Global Pulp Market Outlook

Transcription

1 Global Pulp Market Outlook Nearing a Cyclical Peak or in the Midst of a Prolonged Upturn? RISI Latin American Conference São Paulo, Brazil August 2018 Dave Fortin Vice President, Fiber Copyright 2018 RISI, Inc. Proprietary Information

2 Agenda Review of recent market conditions Aggressive environmental policy changes in China Synchronized growth in the global economy Unexpected downtime continues to impact the market Outlook for paper and board Planned BHK and BSK capacity expansion Review of BHK and BSK cost curves Pulp forecast summary Copyright 2018 RISI, Inc. Proprietary Information 2

3 Major RCP Policy Changes in China New RCP import management system Mixed paper ban in effect as of January 1, 2018 New contamination level of 0.5% took effect on March 1 Latest updates China announced plans to inspect ALL containers from the USA in early May CCIC now performing pre inspection of ALL exports to China China to ban ALL RCP imports by 2020!!! Copyright 2018 RISI, Inc. Proprietary Information 3

4 The Impact of China s RCP Import Policy Changes RCP Imports, Thousand Tonnes China RCP Imports RCP Fiber Loss 30,000 16,000 25,000 20,000 15,000 10,000 5,000 Mixed Other RCP Regulatory Loss Other RCP 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Mixed Paper Ban 0.5% Standard Pulping Loss 11,600 Virgin Pulp Finished P&B Domestic Collections RCP Loss Fiber Needed Solution Copyright 2018 RISI, Inc. Proprietary Information 4

5 New Chinese Policies Are Pushing Domestic RCP Price Levels, and Volatility, Up Imported and Domestic OCC Prices, US Dollars per Tonne $600 $500 Imported OCC, USD/Tonne Domestic OCC, USD/Tonne $400 $300 $200 $100 $ Copyright 2018 RISI, Inc. Proprietary Information 5

6 Synchronized Growth in the Global Economy Purchasing Managers Indices Global Official Caixin Copyright 2018 RISI, Inc. Proprietary Information 6

7 Chinese Domestic Prices for Pulp Slide Lower China Domestic Resale and Imported Pulp Prices 7,900 7,600 7,300 7,000 NBSK Local, RMB (Left) NBSK Local, US$ ex VAT NBSK Import Net Price, US$ $1,150 $1,050 7,900 7,600 7,300 7,000 BEK Local, RMB (Left) BEK Local, US$ ex VAT BEK Import Net Price, US$ $1,150 $1,050 6,700 6,400 $950 6,700 6,400 $950 6,100 5,800 $850 6,100 5,800 $850 5,500 5,200 $750 5,500 5,200 $750 4,900 4,600 $650 4,900 4,600 $650 4,300 4,000 $550 4,300 4,000 $550 3, $450 3, $450 Copyright 2018 RISI, Inc. Proprietary Information 7

8 BSK Producers Maintain Price Premium to BHK Gross Pulp Prices, Delivered to China, US Dollars per Tonne 1, Spread BSK BHK (R) BEK USD/Tonne NBSK USD/Tonne Average Spread Source: RISI Copyright 2018 RISI, Inc. Proprietary Information 8

9 Near Term Conditions and Trends (1) Pulp inventories are low across the industry Unexpected and planned downtime Differences in China between small and large buyers Pulp prices are high and paper prices have been rising Pace of paper price gains lagging and margins getting squeezed Exchange rate changes mitigating upward pressure on prices Paper and board markets now in seasonally weak period DP/BHK price differential remains narrow Bringing swing capacity back into paper grade, for now Copyright 2018 RISI, Inc. Proprietary Information 9

10 Pulp Market in the Midst of an Historical Run Total Change in Gross NBSK Delivered to Europe, US Dollars per Tonne Dec 1993 to Nov Apr 2009 to Sep 2010 Mar 2016 Present Dec 1985 to Mar Consecutive Months with Flat or Higher Prices Copyright 2018 RISI, Inc. Proprietary Information 10

11 Producers Generating Near Record Margins Net NBSK Price/Average Variable Cost of High Cost Producer, Delivered to Europe Mar 2016 Present Dec 1985 to Mar Copyright 2018 RISI, Inc. Proprietary Information 11

12 Pulp Price Gains Outpace Paper and Board BEK / UWF Price Ratio, Delivered to China BEK/UWF Linear (BEK/UWF) Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 Apr 18 Copyright 2018 RISI, Inc. Proprietary Information 12

13 Strong US Dollar Increases Fiber Costs for Non US Pulp Consumers Slightly Currency Units per Tonne, Indexed, January 2017 = USD EUR BRL BEK Delivered to Europe USD RMB BRL BEK Delivered to China Copyright 2018 RISI, Inc. Proprietary Information 13

14 Seasonality of European P&W Demand Copyright 2018 RISI, Inc. Proprietary Information 14

15 DP BEK Price Spread in China US Dollars per Tonne 3,000 China Import Price DP 3,000 DP BEK Price Spread 2,500 China Import Price BEK 2,500 $200 2,000 2,000 1,500 1,500 1,000 1,000 $162/tonne Source: RISI Copyright 2018 RISI, Inc. Proprietary Information 15

16 Near Term Conditions and Trends (2) Large capacity additions started in 2017 ramping up in 2018 OKI mill in Indonesia estimated at around 2 million tonnes Fibria s new line at Três Lagoas now fully ramped up Metsä Fibre s new line in Finland expected to be running at full capacity in the third quarter SCA Ostrand now running Unexpected downtime helped to offset new capacity Suppliers are taking offsetting steps as new lines reach full capacity Fibria continues to take downtime at the Aracruz mill APP has been deliberate about new OKI tonnage and adjusted timeline for planned maintenance downtime in 2018 Copyright 2018 RISI, Inc. Proprietary Information 16

17 Unexpected Downtime Continues Capacity Lost to Unexpected Downtime, Thousand Tonnes Company Mill Country Grade (Comment) Days Capacity / Day Total Idle Start Regionwide Nordics NBSK (Exceptionally Warm Winter) Q2 Regionwide Nordics NBHK (Exceptionally Warm Winter) Q2 SCA Östrand Sweden NBSK (Extended Shut for Project Helios) Q2 SCA Östrand Sweden BCTMP (Extended Shut for Project Helios) Q2 Rottneros Vallvik Sweden NBSK (Bleaching Plant & Recovery Boiler) Q2 Fibria Aracruz Brazil BEK (Proactive Downtime) Q2 Klabin Ortigueira Brazil BEK (Ash Collector) Q2 Klabin Ortigueira Brazil BSK (Ash Collector) Q2 Countrywide Brazil BEK (Trucker Strike) Q2 Canfor (Taylor) British Columbia Canada BCTMP (Extended Shut for Energy Project) Q2 Alpac (Boyle) Alberta Canada BSK (Extended Maintenance Downtime) Q2 Alpac (Boyle) Alberta Canada BHK (Extended Maintenance Downtime) Q2 Net Total (Rated Capacity) 539 Copyright 2018 RISI, Inc. Proprietary Information 17

18 Forecast Drivers Copyright 2018 RISI, Inc. Proprietary Information 18

19 World Production of Paper and Board Accelerating, but Very Slowly 8.0% 6.0% Graphic, Packaging, Specialty and Tissue Percentage Change 6.6% 4.0% 2.0% 2.1% 4.0% 3.0% 1.1% 0.3% 1.0% 0.9% 0.2% 1.2% 1.7% 1.9% 1.9% 0.0% 2.0% 0.6% 4.0% 6.0% 5.3% Copyright 2018 RISI, Inc. Proprietary Information 19

20 Most of the Growth in the Paper Industry Is in Packaging with a Modest Effect on Market Pulp Tissue + P&W Packaging/Specialty P&W Tissue News Copyright 2018 RISI, Inc. Proprietary Information 20

21 Relatively Little BHK Capacity Expansion Suzano (Brazil) 90,000 tonnes incremental at Maranhão mill net of integration into tissue ENCE, Altri, Navigator (Iberia) 250,000 tonnes in incremental projects net of integration into tissue APRIL Kerinci (Indonesia) Further conversion to DP 200, ,000 tonnes in Asia Symbol Rizhao (China) Beginning conversion to DP 200,000 tonnes in ? UPM (Kaukus and Kymi) 150,000 tonnes from debottleneck Svetlogorsk (Belarus) Started production in November ,000 tonnes in 2018(?) Sun Paper Savannakhet (Laos) Start up in 2018 Q2(?) Swing mill: 300,000 BHK / 250,000 DP Eldorado/PE (Brazil) Received permit to produce additional 55,000 tonnes Montes del Plata (Uruguay) 100,000 tonnes debottleneck Chenming Shouguang (China) 1.2 million tonne new line (integrated and delayed) Copyright 2018 RISI, Inc. Proprietary Information 21

22 BHK Cash Cost Curve, 1Q18 Machine Level Costs, Delivered Shanghai, Not Including I, SG&A or Logistics South Africa Asia Europe South America North Amer. Copyright 2018 RISI, Inc. Proprietary Information 22

23 Similar Story for BSK Capacity Expansion UPM (Kaukus and Kymi) 50,000 tonnes debottleneck Svetlogorsk (Belarus) 300,000 tonnes, 2018? SCA Östrand (Sweden) 470,000 tonnes, June 2018 Chenming Huanggong (China) 600,000 tonnes, fourth quarter 2018 Swing mill with DP Resolute Saint Felicien (Canada) 30,000 tonnes, upgrades 2018 Mondi Steti (Czech Republic) 70,000 BSK late 2018 Oji Tasman (New Zealand) 180,000 tonnes, conversion to UKP, 2019 BillerudKorsnas Gruvon (Sweden) 130,000 tonnes, integrated to new BM 2019 Arauco Valdivia 500,000 tonnes, conversion to DP 2019 Plan to increase DP share as demand increases Stora Enso Enocell (Finland) 320,000 tonnes, conversion to DP 2019 Copyright 2018 RISI, Inc. Proprietary Information 23

24 BSK Cash Cost Curve, 1Q18 Machine Level Costs, Delivered Shanghai, Not Including I, SG&A or Logistics Asia Europe South America North America NZ Copyright 2018 RISI, Inc. Proprietary Information 24

25 Forecast Summary Pulp market will soften slightly in the third quarter of 2018 Pulp supply will increase as new lines ramp up Chinese pulp demand will ease due to oversupply in paper and board European demand will weaken seasonally Current high pulp prices could be vulnerable Pulp demand will remain strong due largely to tight fiber supplies in China Market conditions will tighten again in late 2018 and into 2019 as capacity expansion slows Copyright 2018 RISI, Inc. Proprietary Information 25

26 Thank you! For more information: World Pulp & Recovered Paper 5 Year and 15 Year Forecasts World Pulp Monthly Copyright 2018 RISI, Inc. Proprietary Information 26