Market Outlook HAWKINS WRIGHT PwC Global Forest and Paper Industry Conference May 6

Market Outlook
PwC Global Forest and Paper Industry Conference
May 6th 2015
HAWKINS WRIGHT
About Hawkins Wright
Hawkins Wright is an independent consultancy providing a range of strategic, forecasting, market intelligence and business information services to the
international forest products and bioenergy industries.
Hawkins Wright provides tailor-made and confidential market research and consultancy services to clients in the global forest products industry and in
allied businesses. Assignments typically include advice preceding a proposed investment project, the development of a business strategy, and detailed
research on a particular aspect of a forest product market. We regularly undertake market due diligence assignments on behalf of project developers and
financial institutions.
Our regular and multi-client reports and services include:
•
•
•
Pulpwatch a monthly analysis of developments in the global market pulp industry
The Outlook for Market Pulp, providing forecasts of world market pulp demand, supply, costs and prices
The Outlook for Dissolving pulp, providing forecasts of world dissolving pulp demand, supply, costs and prices
•
Defining the China Market for Pulp, Paper and Board, a uniquely detailed analysis of the Chinese pulp
and paper industry
•
Forest Energy Monitor, covering the factors driving the rapidly expanding biomass and wood pellet
markets
The Outlook for Wood Pellets, providing forecasts of world wood pellet demand, supply, costs and prices
•
As well as our regular multi-client reports, Hawkins Wright also publishes a range of onetime studies examining an array of topical issues within the forest
products industry.
For more information: www.hawkinswright.com
HAWKINS WRIGHT
Market Outlook
•
•
•
•
Global Paper and Board demand
Market pulp demand - geared to China
Supply and demand
Exchange rates
• Conclusions
HAWKINS WRIGHT
Global Paper and Board Demand
HAWKINS WRIGHT
Paper Board production - consensus view
600
•
Paper production falls in integrated
regions (mature markets) and grows
in non-integrated regions (EM)
•
However, emerging markets have
slowed considerably and the biggest
growth market, China, has
consistently been overstated
•
Extrapolating based on forecasts of
GDP or population growth is no
longer valid -it would add 50 Mt
2012-2020
500
Million tonnes
400
300
China - official
estimates
200
Emerging, ex China
100
Mature
0
1990
1995
2000
2005
2010
2015
2020
Official sources & national associations
2025
HAWKINS WRIGHT
Paper & Board production
Hawkins Wright assumptions/illustrations
450
400
?
400
350
350
China
Other Far East
Million tonnes
250
Latin America
200
Middle East & Africa
150
East Europe
Japan
100
250
200
150
100
CEPI
50
North America
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
•
•
•
300
Million tonnes
300
50
0
1990
1995
2000
2005
2010
2015
2020
From 2010 to 2014 global P&B demand has grown by 7.6 million tonnes.
Chinese production grew from 65.5Mt to 77.6 million t.
Rest of world fell from 300.3 to 295.8, as growth in Latam, East Europe and other emerging Asia was offset by
declines elsewhere.
HAWKINS WRIGHT
China Paper and Board production and demand
China Paper & board production
•
New China qualities are based on woodpulp
and imported recycled fibre made on machines
installed in last 20 years
110
100
"New" China
"Old" China
90
Our assessments are based on
 Installed Capacity – now 81 million t/y
 Identifiable fibre
 Income distribution ( per capita cons. is a
measure of inequality)
 Consumer spending
CPA estimates
80
thousand tonnes
•
70
60
50
40
30
20
10
0
HAWKINS WRIGHT
Apparent Paper & Board demand v Private consumption
100
90
80
USA
paper & board demand
China
70
Adjust for Old
China and export
sector
60
50
Average
Intensity
$133,000 = 1 t
P&B
40
30
Japan
20
Germany
Italy
10
Brazil
Average
Russia
Spain
0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
private consumption (PPP, US$ trillion)
HAWKINS WRIGHT
The outlook for paper and board
•
In the last ten years the “intensity” of
paper and board demand (i.e. tonnes
per dollar spent ) has fallen
significantly. For example, in 2005 in
the USA, one tonne of paper demand
was generated by $98,000 spending; in
2012 approx. $155,000 was needed.
 New media & technological
innovation
THE AGEING POPULATION
(share of people aged 65 and more in total
population)
30
Japan
China
(19852050)
25
20
15
•
Ageing populations in Europe, Japan,
USA, but also China. Global population
growth concentrated in low
consumption areas like Africa and
India, and Middle East
United
States
Eurozone
10
5
1960
1970
1980
1990
2000
2010
2020
Source: UNPD
HAWKINS WRIGHT
Income distribution in China
• 500 million people brought out of poverty in the last ten years but still 29% of
population have income <US $2 / day.
• 32% of China’s income held by 10% of the population. Explains why crackdown on
corruption and “conspicuous consumption” has had such an impact.
• 1000 millionaires consume more than 1 billionaire.
• Urban middle class 200-250 million.
• If 250 million consume 43 million t/y of paper and board, per capita consumption is
172 kg, similar to Korea.
HAWKINS WRIGHT
Chinese GDP
Slowing, but still growing (+7.4% in 2014)
1200
Household spending
1000
Exports
800
Total
Billion US$
600
+$400 billion
400
200
0
-200
-400
2006
2007
2008
2009
2010
2011
2012
2013
2014(f)
HAWKINS WRIGHT
“New China” Paper and Board 2014 : million t
Production
63.5
Imports
2.5
Exports
5.6
Apparent Consumption
60.4
Converted exports
17.3
Domestic Consumption
43.1
HAWKINS WRIGHT
China – over capacity depresses prices and margins
Capacity Production
Newsprint
%
3.2
3.0
94%
14.5
12.6
87%
9.0
6.7
74%
Carton
17.2
12.2
71%
Container
36.7
29.0
79%
Total
80.6
63.5
79%
P&W
Tissue & Spec
HAWKINS WRIGHT
World fibre consumption by grade
Market pulp demand is remarkably resilient
250
Market pulp
Recycled fibre
million tonnes
200
Integrated pulp
2014 vs 2013:
+1.0% (+2.0 Mt)
150
2014 vs 2013:
-0.6% (-0.6 Mt)
100
50
2014 vs 2013:
+1.4% (+0.8 Mt)
WHY?
1. Tissue is growing in all regions,
and is mostly non-integrated
2. Paper production falls in
integrated regions (mature
markets) and grows in nonintegrated regions (EM)
3. Virgin fibre displacing RCF at the
margin
0
Source: Hawkins Wright – the Outlook for market pulp demand, supply and prices
Note: bleached kraft grades only
HAWKINS WRIGHT
Market Pulp Demand – geared to China
HAWKINS WRIGHT
Market pulp demand growth remains geared to China
70.0
China
60.0
Other emerging
50.0
million tonnes
Latam
40.0
East Europe
30.0
Japan & Oceania
• China accounted for 93% of
global pulp demand growth
in the past 10 years
• Last year, pulp demand in
the rest of the world was
lower than in 2004
20.0
North America
10.0
Europe
0.0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
HAWKINS WRIGHT
Supply and Demand
HAWKINS WRIGHT
Market pulp Capacity 2013 & 2014, - 2018
• In 2013 net capacity grew by 0.8 million tonnes, and in 2014 by 0.9 million tonnes (in line
with demand).
• In 2014 Capacity growth of 0.9Mt was 0.8 million tonnes less than expected this time last
year, due to closures or start-up delays
• The new lines of Eldorado, Ilim, Suzano, and MdP were partially offset by line closures of
Cel du Maroc, Tofte, Huelva, Kamloops, Solombala . New supply has so far been absorbed
by the market.
• In 2015-2018, new capacity 7.8 MTY will be added but partly offset by substitution and
closures
• Environment and sustainability now top priority of China government
• Demand Growth forecast 5.1 MTY of which 4.7 in China/Asia
HAWKINS WRIGHT
Market Pulp Outlook..
• Slow economic growth in Eurozone and BRICs – implies austerity and limits on personal
spending.
• Almost all commodities are suffering the same dynamics of slower Chinese demand as
new supplies reach the market. All require supply-side adjustments.
• Decline in communication papers to continue – even in China and other emerging markets.
Tissue to continue to grow
• Surplus capacity for market pulp…old capacity must be replaced
• Environmental issues accelerate restructuring of China industry
• More stringent regulation which is more strongly policed
HAWKINS WRIGHT
Exchange rates
HAWKINS WRIGHT
Currency depreciation (US dollar strength)
Index of selected currencies against the US$ since January 2011
60%
Euro
Index: January 2011 = 100
80%
100%
120%
China
Canada
140%
Brazil
160%
180%
200%
• Major hardwood producing
currencies strongly depreciated
in 2013 & 2014.
Chile
Russia
220%
• Softwood currencies (euro and
Can$ held their value for longer,
but have since fallen 25-30%
 Russian rouble has also been a
de-stabilising factor
Turkey
240%
Source: Hawkins Wright
HAWKINS WRIGHT
1200
1.8
1000
1.5
800
1.2
600
0.9
400
0.6
euro/dollar exchange rate
NBSK prices (US$/t)
Impact of exchange rates - softwood
NBSK price ($)
200
0.3
€/$ exchange rate
0
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
HAWKINS WRIGHT
Impact of exchange rates - hardwood
1000
600
400
200
BHKP price ($)
€/$ exchange rate
0
euro/dollar exchange rate
BHKP prices (US$/t)
800
1.8
1.7
1.6
1.5
1.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
HAWKINS WRIGHT