Outlook and discussion: market trends and opportunities in ... · Outlook and discussion: market...

Outlook and discussion: market trends and opportunities in the Middle East

Moderated by:

Abdulla Zaid

Economist,

Fastmarkets RISI

Mohnish Rikhy

President

UCIC

Sami AlSafran

CEO

Middle East

Paper Company

Raed Mahmoud Al

Khalid

Supply Chain

Director

Al-Watania Paper

Products Inc.

Dr. Fady Gemayel

President

Arab Federation for

Paper, Printing and

Packaging Industries

(AFPPPI)

Fastmarkets RISI MENA Paper Packaging Outlook and Discussion

Abdulla Zaid

Economist, Paper Packaging

Forces shaping the paper industry

2020 | Fastmarkets | MENA Paper Packaging Outlook and Discussion 2

e-Panelists

Fady Gemayel

32020 | Fastmarkets | MENA Paper Packaging Outlook and Discussion

Sami SafranMohnish Rikhy Raed Al Khaled

Agenda

• Demand outlook

• Import trends

• Capacity and production costs


A deep dive into demand outlook


Paper packaging growth outlook

Containerboard: 56%

Boxboard: 30%

Kraft and specialty paper:

14%

6

Substitution effect

Income effect

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

CA

GR

(201

4 -

20

18

)

Consumption (thousand tonnes)

Boxboard

Kraft and specialty paper

Early movers

Infancy

Expansion

Saturated

Containerboard

Paper packaging grades


Growth potential is strong

17Kilograms per capita

Paper packaging global demand

15 kg lower than global,

Latin American and Far

East Asian averages

7

Substitution effect

Income effect


Demand outlook is different within MENA

Paper packaging regional demand

1. UAE: 79 kg / person

2. Israel: 65 kg / person

3. Saudi Arabia: 46 kg /

person

.

.

.

9. Egypt: 17 kg / person

8

Substitution effect

Income effect

Top performers


Brace yourselves for an import wave


Europe dominates the MENA imports market for recycled linerboard

90%

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Thousa

nd t

on

ne

s

Asia Rest of world Europe

European share of imports

10

European exports account for

an average of 91% of MENA

imports from 2008-2018

Asian exports maintained an

average of 7%


The lion’s share of MENA recycled liner imports in 2016 came from Spain

48%

Spanish share of

European imports

Spanish recycled liner exports to

MENA reached 330,000 tonnes

in 2016, or 48% of European

LNR exports to MENA

Polish recycled liner exports to

MENA peaked in 2016 at 61,000

tonnes, or a 9% share

11

0

100

200

300

400

500

600

700

800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Thousa

nd t

on

ne

s

Spain Poland Italy Belgium Germany Turkey Rest of Europe


Weak European demand and growing capacity signal acceleration in recycled liner net exports

6.7%

2019 | Fastmarkets | MENA Containerboard Market Outlook

-400

-200

0

200

400

600

800

1,000

1,200

1,400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thousa

nd t

on

ne

s

Change in European capacity Change in European demand Change in European net exports

European capacity-demand

gap growth (2019-2021)

European capacity will grow

faster than demand (2.7% vs

3.3%) annually

Weak European demand is

expected to widen demand-

capacity gap and increase

recycled liner net exports

A portion of the European

exports is expected to find its

way to the MENA markets

12

Imports still provide headwinds for domestic producers of recycled linerboard

32%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thousa

nd t

on

ne

s

Imports Domestic production Imports share (R)

Imports share of demand

Import waves in 2012 and

2016

Expected import wave in 2020:

Imports share of demand =

40%

13

Imports and domestic production as shares of demand


Musical chairs dynamic: unloading excess recycled liner tonnage during weak European demand environment

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

0

100

200

300

400

500

600

700

800

900

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

2008 =

1.0

Thousa

nd t

on

ne

s

European recycled liner exports to MENA European recycled liner market condition index (R)

When growth music stops

European market condition

index gives indication of

market strengthening and

weakening (2008 = 1.0)

Weak recycled liner demand

and oversupply in Europe are

the catalyst of MENA market

volatility

14

Excess MENA

imports


Algeria and Saudi Arabia absorbed most of the European recycled exports

Less than 15,000 tonnes / year

15,000–50,000 tonnes / year

50,000–100,000 tonnes / year

More than 100,000 tonnes / year


GCC-TSAIP antidumping investigation and results: reshaping MENA trade outlookGrades under investigation HS Code Definition Result: GCC antidumping duties?

Kraftliner48041100 Kraftliner, uncoated, unbleached, rolls/sheets No

48041900 Kraftliner, uncoated, bleached, rolls/sheets No

Kraft and specialty paper

48043100 Kraft paper uncoated, unbleached, wt nov 150 g/m², NESOI No

48043900 Kraft paper, uncoated, bleached, wt nov 150 g/m², NESOI No

48044100Kraft paper/paperboard, uncoated, unbleached, wt 150 g/m² or

ov, nov 225 g/m², rolls/sheets, NESOINo

Semichemical medium 48051100Semichemical fluting paper (corrugating medium), uncoated,

rolls/sheetsYES

Recycled medium

48051910Fluting paper of recycled liner board weighing

150 g/m² or less

YES, except fluting paper of recycled liner

board weighed less than 105 g/m²

48051920Fluting paper, NESOI, weighing over 150 g/m², uncoated, in

rolls/sheets,YES

48051990 Other fluting paper YES

Testliner

48052400Testliner, uncoated, wt nov 150 g/m², rolls/sheets, spec ch48-

note3

YES, except testliner paper of recycled liner

board weighed less than 105 g/m²

48052500Testliner, uncoated, wt ov 150 g/m², rolls/sheets, spec ch48-

note4YES


Final dumping margin as a percentage of the CIF value

Country Company Final dumping margin

SpainSAICA 24.6%

Other companies 31%

Poland All companies 34%


18

Resurfacing:Supply outlook & market overview


European imports are the main driver in MENA production volatility

68.8%

60%

65%

70%

75%

80%

85%

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thousa

nd t

on

ne

s

Capacity Production Operating rates (R)

Average operating rate

(2019-2021)

Capacity growth is expected to

surpass demand, leading to

lower operating rates

Imports are expected to

increase its share of demand

from 31% in 2018 to 41% in

2020, providing further

downward pressure on

operating rates

19

Recycled containerboard production, capacity and operating rates


Tight demand capacity gap, pushing for capacity expansion

5.3%

0

100

200

300

400

500

600

700

800

900

1,000

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thousa

nd t

on

ne

s

Thousa

nd t

on

ne

s

Capacity Demand Imports (R)

Capacity growth (2018-2021)

Capacity expansion fuelled by

• Growing future demand

potentials

• GCC antidumping duties

20

Recycled containerboard Imports, demand and capacity


Large demand capacity deficit, pushing for import influx

64%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

500

1,000

1,500

2,000

2,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thousa

nd t

on

ne

s

Thousa

nd t

on

ne

s



21

Boxboard Imports, demand and capacity


Domestic production supplies less than 20% of the demand

83%

0

200

400

600

800

1,000

1,200

0

200

400

600

800

1,000

1,200

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Thousa

nd t

on

ne

s

Thousa

nd t

on

ne

s



22

Kraft and specialty paper Imports, demand and capacity


0

50

100

150

200

250

300

350

400

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

US

dolla

rs p

er

tonne

Total fiber Chemicals Energy Labor Other Cash cost to Dubai, UAE Cash cost to Port Said, Egypt

Recycled medium

Cost of production: how competitive are the MENA containerboard producers?

23

Recycled linerboard


0

50

100

150

200

250

300

350

400

450

500

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

US

dolla

rs p

er

tonne


Uncoated recycled board

Cost of production: how competitive are the MENA boxboard producers?

24

Coated multi-ply


0

200

400

600

800

1,000

1,200

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

GCC NorthAfrica

OtherMiddleEast

SouthernEurope

EasternEurope

WesternEurope

US

dolla

rs p

er

tonne


Bleached kraft and specialty paper

25

Unbleached kraft and specialty paper


Cost of production: how competitive are the MENA Kraft and specialty paper producers?

Thank you

26

MIDDLE EAST & NORTH AFRICA PAPER

PACKAGING OUTLOOK

risi.com/MENApackaging


risi.com/MENApackaging /

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