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GLOBAL PULP & PAPER MARKET SITUATION ANALYSIS AN INDUSTRY IN MAJOR TRANSFORMATION VALOIS VISION MARKETING UNECE/COFFI – OCTOBER 18, 2016 1
GLOBAL PULP & PAPER MARKET
SITUATION ANALYSIS
AN INDUSTRY IN MAJOR TRANSFORMATION
VALOIS VISION MARKETING
UNECE/COFFI – OCTOBER 18, 2016 1
2016 UNECE FPARMAJOR FINDINGS – N. AMERICA
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Paper and paperboard balance, North America, 2014-2016(thousand tonnes)
2014 2015 2016f Change (%)2014-2015
Production 83,868 82,984 82,709 -1.1
Imports 12,664 12,155 12,139 -4.0
Exports 20,479 19,216 18,926 -6.2
Apparent consumption 76,053 75,923 75,921 -0.2
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Production of paper and paperboard,
North America, 2014 and 2015(thousand tonnes)
2014 2015 Chg (%) 2014-2015
Graphic papers 24,343 22,961 -5.7
Newsprint 5,939 5,179 -12.8
Uncoated mechanical 3,433 3,566 3.9
Uncoated wood-free 8,538 8,450 -1.0
Coated papers 6,433 5,766 -10.4
Sanitary and household papers 7,427 7,521 1.3
Packaging materials 50,352 50,728 0.7
Case materials 33,949 34,424 1.4
Cartonboard 12,158 12,030 -1.1
Wrapping papers 1,854 1,969 6.2
Other papers, mainly packaging 2,391 2,305 -3.6
Other paper and board 1,746 1,774 1.6
Total paper and paperboard 83,868 82,984 -1.1
Source: UNECE/FAO, 2016.
2016 UNECE FPARMAJOR FINDINGS – N. AMERICA
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Apparent consumption of paper and paperboard,
North America, 2014 and 2015(thousand tonnes)
2014 2015 Change (%) 2014-2015
Graphic papers 23,125 22,236 -3.8
Newsprint 3,822 3,440 -10.0
Uncoated mechanical 3,470 3,586 3.3
Uncoated wood-free 8,819 8,716 -1.2
Coated papers 7,013 6,494 -7.4
Sanitary and household papers 7,540 7,646 1.4
Packaging materials 43,885 44,565 1.6
Case materials 29,796 30,404 2.0
Cartonboard 10,539 10,411 -1.2
Wrapping papers 1,161 1,450 24.8
Other papers, mainly packaging 2,388 2,300 -3.7
Other paper and board 1,504 1,476 -1.8
Total paper and paperboard 76,053 75,923 -0.2
Source: UNECE/FAO, 2016.
2016 UNECE REPORTMAJOR FINDINGS – N. AMERICA
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Woodpulp balance, Brazil, 2014-2015(thousand tonnes)
2014 2015 Change (%) 2014-2015
Production 16,461 17,214 4.6
Exports 10,614 11,528 8.6
Imports 416 407 -2.2
Apparent consumption 6,263 6,093 -2.7
Source: Ibá, 2016.
2016 UNECE REPORTMAJOR FINDINGS – BRAZIL
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Market Pulp imports, China, 2013-2015(thousand tonnes)
2013 2014 2015 Change (%) 2014-2015
Kraft 13,571 14,277 15,783 10.5
Mechanical 1,388 1,508 1,732 14.9
Dissolving 1,804 2,086 2,247 7.7
Other 87 92 76 -17.4
Total 16,850 17,963 19,838 10.4
Source: China Customs Bureau, 2016.
2016 UNECE REPORTMAJOR FINDINGS – CHINA
GLOBAL FLOWS ARE CHANGING
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Lower production reflects
massive downtime announced.
Source: PPPC
GLOBAL P&W PAPER MACHINECLOSURES & CONVERSIONS
2011-2016
• GLOBAL: 15.4 MM TONNES
– W.E.: 6.1 MM (40%)
– N.A.: 5.7 MM (37%)
11.8 MM (77%)
8Source: VVM
9Source: VVM
END OF LIFE CYCLE FOR HIGH-COST
CHEMICAL MARKET PULP MILLS
NORTH AMERICAN PULPCLOSURES & CONVERSIONS
MILLIONS OF TONNES MARKET INTEGRATED
• 1990-1999: 4.942 4.979
% OF GLOBAL 66% 59%
• 2000-2009: 7.612 5.997
% OF GLOBAL 58% 68%
• 2010-2016: 3.385 4.053
% OF GLOBAL 27% 53%
TOTAL: 15.939 15.029
% OF GLOBAL 48% 61%Excludes temporary or unplanned downtime (3-5MM/yr); restarts are not material
10Source: VVM
NORTH AMERICAN PAPERMACHINE CLOSURES & CONVERSIONS
MILLIONS OF TONNES P&W NEWSPRINT PAPERBRD
• 1994-1999: 1.765 .825 2.677
% OF GLOBAL 51% 92% 90%
• 2000-2009: 13.671 6.452 12.060
% OF GLOBAL 51% 76% 60%
• 2010-2016: 7.393 4.094 3.277
% OF GLOBAL 42% 43% 36%
TOTAL: 22.829 11.371 18.014
% OF GLOBAL 47% 60% 56%Excludes temporary or unplanned downtime (5-7MM/yr); restarts are not material
11Source: VVM
CHEMICAL MARKET PULPCAPACITY PERCENT BY REGION
‘% of global capacity ‘90 ’95 ’00 ’05 ’10 ’15 ’20F ’25F
• N. A. 44 47 42 36 26 26 20 18
• W.E. 12 11 10 10 7 7 6 6
• E.E. 1 1 1 1 2 1 1 1
• RUSS.&CIS 11 7 6 7 7 7 9 8
• LATAM 8 12 14 19 27 35 43 46
• ROW* 24 22 27 27 31 24 21 21TOTAL %100 100 100 100 100 100 100 100
* OCEANIA, AFRICA, ASIA, JAPAN
12Source: VVM
INCREMENTAL GLOBALBSK & BHK SUPPLY-DEMAND ‘15-’20
2015-2017
• BSK & BHK GROWTH:– SUPPLY GROWTH: 10.141 MILLION TONNES * (17% = UNECE)
– DEMAND GROWTH: 4.440 MILLION TONNES • 70% OF DEMAND GROWTH = TISSUE
EXCESS: 5.7 MILLION TONNES (INVENTORY BUILD, DOWNTIME)
2018-2020
• BSK & BHK GROWTH:– SUPPLY GROWTH: 9.710 MILLION TONNES *(21% = UNECE)
– DEMAND GROWTH: 6.230 MILLION TONNES • 45% OF DEMAND GROWTH = TISSUE
EXCESS: 3.5 MILLION TONNES (INVENTORY BUILD, DOWNTIME)
* Excludes creep capacity of 1%-1.3% on 62 million tonnes13
Source: VVM
CHINA’S PAPER MACHINE INVESTMENTS
2007-2017MILLIONS TONNES
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• NEWSPRINT: 0.9
• TISSUE: 11.6
• PRINTING & WRITING: 24.3
• PAPERBOARD: 56.8
TOTAL: 93.5
– A MONUMENTAL SHIFT IN PRODUCTION CAPACITY
Source: VVM
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Yr/Yr Increases:2015: +10.4%
2014: +5.4% (app. of yuan vs US$)
2013: +1.5% (app. of yuan vs US$)
2012: +13.4%
2011: +32.6%
2010: -21.8% (Great Depr. 08/09 & Chile earthq.
2009: +45.2%
2008: +15.1%
Source: VVM
16Source: VVM
INTERNATIONAL TRADE
• Free-Trade Agreements: not always a “Win-Win”
• Wave of anti-Free-trade rhetoric flowing in political circles
• Anti-dumping & Countervailing duties imposed
• Review panels tend to take too long; lead to financial injury
• State aid in support of pulp& paper industry:
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SAVING THE INDUSTRY
• Modernize & Innovate (mills left = challenge + niche + public $)
• Challenge of commodity businesses in developed world
• Smart and well-focussed financing
• Control costs including flatter organizations
• Financial discussion must be on EPS not only EBITDA
• Adapt to new economy (internet) niche focus (Adapt, Improvise & Overcome)
• Apply Business 101 common sense (10% rule!)
• Invest in new technologies, products and services
• Revamp Distribution Strategy (Partnerships)
• Can’t be “all things to all people”
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KEY ISSUES
• How to compete with low-wage countries?
– Automation; but a long-term job killer
• How to compete with countries with poor environmental records?
• How to continuously adopt new technologies vs ROI? (EBITDA vs EPS)
• How to compete with countries with overly devalued currencies?
• How to compete with countries with different accounting practices?
• How to compete with companies that benefit from large governmental subsidies, loans or grants?
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VALOIS VISION MARKETING
• STRATEGIC SUPPLY-DEMAND ANALYSIS FOR PULP & PAPER
• PRICING ANALYSIS & FORECASTS
• REPORTS AVAILABLE: VALOISVISION.COM
• CONTACT ([email protected])
– VANCOUVER, CANADA
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