Outlook for Global Recovered Paper Markets Hannah Zhao, Economist, Recovered Paper October 212 Global OCC Market $28 $24 $2 $16 US$ per Tonne % 6 55 5 $12 $8 US West Export (FAS) N. German Export (FAS) $4 China Import (CIF) China PMI-R $ 26 27 28 29 21 211 212 45 4 35 Global ONP Market $3 US$ per Tonne $26 $22 $18 $14 $1 $6 US ONP#8 (FOB) Germany 1.11 (Free Delivered) China Import ONP(CIF) $2 26 27 28 29 21 211 212
ONP Prices in Chinese Market $3 US$ per Tonne $25 $2 $15 $1 From US (CIF) From JP (CIF) From WE (CIF) $5 26 27 28 29 21 211 212 Sorted Office Paper in the North American and European Markets $35 $3 US$ per Tonne Sorted Office Paper-US Sorted Office Waste-UK $25 $2 $15 $1 $5 26 27 28 29 21 211 212 Data sources: and Letsrecycle.com Chinese Recovered Paper Imports 3. US$ per Tonne 3 2.5 25 2. 2 1.5 15 1. 1.5 N. America W. Europe Japan Other Imported OCC Price. 26 27 28 29 21 211 212 5
World Recovered Paper Demand Will Continue to Grow in 213-214 After it dropped sharply in 29 and rebounded in 21 Improved general economy and paper and board market? Brighter 213 after a gloomy 212? Asia will account for a large share of demand growth Although h the growth pace in RCP demand d will slow Additions to recycled-based PAB capacity over next two years Shortage of virgin fiber in general Developed regions will generate very limited RCP usage growth The main constraint: little growth or even a decline in paper and board production World RCP Demand & RCP Usage Rate 3 25 N. America W. Europe Japan China Other Asia Other World Usage Rate 6% 5% 2 4% 15 3% 1 2% 5 1% % 1992 1994 1996 1998 2 22 24 26 28 21 212 214 World Recovered Paper Demand Will Continue to Grow in 213-214 Containerboard (CNT) will account for more than 6% of the total demand increase Very high RCP usage rate in world CNT sector: 87% in 211 Output will continue to expand worldwide in the next two years Other paper and board, mainly paper packaging grades, will also show substantial demand gains OCC will register the largest tonnage gains Mixed paper demand may also grow as the cheaper substitute Demand for high grades may also increase? Used in making tissue, printing & writing paper and white tops
Containerboard Production & RCP Usage Rate 18 16 14 12 N. America W. Europe Japan China Other Asia Other World Usage Rate 9% 8% 1 8 6 7% 4 2 2 22 24 26 28 21 212 214 6% Newsprint Production & RCP Usage Rate 4 75% 3 7% 2 65% 6% 1 N. America W. Europe Japan China Other Asia Other World Usage Rate 2 22 24 26 28 21 212 214 55% 5% P&W Production & RCP Usage Rate 12 12% 1 11% 8 1% 6 9% 4 8% 2 N. America W. Europe Japan China Other Asia Other World Usage Rate 2 22 24 26 28 21 212 214 7% 6%
Tissue Production & RCP Usage Rate 4 3 N. America W. Europe Japan China Other Asia Other World Usage Rate 7% 65% 2 6% 1 55% 2 22 24 26 28 21 212 214 5% Other PAB Production & RCP Usage Rate 1 7% 9 8 65% 7 6 6% 5 4 55% 3 2 1 N. America W. Europe Japan China Other Asia Other World Usage Rate 2 22 24 26 28 21 212 214 5% 45% Asian Containerboard and Boxboard Capacity Expansions 212-213 Country Capacity (Thousand Tonnes) Year Grade China 4,7 212 Recycled CNT China 2,75 / 2,9 212 Recycled / Virgin BOX China 4,4 213 Recycled CNT China 7 / 6 213 Recycled / Virgin BOX Indonesia 35 212 Recycled CNT Indonesia 35 213 Recycled CNT India 3 212 Recycled CNT India 28 212 Recycled BOX India 55 213 Recycled CNT India 285 213 Recycled BOX Vietnam 2 212 Recycled CNT Japan 3 212 Recycled BOX Thailand 6 212 Recycled BOX
North American Containerboard and Boxboard Capacity Expansions Country Capacity (Thousand Tonnes) Year Grade Canada -68 211 Recycled CNT Canada -375* 212-213 Recycled CNT USA 495 211 Virgin CNT USA 2385* 212-213 4% Recycled CNT Canada -36 211 Recycled BOX Canada -6* 212-213 Recycled BOX USA -85 211 Most Recycled BOX USA 185* 212-213 All Virgin BOX * Including assumed and unidentified projects and shifts North American Graphic Paper and Tissue Capacity Expansions Country Capacity (Thousand Tonnes) Year Grade Canada -58 211 Newsprint Canada -4* 212-216 Newsprint USA -285 211 Newsprint USA -33* 212-216 Newsprint Canada -773 211 P&W Canada 74* 212-216 P&W USA -87 211 P&W USA -1,67* 212-216 P&W Canada -3 212 Tissue USA -116 211 Tissue USA 596 212-213 Tissue * Including assumed and unidentified projects and shifts Global Recovered Paper?! Different grades of paper are seeing widely different growth rates and this will have important effects on RCP demand and availability Fast-growing paper sectors, such as CNT and tissue, will request more recycled fiber Printing & writing paper, the net supplier of RCP, however, will see much slower growth in consumption
RCP Crunch: Tissue and P&W 75 P&W Consumption Tissue Production 35 7 3 65 25 6 2 55 P&W Consumption in Developed World 15 World Tissue Production 5 1995 1997 1999 21 23 25 27 29 211 213 1 Global Recovered Paper?! Different growth rates in paper demand and production across regions Developed regions: currently high paper collection rate but flat or even declining paper consumption Developing regions: fast-growing paper production and consumption, but currently low paper collection rates Global RCP crunch Caused by differences between different paper grades and regions Paper and Board Production in Different Regions 25 2 15 1 Developing Regions Developed Regions 5 1997 1999 21 23 25 27 29 211 213
Global Recovered Paper?! Possible fiber furnish change in different paper grades and regions Containerboard, tissue Switch from recycled fiber to virgin pulp in areas with relatively cheap virgin fiber US South: to debottleneck the current recovery boilers Eastern Europe: new white top kraftliner capacity, Russia, 215 Trade will continue to be a big player in the global RCP market Exports from developed regions to developing areas Pulp and RCP Consumption in World Paper and Board Production 25 2 15 Virgin Pulp RCP 1 1992 1994 1996 1998 2 22 24 26 28 21 Recovered Paper Vs. Virgin Fiber.6.5 4.4.3 SOP#37/NBHK UBB #47/NBHK.2.1 2 21 22 23 24 25 26 27 28 29 21 211 212
Recovered Paper Vs. Virgin Fiber 1.6 1.5 OCC/Soft Pulp Wood 1.4 1.3 1.2 1.1 1.9.8.7.6.5.4.3 2 21 22 23 24 25 26 27 28 29 21 211 212 211 Chinese Domestic Collections and Net Imports of RCP 1 8 Domestic Collections Net Imports 6 4 2 1992 1994 1996 1998 2 22 24 26 28 21 212 214
US Recovered Paper Collections 5. Domestic Consumption Net Exports 4. 3. 2. 1.. Net export share: 199: 24%, 2: 26%, 21: 39%, 211: 42% 9 92 94 96 98 2 4 6 8 1 12 14 Western European Recovered Paper Collections 6. 5. Domestic Consumption Net Exports 4. 3. 2. 1.. Net export share: 2: 5%, 21: 14%, 211: 15% 9 92 94 96 98 2 4 6 8 1 12 14 Paper & Board Consumption Per Capita 25 KG 2 15 1 Where the new paper demand & RCP supply will come from in the future 5 US JP WEU CA OCE CN EEU ASA M.East LA Oth. ASA AFR
True Chinese Paper Collection Rate Paper Collection Rate = RCP collection/pab consumption Chinese collection rate is understated because of huge amount of exports of paper p in the form of packaging g and exports of converted paper products recently completed an analysis of the true Chinese collection rate after adjusting the exports of paper packaging materials and converted paper products Two methodologies: 1) based on physical volume of export goods 2) based on monetary value of export goods Key result: 22 million (net) tonnes of paper packaging and converted paper products went overseas and true Chinese collection rate was about 57% in 21. Rising Paper Collection Rates in 213-214 Fast-growing paper collection rate in China A big jump in paper collection rate in 21 (53% to 57%) compared to world average level (56%) Strong demand and high RCP prices Growing potential supply: fast-growing paper and board consumption along with economic development More RCP will stay within China: export driven economy to domestic consumption driven Rising paper recovery rates in other regions Strong demand and RCP pricing, policies Currently low levels, especially in the emerging economies Eastern Europe, Other Asia, Latin America and the Middle East
Guangzhou, China Sichuan, China More and Larger Recovered Paper Baling and Packing Plants in China Collection Rates: Driven to Higher Levels by Strong Demand and Limited Supply 85% 75% World Other Asia North America Japan China Latin America Europe 65% 55% 45% 35% 25% 1 2 3 4 5 6 7 8 9 1 11 12 13 14
Quality and Yield Quality issues Higher recovery rates newer sources are more contaminated More mixed collection of RCP in the developed world to control recovery costs and to get more participation from the generators More mixed collection leads to higher levels of nonpaper contaminants and mixed fibers Yields North America: many paper mills still do not have upgraded stock preparation system lower yield rate Europe and China: better stock preparation system Global Recovered Paper Markets: What Lies Ahead? Upward pressure on RCP pricing Ever higher paper collection rates will push up RCP collection costs, along with rising transportation and labor costs Limited supply worldwide will give RCP prices more running room Global recovered paper crunch will call for: Fiber furnish change in the regions with relatively cheap virgin fiber Trade will remain a big part of global RCP market Global Recovered Paper Markets: What Lies Ahead? Some fiber-short regions, such as Asia, will remain heavily dependent on RCP Still lower cost than virgin fiber in these regions Risks Risks Slowdown in Asian economic growth European economy
Thank you for your attention! For more information: Outlook for Global Recovered Paper Markets World Pulp and Recovered Paper 5-Year & 15-Year Forecasts World Recovered Paper Monitor www.risi.com/wrpm