Global Paper Packaging - events.risiinfo.com · • Cover key paperboard market segments as well as...

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Global Paper Packaging OutlookWith a Focus on the Latin American Markets

Amanda Miranda FantinattiEconomist, Latin America, Paper Packaging

RISI Latin American ConferenceAugust 2018

2© Copyright 2018 RISI, Inc. | Proprietary Information

• Studied economics at the University of São Paulo and earned a Master’s Degree in Economics at Fundação Getúlio Vargas (FGV).

• Based out of RISI’s São Paulo office.

• Primarily responsible for developing the packaging sections for the Latin American forecasts and coverage of other markets such as Africa, Oceania and the Middle East.

• Cover key paperboard market segments as well as downstream dynamics in converting and end‐use markets.

• Previously served as an economist for Parcitas Investimentos.

• Prior to that, worked at Banco Safra de Investimentos and Brevan Howard Asset Management.

• Teaching assistant at FGV.

Amanda Miranda FantinattiEconomist, Latin America, Paper [email protected]

Agenda


• Containerboard Overviewo Global Scenario

Recovered Papero Latin America

• Boxboard Overviewo Latin America

© Copyright 2018 RISI, Inc. | Proprietary Information

Containerboard Overview


Global Containerboard Demand, 2017Asia has the largest market, followed by North America and Western Europe

Middle East2%

North America18%

Western Europe14% Latin America

8%

Eastern Europe7%

Asia48%

All Other3%

North America



The North American Market Shows Strong GrowthContainerboard apparent consumption, annual percent change

‐2%

‐1%

0%

1%

2%

3%

4%

5%

6%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Percen

tage Cha

nge 2016‐2019: 2.8%

2012‐2015: 2.0%


Demand Should Continue to Outstrip Supply in North America Through 2018

92%

93%

94%

95%

96%

97%

98%

99%

‐3%

‐2%

‐1%

0%

1%

2%

3%

4%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Change in Demand

Change in Capacity

Operating Rates (R)


North American Net Virgin Exports to Remain FlatNet Exports, Thousand Tonnes

0

1,000

2,000

3,000

4,000

5,000

6,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Recycled Containerboard

Virgin Containerboard

Europe



European Market Decelerating from Peak in 2017Slowing not too dramatic due to supportive market trends (e‐commerce/ substitution of plastics)

2.8%

5.7%

‐5%

‐2%

1%

4%

7%

10%

2011 2012 2013 2014 2015 2016 2017 2018 2019

Western EuropeEastern Europe


Containerboard, Western EuropeCapacity utilization is slowly decreasing, above historical averages, supporting current price levels

90%

91%

92%

93%

94%

95%

96%

97%

‐500

0

500

1,000

1,500

2,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Thou

sand

Ton

nes

DemandCapacityOperating Rates (R)


Western Europe Will Continue to Be a Net Virgin Containerboard Importer

‐4,000

‐3,000

‐2,000

‐1,000

0

1,000

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Net Im

ports in Th

ousand

Ton

nes

Recycled ContainerboardVirgin Containerboard

China



• Facts China banned mixed paper imports Strict 0.5% allowable contamination limit for its recycled paper imports

• Aim Clean up the country’s environment as China continues to modernize rapidly

• New proposal Entire ban of imported solid waste, included recovered paper before 2020

China Seems Serious About Pollution, Eliminating Wastepaper Imports

• Another motive for the ban? Imported fiber supplies one‐third of

China’s containerboard production In 2017, China imported more than 20

million tonnes of recycled paper

Containerboard production is capital‐intensive while box production is labor‐intensive

Choosing one’s battles!


Chinese RCP ImportsMillion Tonnes

4.9

15.1

4.9 0.8

2017

Old Newspaper (ONP)

Old Corrugated (OCC)

Mixed Papers (MIX)

High Grades (HGR)

• In 2017, China consumed 79.3 million tonnes of recovered paper (RCP), of which more than 30% was imported.

• Of the suppliers of RCP to China, the USA is definitely the most important.


Chinese Containerboard Net Imports

‐500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Recycled Containerboard

Virgin Containerboard


• Chinese containerboard demand growth in 2018 April forecast: +3.8% Preliminary August forecast: ‐2.0%

• Reasons Weakening economy Trade war Substitution effects

China: Major Revisions to the Forecast

Latin America



Containerboard Demand Growth in Latin AmericaThousand Tonnes, Percentage Change

‐10%

‐5%

0%

5%

10%

15%

20%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000 Domestic Production Net Imports Percentage Growth (R)

Avg 2003‐2010: 5%Avg 2011‐2018: 2.4%


Latin American Containerboard ConsumptionThousand Tonnes, Percentage of Total Consumption, 2017

4,31233%

3,74328%

8006%

4,36533%

KraftlinerRecycled LinerSemichemical MediumRecycled Medium


Share of Virgin Containerboard Demand Varies by RegionLatin American classifications are not as strict in the USA

0%

10%

20%

30%

40%

50%

60%

70%

North America Western Europe Latin America Eastern Europe All Others


The 10 Largest Latin American Containerboard Markets by Volume, 2017

35%

31%

7%

4%

4%

4%

3%

3%2% 2%5%

MexicoBrazilArgentinaChileColombiaEcuadorGuatemalaCosta RicaCaribbean IslandsVenezuelaAll Others

The Latin American Packaging Markets Are Far from HomogeneousLatin American containerboard apparent consumption is concentrated in just a few countries

© Copyright 2018 RISI, Inc. | Proprietary Information 24

02,0004,0006,0008,000

10,00012,00014,00016,00018,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mexico Brazil ArgentinaChile Colombia EcuadorAll Others


Changes in Latin American Containerboard Consumption by Major Country

‐2%

‐1%

0%

1%

2%

3%

4%

5%

‐200

0

200

400

600

2011 2012 2013 2014 2015 2016 2017 2018 2019

Mexico Brazil Argentina Chile Colombia Ecuador All Others % Change (R)


Upside Risks: E‐CommerceE‐commerce boosting containerboard sales in the world

16%19%

35%

Total

2007

2010

2017

2010

2017

0%

10%

20%

30%

40%

50%

60%

70%

80%

By IncomeMinimum Wage

Up to 1 MW 1 MW to 2 MW2 MW to 3 MW 3 MW to 5 MW5 MW to 10 MW More than 10 MWSource: www.cetic.br.

Internet Users Who Bought Goods and/or Services Online in the Last 12 Months in Brazil


World: Trade War Brazil: Truckers’ Strike

Downside Risks: Growth Momentum Worsened; Uncertainty Mount

May 2018

30

40

50

60

70

80

90

300

340

380

420

460

500

2016 2017 2018Tonn

es, IBÁ

Paper Packaging Production in Brazil

Packaging & WrappingCardboard (R)


Downside Risks: Growth Momentum Worsened in Brazil and Argentina

3.20

1.50

1.0

1.5

2.0

2.5

3.0

3.5

2014 2015 2016 2017 2018

Percen

t

Brazilian Annual GDP Growth Expectations Survey, BCB

2018 2019

Argentinean Annual GDP Growth Expectations Survey, BCRA


Uncertainty in RCP Policies to Boost Exports?Latin American Net Imports and Imports Share

‐267 ‐334 ‐38520%

22%

24%

26%

28%

30%

‐1,000

0

1,000

2,000

3,000

4,000

5,000

2002 2004 2006 2008 2010 2012 2014 2016 2018

Percen

t

Thou

sand

Ton

nes

Brazil Net Imports Mexico Net Imports

Other Latin American Net Imports Imports/APC (R)


Argentina Is the Largest Destination for Brazilian Kraftliner Exports

0

20

40

60

80

100

120

140

160

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Thou

sand

Ton

nes

Argentina Ecuador

Belgium Chile

Italy All Others


Containerboard Supply Outlook in Latin AmericaThousand Tonnes, Percentage Change

70%

75%

80%

85%

90%

95%

100%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000Capacity Production Operating Rate (R)


Capacity Expansion Projects, 2018‐2020Company Mill Country Capacity

Thousand TonnesDate Grade

Papelera del NOA Rio Blanco Argentina 30 2017 Medium

Papelera del NOA Quilmes Argentina 80 2017 Recycled CNT

PCM Guadalupe Mexico 78 2018 Recycled CNT

Smurfit Kappa Los Reyes Mexico 100 1Q18 Medium

Grupo Gondi Tlalnepantla Mexico 54 1Q18 Recycled CNT

Grupo Gondi Guadalajara Mexico 41 1Q18 Recycled CNT

Empaques Nova Umán Mexico 6 1Q18 Recycled CNT

Copamex Anahuac Mexico n/a n/a Recycled CNT

Cocelpa Araucária Brazil 288 1Q18 Medium

Grupo Gondi Monterrey Mexico 400 4Q19 Recycled CNT

Agroforestal Oberá n/a Argentina 500 n/a Kraftliner

Papel Prensa Buenos Aires Argentina 170 n/a CNT

Klabin Ortigueira Brazil 400‐500 4Q20 Kraftliner

Boxboard Overview



Boxboard Definition = All Paperboard Except Containerboard

• Boxboard as a global product can be fairly difficult to classify given the variety of subgrades that are available, some of which are regionally specific.

• RISI’s solution? An entirely new classification system based on available trade data.• Solid bleached sulfate (SBS)

• Folding boxboard (FBB) and white lined chipboard (WLC)

• Coated unbleached kraft (CUK)

• Coated recycled board (CRB)

• Uncoated recycled board (URB)


Boxboard Demand Has Grown Steadily over the Past Decade in Latin America, Outpacing Real GDP

‐4%‐2%0%2%4%6%8%10%12%14%16%18%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2002 2004 2006 2008 2010 2012 2014 2016 2018

Percen

tage Cha

nge

Thou

sand

Ton

nes

Domestic ProductionNet ImportsPercentage Growth


Boxboard Consumption in Latin America Is Dominated by the Virgin Grades

1,480 47%

518 16%

50 2%

594 19%

494 16%

Folding Boxboard/White Lined Chipboard (FBB/WLC)

Solid Bleached Sulfate (SBS)

Coated Unbleached Kraft (CUK)

Coated Recycled Board (CRB)

Uncoated Recycled Board (URB)


Mexico and Brazil Are the Largest Boxboard Consumers in the Region

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Thou

sand

Ton

nes

Brazil Mexico Chile ColombiaArgentina Venezuela All Others


Latin America Is a Net Importer of Boxboard Despite the Substantial Exports out of Brazil and Chile

10%

20%

30%

40%

50%

60%

‐600‐400‐200

0200400600800

1,0001,2001,400

Percen

t

Thou

sand

Ton

nes

Brazil and Chile Net Imports

Rest of Latin America Net Imports

Imports/APC


The Challenging Economic Scenario Has Put Several Boxboard Capacity Expansion Projects on HoldCompany Mill Country Capacity

Thousand TonnesDate Grade

Ibema Turvo Brazil 30 2011 / Idled Virgin duplex

MD Papéis Limeira Brazil 10 2013 / Idled Coated recycled

Klabin Monte Alegre Brazil 50 2014 Virgin duplex

Cartones Ponderosa San Juan del Rio Mexico 30 2012 Coated recycled

GreenPaper San Nicolas los Garza Mexico 6 2013 Uncoated recycled

Gondi Group Guadalajara Mexico 50 2014 Coated recycled

MD Papéis Lapa Brazil 120 2015 / Idled Boxboard

Papirus Limeira Brazil N/A 2015 / Idled Boxboard

CMPC Maule Chile 93 2018 Virgin duplex

GreenPaper San Nicolas los Garza Mexico 20 1Q 18 Recycled boxboard

Klabin Ortigueira Brazil 400‐500 1Q 23 Virgin duplex


Virgin Boxboard Market Share in Latin America

Klabin47%

CMPC29%

Suzano13%

IBEMA5%

Smurfit Kappa Group2%Carvajal

1%Rest of Market

3%

Take Home Points on the Paper Packaging Outlook• Global Containerboard

Demand shows strong growth, at a slower pace It will take a few years for the supply side to catch up with demand Pricing power should remain firmly in seller’s hand through 2019

• China seems serious about pollution, eliminating wastepaper imports Trade war strategy? A lot of uncertainty surrounding China’s policies

• Latin America Reassessment in Latin America's 2018 growth outlook We are still optimistic on growth going ahead Economic recovery should boost regional paper packaging demand growth

• New investments expected for the near future



Thank you! Questions?

For more information

Outlook for Brazil’s Paper Packaging Marketswww.risi.com/brazilpackaging

World Boxboard Study: Americaswww.risi.com/worldboxboard

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