

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Europe

Supply is outpacing demand in Western Europe

2019 | Fastmarkets | Global Containerboard Outlook March 2019 18

3.9%

1.7%1.5%

1.2%

0

200

400

600

800

1,000

1,200

2015 2016 2017 2018 2019 2020

Demand Capacity

Kraftliner demand will slowly grow due to imports; capacity will stay fairly stable until late 2020

-100

-50

0

50

100

150

200

250

300

2015 2016 2017 2018 2019 2020

Demand Capacity

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Recycled containerboard is expecting a lot of capacity; will projects actually happen?

0

200

400

600

800

1,000

1,200

2015 2016 2017 2018 2019 2020Demand Capacity

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Many projects in the pipeline in Western Europe

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Company Location Country Capacity Year Quarter Grade

Heinzel Laakirchen Mill Austria 450 2017 4 Recycled

Leipa Schwedt Mill Germany 450 2018 2 White top and brown recycled

Burgo Avezzano Mill Italy 200 2018 2 Recycled

International Paper Madrid Mill Spain 380 2018 3 Recycled

Pro-Gest Mantova Mill Italy 400 2019 Recycled

Burgo Verzuolo Mill Italy 600 2019 4 Recycled

DS Smith Porcari Italy 460 Recycled

Cartiere del Polesine Adria Italy 315 Recycled

Hamburger Spremberg Germany 500 2020 H2 Recycled

Progroup Sandersdorf-Brehna Germany 750 2020 H2 Recycled

Emerging Europe has a lot of projects as well

2019 | Fastmarkets | Global Packaging Outlook March 2019

Company Location Country Capacity Year Quarter Grade

Varaka Kagit (Albayrak Group) Balikesir Turkey 300 2019 1 Recycled

OBF Sokol Russia 162 2019 2 RecycledArkhangelsk Novodvinsk Russia 80-90 2019 2 Kraftliner

L-Pack Lipetsk Russia 180 2019 2 Recycled

Schumacher Myszkow Poland 250-300 2019 3 Recycled

Kipas Kagit Söke Turkey 720 2019 4Virgin and recycled cartonboard and white linerboard

Ilim Group Bratsk Russia 100 2019-2020 Kraftliner

Bukoza Hencovce Slovakia 70 2019-2020 White top kraft top testliner

Mondi Ruzomberok Slovakia 300 2020 H2 White top kraft top testliner

Hamburger Kutahya Turkey 480 2020-21 Recycled

Kipas Kagit Söke Turkey 480 2020-21 Recycled

2019 | Fastmarkets | Global Packaging Outlook March 2019

High-cost recycled liner machines have cash costs of about €300/tonne

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Conclusions

World containerboard capacity is outpacing demand

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2015 2016 2017 2018 2019 2020Demand Capacity

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Global containerboard summary

By 5.4 million tonnes

• CAPACITY WILL OUTPACE DEMAND GLOBALLY IN THE NEAR TERM

• MORE GLOBAL KRAFTLINER SUPPLY AVAILABLE GOING FORWARD

• EUROPEAN CONTAINERBOARD DEMAND GROWTH WILL DECELERATE IN 2019-2020

Global containerboard capacity will outpace demand in the next two years

2019 | Fastmarkets | Global Containerboard Outlook March 2019

Thank you!