Global Graphic Paper Outlook Derek Mahlburg Senior Economist, Graphic Papers June 2015

Transcription

1 Global Graphic Paper Outlook Derek Mahlburg Senior Economist, Graphic Papers June

2 Derek Mahlburg, Senior Economist, North American Graphic Paper Has covered North thamerican graphic paper markets with RISI since 2008 Co-author of the monthly Paper Trader and North American graphic paper forecasts Special studies include Global Woodfree Risk of Closure Study, North American Containerboard Conversion Study, and The Impact of Media Tablets on Publication Paper Markets 2

3 World Printing & Writing Paper Demand Is the global market in decline? Yes, its just a matter of degree % Volume (L) Percent Change (R) 110 6% llion Tonn nes Mi 100 0% 90-6% % 3

4 P&W Paper Demand for 2015 and 2016 Shows Slow Decline, But Varies by Region Thousand Tonnes, Percent per Year -987 (-2.6%) -1,018 (-2.4%) -24 (-0.2%) 135 (3.0%) 882 (1.0%) 116 (0.9%) 167 (3.6%) -32 (-1.1%) Global: -761,000 Tonnes (-0.4%) 4

5 Only UWF May Still Be Growing Globally Mechanical grades appear to be flat or declining 60 Global Dem mand, Millio on Tonnes UWF Cme CWF Ume

6 Newsprint Demand Now Declining in Most Global Markets for 2015 and 2016 Thousand Tonnes, Percent per Year -602 (-7.7%) -674 (-5.6%) -155 (-4.5%) -2 (-0.2%) -425 (-1.9%) -80 (-2.8%) 28%) 14 (+1.0%) -39 (-4.3%) Global: -1,963 Tonnes (-3.8%) 6

7 Asia: Growth Is Slowing Remarkably from Past Trends 32 News -1.7%* UWF 1.0%* CWF 0.4%* 27 Cme 1.1%* Ume 2.4%* Woodfree grades dominate the region Mechanical paper needs softwood and is often imported Graphic paper growth rate has slowed considerably: 1% in 2012 and 2013, -0.8% in 2014 Average growth had been 4% Million Ton nnes China slowing, Japanese 2 decline accelerating * Annual growth rate,

8 Europe: Moderating Rate of Decline, UFS Outperforming Other Grades * Annual growth rate, (Combined Western and Eastern Europe) News -5.3%* UWF -0.9%* CWF -2.6%* Cme -2.8%* Ume -2.1%* 21%* llion Tonne es Mi Eastern Europe growth somewhat buffers sharp decline in the West UWF usage rates starting at much lower per capita levels than North America and have less room to fall Region slightly more protected from new technologies, but equally exposed to mature economies 8

9 North American Decline Is Here for the Long Term 16 UWF and Cme are the most impacted grades Main declining threats are new technologies, exacerbated at times by a weak economy UWF seesaw of 2013/2014 to stabilize at 2.9% decline in 2015/2016 nes Million Ton News -7.5%* UWF -2.9%* CWF -0.6%* Cme -4.4%* 44%* Ume -2.5%* * Annual growth rate,

10 US Printing & Writing Paper Usage by Printed Media Has Dropped by 50% Over the Past Decade 4,000 14,000 s, ed Products nes n US Printe usand Ton aper Use in Thou Pa 3,500 3,000 2,500 2,000 1,500 1, Catalogs Magazines Books Newspapers (R) ,000 10,000 8,000 6,000 4,000 2,

11 Many Mergers and Acquisitions over the Past 15 Years Have Led to Only Marginal Gains in North American Graphic Paper Market Shares Mergers offset by focus of capacity shuts at larger companies as well as capacity shuts and spinoffs as part of the merger Mergers have rarely resulted in higher prices Main benefit has come from 5-7% efficiency gain Transport logistics Lower overhead Longer grade runs and higher machine efficiency More buying power Paper of N. Americ can Graphic Capa acity Share 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Top 3 Top 5 Top

12 Historical US Publishing Paper Prices Recovery in coated pricing may get nixed by the strong dollar $1, $55 SC-A Ctd. No lb US Dollars pe er Ton $1,000 $900 $800 Ctd. No lb. Unc. Offset 50 lb. $50 $45 $40 r CWT ollars pe US D $ $35 12

13 Global Overcapacity Developed in UWF During Announced Net Uncoated Woodfree Capacity Changes for vs. Demand Growth for the Same Period, Thousand Tonnes 5,000 4,000 Capacity Growth Demand Growth 3,000 2,000 1, ,000 Europe N. America Asia, ME, OCE, Afr Latin America Global Note: Asian capacity expansions exclude the offsetting effect of government mandated closures of small, old, polluting mills 13

14 Leading to a Rise in Exports from Asia While Brazilian Net Exports of Uncoated Woodfree Stagnate es of Net E Thous sand Tonn 3,000 2,000 Exports2,500 1,500 1, Brazil Indonesia China

15 Shipments of Cut Size Uncoated Uncoated Woodfree to the North American Market Imports now supply over 20% of demand Tons per Month Thousand Import Domestic Import Share (R) % 25% 20% 15% 10% 5% 0% Import Sh hare, Perce ent 15

16 UWF Demand and Capacity Changes for Announced Net Uncoated Woodfree Capacity Changes for vs. RISI Forecast of Demand Growth for the Same Period, Thousand Tonnes 5,000 4,000 3,000 Capacity Growth Demand Growth 2,000 1, ,000 Europe N. America Asia, ME, Latin America Global OCE, AFR Note: includes prorated capacity changes for

17 Uncoated Woodfree Operating Rates Import pressures and strong dollar pressuring North American shipments 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90% 89% 88% 87% 86% 85% 84% 83% N. America W. Europe Asia B il 96% Brazil

18 Tariff Suit Against Offshore Importers of Cut Size Paper into the USA US Imports of Uncoated Freesheet from Selected Offshore Countries Thousand Tonnes Total Uncoated Freesheet Only Cut Size and Folio Sheets Country China/Hong Kong Indonesia Brazil Portugal Australia Totals Percentage Growth 25% 35% 26% 34% Notes: Classification of grades into uncoated freesheet, cut size and folio sheets are RISI estimates and are not necessarily the exact categories to be used by the ITC in this investigation. 18

19 Tariff Suit Against Offshore Importers of Cut Size Paper into the USA CVD against China and Indonesia To offset government subsidies Preferential lending Income tax and VAT tax rebates Government provision of goods or services, including electricity, chemicals and land, at less than adequate remuneration Provision of standing timber at low prices and prohibition of log exports Debt forgiveness by the government Likely to be in place by third quarter of 2015 Could be around 18% if similar subsidies given to UFS mills compared with calculations for CFS mills in 2010 CVD Would not necessarily affect all suppliers 19

20 Market Share of Imports into the USA by Grade 70% Tariffs in place 60% since 2010 Tariffs under 50% investigation in % 30% 20% 10% 0% CWF Total CWF Sheets Cme UWF Cut Size UWF Ume Canada Offshore 20

21 How Did the 2010 Coated Woodfree Tariffs on Chinese/Indonesian Paper Impact the US Market? Most of benefits went to unaffected producers in Asia and Europe, resulting in very little price improvement in the US market 2009 US CWF Market 1.2 Million Tonnes 2010 US CWF Market 1.3 Million Tonnes China 22% China 2% Indonesia 2% Domestic 48% Korea, Japan 13% Indonesia 9% Domestic 57% Korea, Japan 24% Europe 15% Europe 8% 21

22 20 lb/75 gsm Cut Size Copy Paper Prices Strong US dollar is clear impediment to higher US copy paper prices US Dollars per Ton $1,250 $1,200 $1,150 $1,100 $1,050 $1,000 $950 $900 $850 $800 $750 USA Europe Hong Kong $

23 Announced Net Coated Woodfree Capacity Changes for vs. RISI Forecast of Demand Growth for the Same Period Thousand Tonnes ,000 Capacity Growth Demand Growth Europe N. America Asia, ME, Latin America Global OCE, AFR Note: includes prorated capacity changes for

24 Coated Woodfree Operating Rates Lack of announced capacity expansion and demand growth in Asia will cause operating rates to improve 95% 93% 91% 89% 87% 85% 83% 81% 79% 77% 75% N. America W. Europe Asia

25 The Big Issue Facing Paper Pricing in 2015 is the Strong US Dollar US Dollar Per Foreig gn Curren ncy Euro Canadian Dollar

26 60 lb/100 gsm CWF Paper Prices If the euro stays low or drops further, a big gap in prices will open up, forcing some changes in trade $1,150 $57.5 $1,100 $55.0 $1,050 $52.5 US Dollars per Ton $1,000 $950 $900 $850 USA $50.0 $47.5 $45.0 $42.5 CWT US Dollars per $800 Europe $40.0 $750 $37.5 $700 $

27 North American Mill Cash Cost Inflation Is Turning Negative in 2015 Costs are not driving prices in % US rth h Costs in U xisting Nor n Mill Cash ge of All Ex rican Mills Change in for Averag Amer Percent Dollars 80% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% UWF Offset CWF Offset

28 Price to Mill Cash Cost Margins Average for all existing North American mills 1.6 Pric ce/mill Cas sh Costs Newsprint CME/LWC-40 lb CWF - 60 lb rolls UWF - Copy Paper Ume - SC-A

29 Weak Newsprint Operating Rates Will Force Producers to Make Tough Choices European Operating Rates Climb Due to Closures, Weak Euro 100% 95% 90% 85% 80% 75% W. Europe N. America Asia World

30 Cumulative World Newsprint Capacity Closures and Oversupply Declining global demand will keep oversupply at 10% over the next two years despite 2.8 million tonnes of capacity closures and conversions Thousa and Tonnes 16,000 14,000 12,000 10, ,000 6,000 4,000 2, ,000 Cumulative Capacity Closures Overcapacity (100% minus operating rate, R. axis) 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 30

31 Thank you for your attention! For more information: World Graphic Paper 5-Year Forecast Global Woodfree Risk of Closure Study China s Influence on World Graphic Paper Markets in the Coming Decade 31