FUTURE OUTLOOK FOR THE FOREST INDUSTRY SPCI … · SPCI Stockholm Timo Suhonen, Nicholas Oksanen...

FUTURE OUTLOOK FOR THE FOREST INDUSTRY SPCI Stockholm Timo Suhonen, Nicholas Oksanen

April 28, 2016

PULP & PAPER MARKET OUTLOOK

TIMO SUHONEN

COPYRIGHT©PÖYRY APRIL 28, 2016

SPCI 3

WORLD PAPER PRODUCTION 1950–2015

Production of paper and paperboard has stalled since 2010.

0

50

100

150

200

250

300

350

400

450

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Million tons

1950s:

CAGR 5.5%/a

3.0 million t/a

1980s:

CAGR 3.5%/a

6.9 million t/a

1970s:

CAGR 3.1%/a

4.5 million t/a

1960s:

CAGR 5.7%/a

5.3 million t/a

1990s:

CAGR 3.1%/a

8.7 million t/a

2000s:

CAGR 1.9%/a

6.6 million t/a

2010-2015

CAGR 0.5%/a

1.8 million t/a


SPCI 4

World demand for paper and paperboard Market structure by main product area

WORLD DEMAND FOR PAPER & PAPERBOARD 2000-2014

Globally, the share of packaging out of total paper and paperboard demand has

grown; graphic papers have been losing ground

0

50

100

150

200

250

300

350

400

450

2000 2002 2004 2006 2008 2010 2012 2014

Million tonnes

News 12%

P/W 31%

Tissue 6%

Packaging 51%

2000

News 7%

P/W 26%

Tissue 8%

Packaging 59%

2014

327 million tonnes

401 million tonnes

Packaging

Tissue

P/W

Newsprint


SPCI 5

Demand for paper and paperboard in Europe Market structure by main product area

DEMAND FOR PAPER & PAPERBOARD IN EUROPE 2000-2014

The share of packaging out of total paper and paperboard demand in Europe has

grown from 47% in 2000 to 53% in 2014

0

20

40

60

80

100

120

2000 2002 2004 2006 2008 2010 2012 2014

Million tonnes

News 14%

P/W 33%

Tissue 6%

Packaging 47%

2000

News 9%

P/W 29%

Tissue 9%

Packaging 53%

2014

90 million tonnes

92 million tonnes

Packaging

Tissue

P/W

Newsprint


SPCI 6

Demand for paper and paperboard in Asia Market structure by main product area

DEMAND FOR PAPER & PAPERBOARD IN ASIA 2000-2014

The demand for paper and paperboard in Asia continues to grow; the share of

packaging and tissue is growing while graphics decline

0

40

80

120

160

200

2000 2002 2004 2006 2008 2010 2012 2014

Million tonnes

News 10%

P/W 29%

Tissue 5%

Packaging 56%

2000

News 6%

P/W 26%

Tissue 6%

Packaging 62%

2014

107 million tonnes

191 million tonnes

Packaging

Tissue

P/W

Newsprint

COPYRIGHT©PÖYRY

ESTIMATED GDP GROWTH BY REGION THROUGH 2030

APRIL 28, 2016 SPCI 7

The world economy is projected to grow by 3.0%/a through 2030

Real GDP growth, %/a

Middle East

Eastern Europe

China

Latin America

Rest of Asia

Oceania

Japan

Western Europe

North America

Average 3.0%/a

Share of total GDP 2013, %

Africa

0

1

2

3

4

5

6

0 10 20 30 40 50 60 70 80 90 100

COPYRIGHT©PÖYRY

KEY MEGATRENDS OF THE PAPER INDUSTRY


Key megatrends shaping the global paper and paperboard industry.

Demographics

• Urbanization

• Aging population

• Middle class

• Increasing # of

households

Economic trends

• Globalization

• Consolidation

• Limited resources

• Digital economy

Political &

regulatory trends

• New power centres

• Trade liberalization

• Africa waking up Environmental

trends

• Climate change

• Waste mgmt

• Chain of custody

Technological

trends

• Digitization

• Automation

• New materials/

nanotechnology

Paper and

Paperboard

Industry

Consumer trends

• Westernization

• Social media

• E-commerce/on-

line shopping


SPCI 9

WORLD DEMAND FOR PAPER AND PAPERBOARD 2000-2030

World demand for paper and paperboard is expected to grow by 1.0%/a in the long

term, reaching 467 million tonnes by 2030

0

50

100

150

200

250

300

350

400

450

500

2000 2005 2010 2015 2020 2025 2030

Million tonnes

North America

Mature

markets

CAGR

-0.9%/a

Emerging

markets

CAGR

2.1%/a

Rest of the World Forecast

Western Europe

Eastern Europe

China

Rest of Asia, incl.

Middle East

Latin America

Japan


SPCI 10

LONG-TERM PAPER DEMAND GROWTH BY REGION

Global paper and paperboard demand is forecast to grow 1.0%/a in the long term

Rest of the World Average 1.0 %/a

Rest of Asia

Eastern Europe Latin America

North America

China

India

Middle-East

Japan Western Europe

-2

-1

0

1

2

3

4

5

0 20 40 60 80 100

Share of consumption in 2014, %

Demand growth, %/a

COPYRIGHT©PÖYRY

LONG-TERM PAPER DEMAND GROWTH BY PRODUCT AREA


Demand for graphic papers will weaken during 2014-2030, while the consumption

of tissue papers and packaging boards continues to grow

Other grades

Cartonboards Containerboards

Average 1.0 %/a

Tissue

Sack paper

Uncoated woodfree Coated

woodfree

Newsprint

Uncoated mechanical

Coated mechanical

-4

-3

-2

-1

0

1

2

3

4

0 20 40 60 80 100

Share of consumption in 2014, %

Demand growth, %/a


SPCI 12

GLOBAL PAPER INDUSTRY ASSET QUALITY COMPARISON

In terms of asset quality, China stands out as the largest and most modern paper

producing region

Technical age, years

Weighted Average PM capacity, 1000 t/a

Weighted average

technical age 18 years WEAK

STRONG

Weighted average

capacity 213 000 t/a

China

Nordic

Countries

North

America

Western

Europe

Japan

Asia-Pacific Eastern

Europe

Latin

America

Africa

COPYRIGHT©PÖYRY

PAPER INDUSTRY SUPPLY/DEMAND IN CHINA


Over-investments in have led to significant house-cleaning in China; aftershocks

are also felt in Europe and America

0

20

40

60

80

100

120

140

160

2005 2010 2015 2020

Confirmed capacity changes

Capacity

Demand

Production base

Production high

Million t/a

COPYRIGHT©PÖYRY

PAPER MARKET – KEY MESSAGES


Graphic paper market maturity

– Slowing demand

– Over-capacity

Tissue boom

– Healthy demand growth

– Investment boom, especially in Asia

Packaging market transformation

– Export packaging meltdown in China

– Over-capacity

Industry’s response – way forward

– Disciplined approach to capacity expansions

– Exits, repurposing, relocation

– Competition cost efficiency, operational excellence


SPCI 15

Papermaking Fibre Production 2014 Market Pulp Drivers

RP 56 %

Non-wood pulp 3%

Integr. wood pulp 26 %

Market pulp 15 %

409 million t/a Growth of Asia-Pacific paper

market

Weakening availability of white

recovered paper

Changing fibre furnishes (esp.

tissue)

Shut-down of polluting non-wood

pulp capacity in China

GLOBAL PAPERMAKING FIBRE PRODUCTION

Market pulp accounts for 15% of global papermaking fibre production


SPCI 16

SHARE OF MARKET PULP 2000-2030

The share of market pulp out of total papermaking fibre is forecast to grow from

15% to 17%, but its share out of total wood pulp is expected to grow more steeply,

from 37% to 44% by 2030

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030

Share of market pulp out

of total papermaking Fiber

Share of market pulp

out of total wood pulps

Forecast


SPCI 17

DEMAND FOR MARKET WOOD PULP BY GRADE 2000-2030

Demand for market wood pulp is expected to grow by 1.9%/a in the long term,

driven by bleached hardwood and softwood kraft pulps

0

10

20

30

40

50

60

70

80

90

2000 2005 2010 2015 2020 2025 2030

Million tonnes

Bleached hardwood kraft

Forecast

Bleached softwood kraft

Unbleached kraft

Sulphite

2014-2030:

+21 million tonnes

CAGR: +1.9%/a

Mechanical


SPCI 18

WORLD DEMAND FOR MARKET WOOD PULP

BY REGION 2000-2030

Paper grade market pulp demand is expected to grow by a good 20 million tonnes

during the forecast period, driven by China and the rest of Asia

0

10

20

30

40

50

60

70

80

90

2000 2005 2010 2015 2020 2025 2030

Million tonnes

Mature markets

CAGR

-0.6%/a

Emerging markets

CAGR

+3.2%/a

Japan

Rest of World Forecast

Western Europe

Eastern Europe

China

Rest of Asia

Latin America

North America

2014-2030:

+21 million tonnes

CAGR: +1.9%/a

COPYRIGHT©PÖYRY

MARKET PULP DEMAND GROWTH BY REGION 2014-2030


Global demand for market wood pulp is forecast to grow by 1.9%/a in the long-

term

Rest of Asia Latin America

Eastern Europe

Growth %/a

Middle East

Africa

China

Japan

North America Oceania

Western Europe

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

0 20 40 60 80 100

Share of consumption in 2014 (61 million tonnes), %

Average 1.9%/a


SPCI 20

MARKET WOOD PULP DEMAND – KEY SOURCES OF GROWTH

China is responsible for 63% of the world’s incremental demand during 2014-2030

0

10

20

30

40

50

60

70

80

90

2014 NorthAmerica

WesternEurope

Japan EasternEurope

China Rest ofAsia

LatinAmerica

Others 2030

Million ADt/a

Demand

Decline 2014-2030

Increment 2014-2030

COPYRIGHT©PÖYRY

INDUSTRY STRUCTURE − MARKET BSKP*


The most modern and largest BSKP mills are in Germany, Chile, Finland and

Russia

0

200

400

600

800

1000

1200

051015202530

Germany


Weighted average

Mill capacity, 1 000 t/a

WEAK

STRONG

Weighted average

capacity 531 000 t/a

Weighted average technical

age 22 years

China

Sweden

Japan

France

2015

Chile Finland

USA

Russia

Czech Rep.

Argentina

New Zealand

Canada Austria

Bubble size reflects the

allocated grade capacity

* Including domestic captive capacity

COPYRIGHT©PÖYRY

INDUSTRY STRUCTURE − MARKET BHKP*


The largest and most modern market BHKP mills are found in Latin America,

Indonesia and China

* Including domestic captive capacity

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

051015202530

China

Chile

Indonesia

Uruguay

Brazil


Weighted average

Mill capacity, 1 000 t/a

WEAK

STRONG

Weighted average

capacity 1 294 000 t/a

Weighted average

technical age 13 years

Canada Japan

USA

2015

Bubble size reflects the

allocated grade capacity

Finland

Spain

Portugal Sweden

Russia

COPYRIGHT©PÖYRY


MAJOR MARKET BSKP/BHKP PROJECTS 2014-2018

Net incremental capacity 11.4 million tonnes1

Company/mill Year BSKP, kt/a BHKP, kt/a Remarks

Suzano, Imperatriz 2014 - 1 500 New mill

Stora Enso/Arauco, Montes del Plata 2014 - 1 300 New mill

Jiangsu Oji, Nantong 2014 - 420 New mill

Others 2014 20 -535

Jari Cellulose, Monte Dourado 2015 - 420 Restart

CMPC, Guaiba 2015 - 1 300 New line

Others 2015 -215 80

Klabin, Ortigueira 2016 400 1 100 New line

Domtar, Ashdown 2016 400 - Conversion to fluff

Oki, Bukit Batu 2016 - 2 000 New mill

JSC Svetlogorsk 2016 300 - New mill

International Paper, Riegelwood 2016 400 - Capacity expansion

Södra, Värö 2016 270 - Capacity expansion

Others 2016 220 115

Metsä Fibre, Äänekoski 2017 670 100 New mill + shut-down

Others 2017 -50 -350

Fibria, Tres Lagoas 2018 - 1 750 New line

SCA, Östrand 2018 470 - New line + shut-down

Others 2018 - 400

TOTAL 2014-2018 2 885 8 500 1 Bleached kraft market pulp excluding dissolving pulps


SPCI 24

MARKET BHKP SUPPLY/DEMAND AND DELIVERY RATE

Delivery rate is at risk of deterioration

82

84

86

88

90

92

94

96

98

0

5

10

15

20

25

30

35

40

45

2000 2005 2010 2015 2020

Delivery

Rate

Demand

Supply

Delivery Rate

without exits

Supply without

estimated exits

Million t/a Percent

COPYRIGHT©PÖYRY

SHIFTS IN BHKP SUPPLY – DEVELOPMENT OF SUPPLY*) CURVE


Flattening and downward-shifting supply curve implies declining long-term trend

price

0

100

200

300

400

500

600

700

800

900

1000

0 5000 10000 15000 20000 25000 30000 35000

2004

2009

2014

USD/ADt, 2014 price level

Trend price in real

terms

*) Full costs, delivery to North Atlantic ports; capital charges include straight-line depreciation (ROCE 0%)

Cumulative capacity, 1000 ADt/a

COPYRIGHT©PÖYRY

PULP MARKET - KEY MESSAGES


Mixed messages for market pulp

– Declining demand for graphic paper (+/-)

– Growth of fiber-based packaging and hygiene/tissue (+)

China

– Economic slow-down (-)

– Pulp imports (+)

Investment activity

– Ahead of demand?

Price implications

Structural changes awaited

– Exits

– Cost cutting

FOREST INDUSTRY -

BIOBASED GROWTH OPPORTUNITIES

NICHOLAS OKSANEN

COPYRIGHT©PÖYRY 28

TOWARDS HIGH CARBON MATERIALS, LOW CARBON ENERGY

APRIL 28, 2016 SPCI

130 Mha

of forest land has been lost

since 1990

Reforestation is about ecology, climate

and business

Bioeconomy is about new carbon

materials and bioenergy

CO2: Burning forests emit, growing forests capture it

M = million

Ha = hectares

COPYRIGHT©PÖYRY

~300 Additional availability

200 25 290

Agriculture

demand Industrial

forestry Bioenergy

Mha

Mha Mha Mha

Biochemical

industry

Deficit Mha

~250 Source: Nilsson (2007)

HOW MUCH LAND IS AVAILABLE?

?

Projected need

twice as much

Resulting

deficit


COPYRIGHT©PÖYRY

GROWTH OPPORTUNITIES FROM BIO-BASED SOLUTIONS


Overcapacity in certain pulp & paper products is pushing to new

innovations

– Instead of traditional writing papers and newsprint, companies are finding new, high-

value uses for wood diversification and strategic changes!

– Waste wood as a power generation fuel Instead of burning everything, create

value out of it!

– More profitable use of biomaterials e.g. advanced packaging, biobased chemicals,

advanced biofuels high-profit products

Oil price level is currently low putting the bio business cases to enormous

pressure

COPYRIGHT©PÖYRY

PÖYRY BIOSPECTRUM OF OPPORTUNITIES


Across the range, from all feedstocks to all bioproducts

Value added

Feed

sto

ck

Agro

Wood

Waste

Bio-CHP Torrefied pellets Biodiesel Bio-based

intermediates

Bio-based

specialty chemicals

Pellets Ethanol Bio-based platform

chemicals

Bio-based

materials

Advanced biobased

materials from carbon

fibres onwards

Algae

COPYRIGHT©PÖYRY

NEW PRODUCT OPPORTUNITIES: BIO-BASED PRODUCTS


Wood waste & lignin to energy,

chemicals, e.g. carbon fibre

Nanocellulose to e.g.

packaging, automotive,

cement, aerospace

Hemicellulose to sugars to

biochemicals

Pulp composites and plastics

Bio-based chemicals

from pulp and recovered

paper

Tall oil , fatty acids to

biofuels and chemicals

Products

New

COPYRIGHT©PÖYRY

SUPPLY DEVELOPMENT OF ETHANOL AND BIODIESEL

0

20

40

60

80

100

120

140

160

180

200

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Ethanol

Biodiesel


Ethanol and Biodiesel show steady growth potential

Million tonnes Billion litres

Source: OECD-FAO Agricultural Outlook 2015-2024

COPYRIGHT©PÖYRY

IN TOTAL, 64 COUNTRIES HAVE SPECIFIC TARGETS OR

MANDATES FOR TRANSPORTATION BIOFUELS


Specific mandates

of targets for

ethanol in

transportation fuels

Brazil mandates a

minimum ethanol

content to 27%

USA needs to import 2G

fuel ethanol to meet their

renewable fuel obligation

China aims to set up 10%

biofuel mandate by 2020.

Currently 9 provinces have

E10 mandate.

India has a E10 mandate in

place and a 20% target for

all biofuels by 2017

COPYRIGHT©PÖYRY

GLOBAL DEMAND FOR BIO-BASED CHEMICALS IS DRIVEN

BY BIOPLASTICS


0

0,5

1

1,5

2

2,5

3

2013 2018

Other biobased andnon-biodegradable

Other biodegradables

Starch blends

Bio-PE/PP

PLA and PLA-blends

Bio-PET

Mt

Growth

15%/a

Bio-based chemicals show also steady growth potential

COPYRIGHT©PÖYRY 36

WHAT IS WOOD MADE OF?

Plant biomass - the same basic components, in slightly varied proportions.

Wood is attractive industrial assets

Cellulose

40-45 %

Hemicellullose

19-32 %

Lignin

22-31 %

Extractives

2-3.5 %

Cellulose is the most

abundant organic polymer

on earth; strong and

crystalline.

Hemicellulose is a sugar

rich polymer with a random,

amorphous, weak structure.

APRIL 28, 2016 SPCI

COPYRIGHT©PÖYRY

CELLULOSE IS THE MOST ABUNDANT ORGANIC POLYMER ON

EARTH

Cellulose consists of crystalline and amorphous regions. By treating it with strong acid, the

amorphous regions can be broken up

APRIL 28, 2016 SPCI

A polysaccharide consisting of a linear chain of several hundred to many

thousands of linked D-glucose units.

Source: UPM Biofibrils – novel bio-based nanomaterial for various industrial applications, EuroNanoForum2013

37


SPCI 38

BIOREFINING OPPORTUNITIES OF SOFTWOOD PULP MILL

COPYRIGHT©PÖYRY

EXAMPLES OF NOVEL BUT COMMERCIAL

BIOREFINING CONCEPTS

As pulp production has become less

integrated to paper and board

production, new biorefining concepts

and technologies have emerged in

search for additional revenues.

The first commercial investments

have focused on reducing fossil

fuel consumption and utilising

sustainable side-streams for

renewable energy production.

Due to the turmoil in energy markets,

the focus is gradually shifting towards

biomaterials and bio-based

chemicals.



40

NANOCELLULOSE

SPCI

COPYRIGHT©PÖYRY

NANOCELLULOSE PROSPECTIVE END-USES

Some of the potential future

application areas of nanocelluloses

include

– paper and board

– composites

– barrier materials

– foams and aerogels

– medical, drug, food and cosmetic

applications

APRIL 28, 2016 SPCI

Nanocellulose applications based on patent activity,

2014-2015

Paper coating 8 %

Paper furnish

14 %

Medical, drug

delivery, food &

cosmetics 9 % Films, membranes &

nanocellulose sheets

12 %

Other 28 %

Plastics &

composites 17 %

Drying/redispersion of

dried nano 11 %

Based on a patent analysis carried out by Pöyry

41

COPYRIGHT©PÖYRY

OVERVIEW OF PLAYERS ACTIVE IN THE FIELD


MFC NCC

(/MCC)

BNC Both or

not

specified

Canada 2 4 1

USA 5 1 1 3

France 3

UK 2

Switzerland 3

Germany 2 1

Norway 2 1

Sweden 2 1 1

Finland 3 1

South Africa 1

Israel 1

Japan 3 1

MFC

• Microfibrillated cellulose

NFC

• Nanofibrillated cellulose

MCC

• Microcrystalline cellulose

NCC

• Nanocrystalline cellulose

BNC

• Bacterial cellulose

Nanocelluloses are currently mainly in the development stage


SPCI 43

TALL OIL

COPYRIGHT©PÖYRY

IMPORTANCE OF TALL OIL RECOVERY IN A PULP MILL

Several business cases shows that

tall oil business has a good income

Crude tall oil is extracted from

softwood (pine and spruce) in pulp

mills and used e.g. in paint industry,

and further developed to biodiesel

Pöyry’s own HDS® crude tall oil

(CTO) production technology has

been delivered to more than 20

plants


…THE CHALLENGE OF BIO-BASED OPPORTUNITIES

Paints, coatings,

inks and adhesives

LARGE, RICH AND COMPLEX FIELD OF APPLICATIONS

In applications, the problem is rather the very many potential end uses. With too

much choice, it is hard to pick where to focus.

46

Bio-based plastics

Plasticisers and

additives

Personal care and

detergents

Pharmaceuticals

Solvents and

industrial fluids

Fuels

Other

Dispersants

Binders and adhesives

Platform chemicals

Fine chemicals

Foams, gels and films

Bio

-bas

ed

ch

em

icals

Sugar

Oil & Fats

Lignin Gas

APRIL 28, 2016 SPCI

EXAMPLE BIO-BASED CHEMICALS


SPCI 47

Current product portfolio (growth vs. cash flow)?

Market demand for capacity increase?

Concrete market opportunities and pricing mechanisms?

Robust sales plan with thorough understanding of client needs

Bottlenecks for capacity increase in existing assets?

Role of new bioproducts in both debottlenecking and rebuild needs

(new revenue streams but also new CAPEX and OPEX items)?

Level of integration, potential partnering?

Strategic position in the new value chains?

Pulp and paper

markets

Expansion

potential

Business

concept

Bioproduct markets

and sales plan

FROM MILLS TO BIOREFINERIES?

COPYRIGHT©PÖYRY

KEY MESSAGES


Traditional forest Industry companies have great opportunities in the new bio

products

There needs to be always a valid business case

Current oil price sets a short slow down in the investment but the long term

perspectives with the increasing oil price are good

Growth opportunities in biofuels and bio chemicals are extensive with the

various raw materials ending up to various end products

There are many examples of running bio mills which start setting the scene

for the industry

Current challenge is also the variety of end products with the low ‘tonnage’

amount which would drive the industry rapidly further in building up modern

biorefineries

COPYRIGHT©PÖYRY

(c) grafikdienst.com (c) grafikdienst.com

PÖYRY BIO-BASED SOLUTIONS – AT YOUR SERVICE


www.poyry.com

Consulting. Engineering. Projects. Operation.

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FUTURE OUTLOOK FOR THE FOREST INDUSTRY SPCI … · SPCI Stockholm Timo Suhonen, Nicholas Oksanen...

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