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Transcript
North American Containerboard Outlook
Ken Waghorne
Vice President, Paper Packaging
August 2013
Today’s Agenda
• Economic Overview
• North American Domestic Demand
• Global Trade Issues
–
–
–
–
Asia
Europe
Latin America
Rest of World
• Other Factors Affecting Prices
• RISI’s North American Price Projections
2
Global Economy Improving Moderately
Annual Real GDP Growth
Source: IMF, RISI
3
Emerging Economies Continue to Support
Global Growth
Global Real GDP* Growth
*Measured at purchasing power parity exchange rates
Source: IMF, RISI
4
US Household Net Worth Almost Back to
Pre-Recession Level
Index, Starting Quarter = 100
Source: Federal Reserve
5
Housing Momentum Building
Existing Home Sales and Housing Starts, Thousands of Units
Source: NAR, BEA
6
Consumption Growth Accelerating
Real Consumption Expenditure, Annualized Percentage Change;
Unemployment Rate
Source: BLS, RISI
7
Consumer Spending on Food and Beverages
(Billion 2005 Dollars) Was Weak in 2011-2012
8
Manufacturing Growth Supporting Economy
Index of Industrial Production, Jan 2000 = 1.00; PMI
9
Durable Goods Drives Manufacturing
Index of Industrial Production – Durable, Non-Durable Goods,
Jan 2000 = 100
10
Low Natural Gas Prices Helping US
Manufacturers
Henry Hub Natural Gas, West Texas Intermediate Crude Oil, $/MMBtu
11
The Declining Merchandise Trade Deficit
Should Allow Manufacturing to Grow Faster
Than Consumer Spending
900
800
700
600
500
400
300
200
100
0
0
12
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2
3
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5
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7
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14
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Growth in Industrial Production (Percent) Is
Expected to Exceed GDP Growth from 2013
to 2015
13
Today’s Agenda
• Economic Overview
• North American Domestic Demand
• Global Trade Issues
–
–
–
–
Asia
Europe
Latin America
Rest of World
• Other Factors Affecting Prices
• RISI’s North American Price Projections
14
US Box Market Should Be Poised to Rally
• Shipments Fell 13% Between 2007 and 2009
– Steepest Decline for the Market Since the 1970s
• Shipments in 2012 were just 4% higher than in 2009
– Far more subdued than the overall growth in manufacturing
– But fairly well in line with the performance of nondurable goods
• Uneven US economy held shipments flat in the first half of
2013
– But market should accelerate by second half of the year
– Shipments should increase 1.6% in 2013 and 3.7% in 2014
• Long-term growth in box shipments will average 1.8%
– Containerboard demand should grow at a more moderate 1.2%
pace
– Shift to lightweight liner will take hold in North America
15
Corrugated Box Shipments Have Been
Volatile Since Mid-2012, But the Trend is
Relatively Flat
Billion Square Feet
16
Thousand Short Tons
Containerboard Cutup Has Exceeded Box
Shipments in 2005, Implying Strong Growth
in Non-Box Uses of Corrugated Sheets
17
US Box Shipments Tracked Closely with
Nondurable Goods Production for Most of
2011-2012 -- Decline in Early 2013 Indicates an
Inventory Drawdown
BSF per Index Unit
18
RISI’s Forecast: Box Shipments Should
Recover Strongly Following Soft Patch of
Early 2013
Annualized Growth Rate (%)
19
Growth in US Containerboard Apparent
Consumption Is Expected to Remain Quite
Slow
Growth, Million Tons
20
Today’s Agenda
• Economic Overview
• North American Domestic Demand
• Global Trade Issues
–
–
–
–
Asia
Europe
Latin America
Rest of World
• Other Factors Affecting Prices
• RISI’s North American Price Projections
21
Asian Demand for Containerboard Far
Surpasses Other Regions (2012)
22
Asian Demand Growth Should Bottom Out in
2012, But the 2013-2014 Recovery Will Be
Modest Relative to Trend of the Last 10 Years
Annual Change in Million Tonnes
23
Chinese Demand Growth Is Expected to
Average 2.1 Million Tonnes per Year in 20132014
24
Asian Containerboard Market Remains
Oversupplied in 2013, But the Situation Might
Start to Improve in 2014
Growth, Million Tonnes
25
Asia Is Expected to Be a Small Net Exporter of
Recycled from 2013 Onward
Million Tonnes
26
The Western European Containerboard Market
Has Suffered from Economic Distress since
2008 with Recycled Share Increasing Further
27
Euro Area Production Trending Lower
Industrial Production Indices, 2010=1
Source: Eurostat
28
Growth in Western European Containerboard
Demand Is Not Expected to Resume Until 2014
Once Industrial Production Begins to Drive
Box Demand
Annual Change in Million Tonnes
29
Eastern European Containerboard Market: Much
Smaller than the Western European Market (9.1
Million Tonnes in 2012) But Growing Rapidly
30
Eastern European Demand Will Grow Almost
750,000 Tonnes in 2013-2014
Annual Change in Million Tonnes
31
The Western European Recycled
Containerboard Industry Is Still Relying on
Exports to Maintain Market Balance
Western European Net Exports, Thousand Tonnes
32
Poor Profit Margins (Prices/Variable Costs in
Euros per Tonne) Should Lead to Permanent
Closures in the European Recycled
Containerboard Market
33
Assumed Capacity Closures in the Western
European Recycled Containerboard Market
Will Help Lift Operating Rates by 2%
34
Latin American Containerboard Demand
Should Expand Faster Than Supply in 2014,
Leading to Increased Regional Net Imports
Growth, Thousand Tonnes
35
Brazil Is the Only Net Exporter in Latin
America and Sells Throughout the World
Kraftliner Exports, Thousand Tonnes
36
African Containerboard Demand Will Continue
to Outpace Supply, Allowing Some Further
Increase in Imports
Growth, Thousand Tonnes
37
Capacity Expansion Will Exceed Demand
Growth in the Middle East Through 2014,
Leading to Declining Net Imports
Growth, Thousand Tonnes
38
Capacity Removals in Oceania in 2012 Helped
Tighten the Market, But Another Expansion
Round is Possible in 2017-2018
Growth, Thousand Tonnes
39
Net Imports into Latin America and Africa Will
Grow in 2013-2014, But Conditions Remain
Challenging in the Middle East
Million Tonnes
40
Latin America and Canada Are the Dominant
Destinations for US Kraftliner Exports
Million Tonnes, Annual Rates
41
Although Challenges Will Remain Through
2013, US Producers Are Well Positioned to
Meet Future Growth in Global Kraftliner
Demand
Million Tons
42
Share of Production
Today’s Agenda
• Economic Overview
• North American Domestic Demand
• Global Trade Issues
–
–
–
–
Asia
Europe
Latin America
Rest of World
• Other Factors Affecting Prices
• RISI’s North American Price Projections
43
North American Brown Linerboard Mills
Have Some of the Lowest Costs in the World
Cash Costs, First Quarter of 2013
44
Several Recycled Mills Were Quite
Competitive with Kraftliner in Early 2013
Cash Costs, First Quarter of 2013
45
Old Corrugated Container (OCC) Costs
Should Trend Upward Again Once Global
Containerboard Demand Accelerated
Dollars per Short Ton
46
Driving Factor Behind OCC Price Increases:
The Developing Markets Will Continue to
Provide All Growth in Global Containerboard
Demand Through 2014
47
Recycled Production Costs Are Expected to
Rise Faster that Kraftliner Costs Through 2014
Average Total Cost, US Dollars per Short Ton
48
N. American Industry Has Learned to Remove
Capacity as Demand Falters, But Conversions
from Graphic Paper Provide a New Dynamic
Thousand Short Tons
49
Capacity from New Entrants Will Eventually
Drive Containerboard Operating Rates Down
50
The North American Containerboard Industry
Is Very Highly Concentrated
51
The Herfindahl-Hirschman Index (HHI) Tracks
Industry Concentration Levels and Indicates
Competitive Behavior
52
The North American Containerboard Industry
No Longer Owns Much Timberland
Net Timberland Transactions, Thousand Acres
53
Today’s Agenda
• Economic Overview
• North American Domestic Demand
• Global Trade Issues
–
–
–
–
Asia
Europe
Latin America
Rest of World
• Other Factors Affecting Prices
• RISI’s North American Price Projections
54
Containerboard Pushed Through a $50/ton
Price Increase in Late 2012
• And followed this with another $50/ton increase in April
2013
• Market-related downtime trumped several negative
factors
– Relatively weak domestic demand
– Steady decline in old corrugated container costs
– Enduring oversupply in corrugated box market
• Prices are expected to remain flat for the remainder of
2013
– As new capacity enters the market
– Before accelerating in 2014-2015
55
Containerboard Inventories Were Below the
Balanced Level in Late 2012 and Early 2013
56
Containerboard Prices Are Expected to
Remain Flat for the Remainder of 2013 Before
Rising in 2014
US Dollars per Short Ton
57
High Industry Profitability Is Expected to
Attract New Tonnage to the Market
Price/Total Cost
58
North American Containerboard Summary
• Market has been moving sideways since 2010
–
–
–
–
Lackluster domestic demand
Export demand quite positive
Capacity creeping upward
Inventories remain well under control
• The downside risks to the market are substantial
– Will the manufacturing renaissance play out?
– Has Europe stabilized?
– How much new capacity will enter the market?
• The upside risks are harder to envision
– Given that our base forecast includes a US manufacturing revival
– How many increases will the industry attempt in 2014?
– How high do prices need to go to force some market changes?
59
Thank-you for your attention!
For more information:
Latin American Pulp & Paper 5-year
Forecast
www.risi.com/forecasts
Paper Packaging Monitor
www.risi.com/ppm
World Recovered Paper Monitor
www.risi.com/wrpm