Outlook and discussion: market trends and opportunities in ... · Outlook and discussion: market...
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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)
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Fastmarkets RISI MENA Paper Packaging Outlook and Discussion
Abdulla Zaid
Economist, Paper Packaging
Forces shaping the paper industry
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e-Panelists
Fady Gemayel
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Sami SafranMohnish Rikhy Raed Al Khaled
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Agenda
• Demand outlook
• Import trends
• Capacity and production costs
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A deep dive into demand outlook
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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
2020 | Fastmarkets | MENA Paper Packaging Outlook and Discussion
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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
2020 | Fastmarkets | MENA Paper Packaging Outlook and Discussion
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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
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Brace yourselves for an import wave
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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
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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%
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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
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0
100
200
300
400
500
600
700
800
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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s
Spain Poland Italy Belgium Germany Turkey Rest of Europe
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Weak European demand and growing capacity signal acceleration in recycled liner net exports
6.7%
2019 | Fastmarkets | MENA Containerboard Market Outlook
-400
-200
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400
600
800
1,000
1,200
1,400
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
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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
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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
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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
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Musical chairs dynamic: unloading excess recycled liner tonnage during weak European demand environment
0.0
0.2
0.4
0.6
0.8
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1.2
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1.6
1.8
2.0
0
100
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700
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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
2008 =
1.0
Thousa
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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
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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
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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
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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%
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18
Resurfacing:Supply outlook & market overview
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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
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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
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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
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Thousa
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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
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Large demand capacity deficit, pushing for import influx
64%
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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
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s
Thousa
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s
Capacity Demand Imports (R)
Imports share of demand
21
Boxboard Imports, demand and capacity
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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
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nd t
on
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s
Thousa
nd t
on
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s
Capacity Demand Imports (R)
Imports share of demand
22
Kraft and specialty paper Imports, demand and capacity
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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
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0
50
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150
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500
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
Uncoated recycled board
Cost of production: how competitive are the MENA boxboard producers?
24
Coated multi-ply
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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
Total fiber Chemicals Energy Labor Other Cash cost to Dubai, UAE Cash cost to Port Said, Egypt
Bleached kraft and specialty paper
25
Unbleached kraft and specialty paper
2020 | Fastmarkets | MENA Paper Packaging Outlook and Discussion
Cost of production: how competitive are the MENA Kraft and specialty paper producers?
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Thank you
26
MIDDLE EAST & NORTH AFRICA PAPER
PACKAGING OUTLOOK
risi.com/MENApackaging
2020 | Fastmarkets | MENA Paper Packaging Outlook and Discussion