Outlook for the World
Paper Grade Pulp Market
Kurt Schaefer, VP Fiber
November 2015
kschaefer@risi.com
1
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This Forecast Presentation Is Based on
Our Pulp and RCP Forecasts
For more information:
World Pulp & Recovered Paper
5-Year and 15-Year Forecasts
www.risi.com/forecasts
World Pulp Monthly
www.risi.com/wpm
Announcing Our Updated China Pulp
Study---Available This Week.
New Edition:
The China Pulp Market in
Transition:
A Comprehensive Analysis
and Outlook
3
© Copyright 2015 RISI, Inc. | Proprietary Information
Abbreviations and Grades
• BSK = Bleached Softwood Kraft Pulp (“long” fiber)
– NBSK (northern), SBSK (southern), radiata
• BHK = Bleached Hardwood Kraft Pulp (“short” fiber)
– BEK (eucalyptus), NBHK (northern mixed), acacia
• DP = Dissolving Pulp
– Primarily textile grade (“viscose” pulp)
• P&W = Printing & Writing Paper
– Coated and uncoated; woodfree and mechanical
• Delivered Cash Cost = Mill Cost + Delivery Cost
– Includes: Fiber, chemicals, energy, labor, logistics
– Excludes: Depreciation, interest, SG&A
• TPY = Tonnes per year
4
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Global Real GDP: Economic Growth
Rebalancing and Accelerating in 2016
9
%
7.7
8
7.7
7.3
6.9
7
6.6
6
5
4
3.4
3.0
3
2.4
2.2
2
1.6
1.8
3.3
3.3
3.7
3.1
2.7
1.5
0.9
1
0
-0.3
-1
-0.8
Euro area
-2
5
12
13
14
15
16
United States
12
13
14
15
16
China
12
13
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14
15
World
16
12
13
14
15
16
World Production of Paper and Board:
Accelerating Slowly
Graphic, Packaging and Specialty and Tissue; Percent Change
8%
6.5%
5.7%
6%
4%
4.0%
3.7%
3.3%
3.0%
2.7%
2.1%
2%
1.0%
0.8% 0.9%
1.3%
1.6%
0.2%
0%
-0.6%
-2%
-2.0%
-4%
-5.4%
-6%
2000
6
2002
2004
2006
2008
2010
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2012
2014
2016
Most of the Growth in the Industry Is in
Packaging—Modest Effect on Market Pulp
300
180
Packaging/Specialty
P&W
250
Tissue + P&W
160
Tissue
News
140
200
120
100
150
80
100
60
40
50
20
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
7
0
2000 2002 2004 2006 2008 2010 2012 2014 2016
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The New Reality for World P&W Demand:
Peak Demand Has Already Happened
180
P&W Production
2007 Forecast
160
Million Metric Tons
140
120
100
80
60
40
20
0
80
8
85
90
95
00
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05
10
15
In China, P&W Production Is Leveling
Off, While Tissue Continues to Grow
30
Million Tonnes per Year
25
P&W
Tissue
20
15
10
5
0
1990
9
1995
2000
2005
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2010
2015
P&W Consumption per Person,
1970 to 2014
140
kg/person
120
Japan
100
South Korea
80
China
60
40
20
Per capita real GDP, US$
0
0
10
5000
10000
15000
20000
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25000
30000
35000
BHK Capacity in China on a Mill-by-Mill
Basis
8
Oji Nantong
7
Chenming Zhanjiang
Asia Symbol Rizhao
APP Hainan
6
Others
5
4
3
2
1
0
2000
11
2001
2002
2003
2004
2005
2006
2007
2008
2009
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2010
2011
2012
2013
2014
2015
Even in a Weak Dollar Setting, China’s
Pulp Producers Have Competitiveness
Problems Related to Fiber Supply
• Lack of woodfiber
and available land
– Many plantations are
on marginal sites
with low yields
– Labor costs have
been rising quickly
– Importing woodfiber
is expensive
• Tighter enforcement
of pollution and water
use standards
12
Eucalyptus in southern China
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What Are the Sources of Incremental
China’s Pulp Demand?
• Tissue production is rising by about 600,000 tpy
– Predominantly based on virgin fiber
• Policy closures of “backward” pulp and paper
capacity favors BHK consumption growth (at the
expense of local fiber, including nonwood).
• Rising demand for higher quality paper also raises
BHK demand
• Continuing move toward more BHK, less BSK, as
new paper machines are installed.
• BSK demand for absorbent applications is growing
• Conclusion: Net imports of BHK into China will
continue to show solid growth
13
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“World Class” Pulp Lines are Growing
Exponentially in Size
(1000 annual tonnes of capacity)
2500
2000
1500
1000
500
0
1975
14
1980
1985
1990
1995
2000
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2005
2010
2015
BHK Net Imports by Region: Trade Flows
Continue to Adjust to New S. Amer. Supply
10
5
0
2000
2005
-5
-10
South America
Asia
Europe
-15
N. America
Other
-20
15
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2010
2015
In Indonesia, APP’s South Sumatra BHK
Project Will Open in 2016/Early 2017
• 2.0-2.8 million tonnes per year of BEK and BAK
• Acacia from plantations in South Sumatra
• May include paper machines eventually
16
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In Brazil, Five Large BEK Lines Will Be
Started Up in 2014-2018; ~ 8 MTPY
• Suzano Maranhao
– 1.5 MTPY, 2014
• CMPC Guaiba
– 1.3 MTPY, 2015
• Klabin Ortigueira
– 1.1 MTPY, 1Q 2016
• Fibria Tres Lagoas
– 1.85 MTPY, 4Q 2017
• Eldorado Tres Lagoas
– ~2.2 MTPY, 2H 2018
17
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2015 Capacity Developments
18
Com pany (Mill)
Location
Country
Grade
Mkt. Cap
Int. Cap Status
Altri
Constancia
Portugal
BHK
Jari
M onte Duardo
Brazil
DP/BHK
330
C
2015
January
Paper Excellence (Chetwynd)
British Columbia
Canada
BCTM P (hwd)
240
C
2015
May 1
Nanning Phoenix
Nanning
China
BHK/BSK
-150
C
2015
Q1
CM PC
Guaiba
Brazil
BHK
Yibin Paper
Yibin
China
Bamboo
Yinquant Paper
Qing'an
China
Wheat Straw
Portucel
Cacia
Portugal
BHK
Sun Paper
Zoucheng
China
DP/BHK
Sun Paper
Yanzhou
China
BHK
300
Resolute
Calhoun
USA
BHK
75
Tralin
Jiamusi
China
Straw
Heinzel Pols
Styria
Austria
BSK
Holmen
Iggesund
Sweden
BSK
UPM (Kymi)
Kuusankoski
Finland
UPM (Kymi)
Kuusankoski
Verso
Verso
-120
Year
Date
C 2011-2015
C
2015
May 3
200
C
2015
Q2
90
C
2015
Q3
C
2015
Q3
C
2015
Q4
C
2015
Q4
25
C
2015
Q4
95
C
2015
Q4
240
C
2015
Q4
50
C
2015
Q4
BSK
70
C
2015
Q4
Finland
BHK
100
C
2015
Q4
Androscoggin
M aine
BSK
225
C
2015
October
Wickliffe
Kentucky
BHK
200
C
2015
October
Paper Excellence (Howe Sound)
British Columbia
Canada
BSK
C
2015
Q4
Suzano
Suzano
Brazil
BHK (fluff)
C
2015
Q4
Waggeryd
Vaggeryd
Sweden
BCTM P (swd)
20
C
2015
Rottneros
Vallvik
Sweden
BSK
20
C
2015
Chenming*
Nanchang
China
BCTM P
C
2015
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1,300
70
25
100
-100
250
2016 Capacity Developments
19
Com pany (Mill)
Location
Country
Grade
Mkt. Cap
Int. Cap Status
Year
Date
ENCE
Navia
Spain
BHK
40
C
2015-16
Q2-Q1
-130
P
2015-18
-180
C
2016
Q1
90
C
2016
Q1
Catalyst Paper
M aine
USA
BHK
Expera
Old Town
USA
BSK/BHK
WestRock
Evadale
USA
BSK
Svetlogorsky
Svetlogorsk
Belarus
BSK/BHK/DP
-90
400
C
2016
Q1
C
2016
Q1
Klabin
Ortigueira
Brazil
BHK
1,100
Klabin
Ortigueira
Brazil
BSK
400
C
2016
Q1
SodraCell
M orrum
Sweden
BSK
35
C
2016
Q1
IGIC (Woodland)
M aine
USA
BHK
-100
C
2016
Q1-Q2
C
2016
Q2
100
International Paper (Riegelwood)
North Carolina
USA
BSK
360
PT OKI/APP
Sumatra
Indonesia
BHK
2,800
C
2017
Q3
Double A
Alizay
France
BHK
130
C
2016
Q3
ITC
Bhadrachalam
India
BCTM P
C
2016
Q3
C
2016
Q3
-95
C
2016
Q3
-135
C
2016
Q3
?
C
2016
End
125
P
2016
C
2016
C
2016
105
SodraCell
Varo
Sweden
BSK
275
Domtar (Ashdown)
Arkansas
USA
BSK
230
Domtar (Ashdown)
Arkansas
USA
BHK
UPM
Kaukas
Finland
BSK/BHK
Columbia Pulp
Washington
USA
UKP (Straw)
Yongfeng*
Xuyong
China
Bamboo
Irving
New Brunswick
Canada
BSK
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200
30
Key BHK Capacity Developments
•
•
•
•
20
Sun Paper Yanzhou switch to BHK, Q4: 250-300k?
Old Town closures, Q4/Q1: ~180k BHK/BSK
Klabin Ortigueira, Q1: 1.1 million BHK
APP OKI, Q3/Q4: 2.0-2.8 million BHK
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Key BSK Capacity Developments
•
•
•
•
•
21
Svetlogorksy BSK/BHK/DP 1H2016: 400k
Klabin Ortigueira 1Q16: 400k
IP Riegelwood 2Q16: 360k
Domtar Ashdown 3Q16: >300k
Sodra Varo 3Q16: 275k
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FX: Strong Dollar Continues in 2016
$1.60
EUR USD
CAD USD
$1.40
BRL USD
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
00
22
01
02
03
04
05
06
07
08
09
10
11
12
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13
14
15
16
17
18
2016 Forecast Summary
• Continuing strong dollar, with upside risk in terms of
dollar strength with acceleration of the US economy
– Putting downward pressure on production costs
• Modest acceleration in growth of paper and board
demand, mostly b/c of packaging
• In the pulp market, supply-side changes remain
more prominent than usual
• For BHK, given the new assumed timing for the
South Sumatra project, profitability seems to be on a
downward trend through the end of 2016
• For BSK, 2nd half of 2016 could see capacity growth
> demand growth, esp. for SBSK/fluff
23
© Copyright 2015 RISI, Inc. | Proprietary Information
Announcing Our Updated China Pulp
Study---Available Today.
New Edition:
The China Pulp Market in
Transition:
A Comprehensive Analysis
and Outlook
24
© Copyright 2015 RISI, Inc. | Proprietary Information