This is new slide - gaa.org · The growth of paper and paperboard production is expected to be...

FIBER

GAA Environmental Workshop

Washington, D.C. June 19-21, 2012

June 20, 2012

KATHY KNEER, PRINCIPAL

New York, NY

OVERVIEW OF FIBER DEMAND

GAA Environmental Workshop 2012 2 Pöyry Consulting

THE WORLD OF FIBER

Papermaking Fiber

Virgin Fiber

High-grades

OCC ONP / OMG

Mixed

Integrated

BHKP BSKP

Market Pulp

Recovered Fiber

53% 47%

19% 49% 22% 10%

31% 69%

52% 33%

Other

15%

The global fiber market totalled some 375 million tons in 2010. Recovered fiber accounts for slightly over half the consumption.


2020 DEMAND OUTLOOK

Total Fiber Demand RCP Share of Total Fiber

RCP

Pulp

million t/a

Demand for RCP will increase going forward:

•Most paper/board production increase is in emerging markets

•Many emerging markets, Asia, especially, have less available virgin fiber

•RCP share of total fiber will get close to 60%


RECOVERED PAPER – GLOBAL OVERVIEW

Japan China Eastern Europe Western Europe North America

Latin America Africa

Collection

Consumption

Net exporter Net importer

Rest of Asia Oceania

North America and Western Europe are the main surplus areas, while China can currently source only about half of its needs from domestic collection.


1.7

12.8

9.3

0.2

1.6

4.9

0.9

17.4

0.9

MAJOR TRADE FLOWS OF RECOVERED PAPER

China is increasing imports of RCP from all regions, including US. Volumes from US to China have grown from 5 to 14 million tons between 2003-2011.

Major Global Trade Flows Year 2009, million tons


LARGEST PAPER INDUSTRY RCP USERS GLOBALLY RCP Usage of Selected Paper Companies 2010E

Million tons


*Does not produce printing and writing grade papers.

USE IN PAPERMAKING

Other

Tissue

Newsprint

Cartonboard

Containerboard

RCP Consumption by Paper Grades

Today, approximately 200 million tons of paper are recovered for reuse in papermaking, corresponding to approximately 50% of global paper and board consumption. The recovery rate varies by region and by grade. Consumption also varies by region, and by grade.

Recovered

Incineration & Landfill

Non-recoverable*

390

190

120

80

Paper and Board Consumption

50%

30%

20%

*Tissue, cigarette, labels etc.

Million tons


FIBER DEMAND AND SUPPLY: CHALLENGES AHEAD


CHALLENGES

RCP supply Will there be enough?

How will demand and recovery/consumption balance?

Collection rates How much can they increase and where?

Furnish substitution What will be the impact on demand for RCP?

RCP prices and paying capability

How much can prices increase? Who can afford to pay?

Graphic paper demand

How much can it decline?

How does the decline impact availability of RCP and production of tissue and cartonboard?


ALTERNATIVE PATHWAYS FOR FIBER MARKET

11

World Fiber Demand

Mature Markets*

Emerging Markets

Million tons

Emerging Markets

Mature Markets*

Million tons

RECOVERED FIBER VIRGIN FIBER Recovered paper supply constraints and price

Sources of virgin fiber?

New fiber platforms

Supply constraints - Shortage?

Competition for recovered paper

– Implications for market balances?

*) North America, W.Europe & Japan

Pöyry Consulting GAA Environmental Workshop 2012

SO WHERE IS FIBER NEEDED?

Poyry Consulting GAA Environmental Workshop 2012 12

The growth of paper and paperboard production is expected to be highest in China and other Southeast Asia. Graphic paper production will decrease on a global basis.

Mature markets*

-0.5%

China 3.7%

Other regions

3.0%

*Mature markets: North America, Western Europe and Japan

000 mt 000 mt

Mature markets*

-2.4% China 2.4%

Other regions

1.9%

IMPACT OF CHINA ON GLOBAL RCP MARKET

RCP consumption in China RCP utilization in China in 2010

RCP demand growth has been very rapid in China from 8 million tons in 1995 to over 65 million tons in 2010. This development is estimated to continue and the demand is projected to exceed 100 mt by 2020.

65 million tons

Forecast


CHINA – IMPORT SUPPLY OF RCP

Imports of recovered paper to China have grown rapidly over the last decade, coinciding with investment in collection systems and availability across Europe and North America.

The key exporting countries remain the US, the UK and Japan.

Imports of recovered paper have increased substantially driven by availability in specific countries and Chinese demand. This growth will slow over the next decade.


GRAPHIC PAPER DEMAND Graphic papers demand will behave very differently in mature vs. emerging

markets, with slight overall decline forecast.

*) Newsprint and Printing/Writing papers


Graphic paper is the only major paper/board category with forecast decline

Driven by rapid decline in mature markets, especially in newsprint, but also in other grades

Lower demand drives lower production: less available for collection

Leads to need for fiber substitution in tissue and cartonboard grades, especially

Packaging and tissue are dependent on the fiber inflow from graphic papers, both in terms of volume and quality

GRAPHIC PAPERS PROVIDE FIBER TO PACKAGING AND TISSUE

Fiber Production End Use Graphic Papers

Packaging and Tissue Fiber Production End Use

Not collected Virgin

RCP

50 %

100 % Virgin

RCP

Recovered

Recovered

Not collected

Graphic papers lose RCP to other grades and have to compensate for it with an ‘additional’ inflow of virgin fiber

Globally some 40million t/a


FURNISH DEVELOPMENT IN NORTH AMERICA

Furnishes of the selected grades are not expected to change much through 2020.


FURNISH DEVELOPMENT COMPARISON

Containerboard 2020 Tissue 2020 Cartonboard 2020

North America’s furnish development is much different from China’s.

Pöyry Consulting 18 GAA Environmental Workshop 2012

Containerboard 2020 Tissue 2020 Cartonboard 2020

North America

China

End-users (Paper producer, board producer etc.)

RECOVERED PAPER FLOW

Landfill Corrugated Plants

Office Household Trade Industry

Printing Converting

Waste management company

Collector

Handling plant

Trader Dealer

Source

Collection

Sorting Baling Shredding

Trade

RCP Consumption

There are several paths from collection to consumption, some which include several

“handlers” and intermediate steps. This can increase costs significantly.


Since low-cost sources are already largely utilised, it is likely that the marginal cost of collection will go up in the future. This will drive prices higher.

Illustrative

Co

st o

f co

llect

ion

Today Tomorrow

Price

Collected Volume

Price

Dem

and

Dem

and

Retail

Industry

Printing

Households


INCREASING COLLECTION RATES HIGHER COLLECTION COSTS AND PRICES

RCP COLLECTION ROUNDS AND QUALITY

It is possible to recycle fiber numerous times, but in reality, due to collection rates

and process losses, over 80% of the fiber is lost after two collection rounds.

Furthermore, the quality of the fiber weakens significantly with each collection

round.


DECLINING RCP FIBER AVAILABILITY Changes in paper and board consumption structures could generate a vicious circle

in RCP availability and consequently influence global fiber dynamics.

DECLINE IN GRAPHIC DEMAND PACKAGING GROWTH BUT IN DEVELOPING REGIONS

Driver for Change Electronic substitution coupled

with cost reduction initiatives.

Shift of industrial production and packaging from mature markets to Asia accelerates.

Main Challenges

Availability of ONP/OMG and HG RCP

Price pressures

Fiber inflow to tissue and packaging

Availability of OCC

Limitations regarding collection rates

Quality limitations


SUMMARY: KEY ISSUES IN RCP


Growing demand…

…and stagnating collection rates…

…coupled with deteriorating quality and yields…

… result in tighter supply/demand balance...

…impacting prices.

Threat from energy use?

Supply chain control?

Poyry Consulting GAA Environmental Workshop 2012 24

KATHY KNEER, PRINCIPAL [email protected]

646-651-1548

mailto:[email protected]

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