Fastmarkets RISI MENA Containerboard Market Outlook Forces shaping - - PowerPoint PPT Presentation

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Fastmarkets RISI MENA Containerboard Market Outlook Forces shaping - - PowerPoint PPT Presentation

Oct 25, 2023 201 likes •465 views

Fastmarkets RISI MENA Containerboard Market Outlook Forces shaping the containerboard industry Abdulla Zaid Economist, Paper Packaging All forecasts and statistics contained in this presentation are based on public information and Fastmarkets

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Fastmarkets RISI MENA Containerboard Market Outlook

Abdulla Zaid

Economist, Paper Packaging Forces shaping the containerboard industry

2019 | Fastmarkets | MENA Containerboard Market Outlook 1

All forecasts and statistics contained in this presentation are based on public information and Fastmarkets RISI proprietary market analysis.

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Agenda

  • Paper packaging overview
  • Containerboard trends
  • Recycled demand outlook
  • Recycled supply outlook
  • Market overview and costs

2019 | Fastmarkets | MENA Containerboard Market Outlook 2

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2019 | Fastmarkets | MENA Containerboard Market Outlook

Paper packaging growth outlook

Containerboard: 56% Boxboard: 30% Kraft and specialty paper: 14%

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Substitution effect Income effect

  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0% 2% 4% 6% 8% 10% 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 CAGR (2014 - 2018) Consumption (thousand tonnes) Boxboard Kraft and specialty paper Early movers Infancy Expansion Saturated Containerboard

Paper packaging grades

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Where are we in the business cycle?

  • Deceleration in the global economy
  • Containerboard demand slowing
  • Markets becoming oversupplied

4 2019 | Fastmarkets | MENA Containerboard Market Outlook

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2019 | Fastmarkets | MENA Containerboard Market Outlook

Growth potential is strong

Kilograms per capita

Containerboard regional demand 12 kg lower than global, Latin American and Far East Asian averages

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10 20 30 40 50 60 70 80 90 100 10,000 20,000 30,000 40,000 50,000 60,000 Kilograms per capita GDP per capita North America Latin America Europe Sub-Saharan Africa Oceania Far East Asia World MENA Substitution effect Income effect

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2019 | Fastmarkets | MENA Containerboard Market Outlook

Demand outlook is different within MENA

Containerboard regional demand

  • 1. Israel: 48 kg / person
  • 2. UAE: 41 kg / person
  • 3. Saudi Arabia: 26 kg /

person . . .

  • 12. Egypt: 9 kg / person

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Substitution effect Income effect 5 10 15 20 25 30 35 40 45 50 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Kilograms per capita GDP per capita Saudi Arabia United Arab Emirates Egypt GCC North Africa Other Middle East Substitution effect Income effect

Top performers

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2019 | Fastmarkets | MENA Containerboard Market Outlook

MENA containerboard substrates

Kraftliner

Furnish not less than 80% chemical pulp 526,000 tonnes, 12% of total containerboard demand

Semichemcial medium

Contains semichemical pulp, neutral sulphite semichemical pulp 215,000 tonnes, 5% of total containerboard demand

Recycled medium

Produced using mostly recycled fibers 1.5 million tonnes, 35% of total containerboard demand

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12% 47% 5% 35%

Kraftliner Recycled liner Semichemical medium Recycled medium

Recycled liner

Furnish less than 80% chemical pulp 2 million tonnes, 47% of total containerboard demand

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2019 | Fastmarkets | MENA Containerboard Market Outlook

70% 72% 74% 76% 78% 80% 82% 84% 86% 88% 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Thousand tons Kraftliner Recycled liner Semichemical medium Recycled medium Recycled share

An accelerating trend to replace virgin with recycled

Million tonnes

Containerboard demand and substrates Total tonnage growth in apparent consumption between 2019 and 2021

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A deep dive into recycled demand outlook

2019 | Fastmarkets | MENA Containerboard Market Outlook

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Imports still provide headwinds for domestic producers of recycled linerboard

32%

2019 | Fastmarkets | MENA Containerboard Market Outlook

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 500 1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Thousand tonnes Imports Domestic production Imports share (R)

Imports share of demand Import waves in 2012 and 2016 Expected import wave in 2020: Imports share of demand = 40%

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Imports and domestic production as shares of demand

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Europe dominates the MENA imports market for recycled linerboard

90%

2019 | Fastmarkets | MENA Containerboard Market Outlook

100 200 300 400 500 600 700 800 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thousand tonnes Asia Rest of world Europe

European share of imports

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European exports account for an average of 91% of MENA imports from 2008-2018 Asian exports maintained an average of 7%

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The lion’s share of MENA recycled liner imports in 2016 came from Spain

48%

2019 | Fastmarkets | MENA Containerboard Market Outlook

Spanish share of European imports Spanish recycled liner exports to MENA reached 330,000 tonnes in 2016, or 48% of European LNR exports to MENA Polish recycled liner exports to MENA peaked in 2016 at 61,000 tonnes, or a 9% share

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100 200 300 400 500 600 700 800 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thousand tonnes Spain Poland Italy Belgium Germany Turkey Rest of Europe

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Brace yourselves for another import wave

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Weak European demand and growing capacity signal acceleration in recycled liner net exports

6.4%

2019 | Fastmarkets | MENA Containerboard Market Outlook

  • 400
  • 200

200 400 600 800 1,000 1,200 1,400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Thousand tonnes Change in European capacity Change in European demand Change in European net exports

European capacity-demand gap growth (2019-2021) European capacity will grow faster than demand (2.8% vs 3.3%) annually Weak European demand should widen demand-capacity gap and increase recycled liner net exports A portion of the European exports will find its way to the MENA markets

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Musical chairs dynamic: unloading excess recycled liner tonnage during weak European demand environment

2019 | Fastmarkets | MENA Containerboard Market Outlook

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 100 200 300 400 500 600 700 800 900 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2008 = 1.0 Thousand tonnes European recycled liner exports to MENA European recycled liner market condition index (R)

When growth music stops European market condition index gives indication of market strengthening and weakening (2008 = 1.0) Weak recycled liner demand and oversupply in Europe are the catalyst of MENA market volatility

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Excess MENA imports

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Algeria and Saudi Arabia absorbed most of the European recycled exports

Less than 15,000 tonnes / year 15,000–50,000 tonnes / year 50,000–100,000 tonnes / year More than 100,000 tonnes / year

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GCC-TSAIP antidumping investigation and results: reshaping MENA trade outlook

2019 | Fastmarkets | MENA Containerboard Market Outlook

Grades under investigation HS Code Definition Result: GCC antidumping duties?

Kraftliner 48041100 Kraftliner, uncoated, unbleached, rolls/sheets No 48041900 Kraftliner, uncoated, bleached, rolls/sheets No Kraft and specialty paper 48043100 Kraft paper uncoated, unbleached, wt nov 150 g/m², NESOI No 48043900 Kraft paper, uncoated, bleached, wt nov 150 g/m², NESOI No 48044100 Kraft paper/paperboard, uncoated, unbleached, wt 150 g/m² or

  • v, nov 225 g/m², rolls/sheets, NESOI

No Semichemical medium 48051100 Semichemical fluting paper (corrugating medium), uncoated, rolls/sheets YES Recycled medium 48051910 Fluting paper of recycled liner board weighing 150 g/m² or less YES, except fluting paper of recycled liner board weighed less than 105 g/m² 48051920 Fluting paper, NESOI, weighing over 150 g/m², uncoated, in rolls/sheets, YES 48051990 Other fluting paper YES Testliner 48052400 Testliner, uncoated, wt nov 150 g/m², rolls/sheets, spec ch48- note3 YES, except testliner paper of recycled liner board weighed less than 105 g/m² 48052500 Testliner, uncoated, wt ov 150 g/m², rolls/sheets, spec ch48- note4 YES

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Final dumping margin as a percentage of the CIF value

2019 | Fastmarkets | MENA Containerboard Market Outlook

Country Company Final dumping margin Spain Sociedad Anonima Industrias Celulosa Aragonesa (SAICA) 24.6% Other companies 31% Poland All companies 34%

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2019 | Fastmarkets | MENA Containerboard Market Outlook

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Resurfacing: Supply outlook & market overview

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European imports are the main driver in MENA production volatility

68.8%

2019 | Fastmarkets | MENA Containerboard Market Outlook

60% 65% 70% 75% 80% 85% 500 1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Thousand tonnes Capacity Production Operating rates (R)

Average operating rate (2019-2021) Capacity growth is expected to surpass demand, leading to lower operating rates Imports are expected to increase its share of demand from 31% in 2018 to 41% in 2020, providing further downward pressure on

  • perating rates

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Recycled containerboard production, capacity and operating rates

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Tight demand capacity gap, pushing for capacity expansion

5.3%

2019 | Fastmarkets | MENA Containerboard Market Outlook

100 200 300 400 500 600 700 800 900 1,000 500 1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Thousand tonnes Thousand tonnes Capacity Demand Imports (R)

Capacity growth (2018-2021) Capacity expansion fuelled by

  • Growing future demand

potentials

  • GCC antidumping duties

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Recycled containerboard Imports, demand and capacity

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2019 | Fastmarkets | MENA Containerboard Market Outlook

50 100 150 200 250 300 350 400 GCC North Africa Other Middle East Southern Europe Eastern Europe Western Europe GCC North Africa Other Middle East Southern Europe Eastern Europe Western Europe US dollars per tonne Total fiber Chemicals Energy Labor Other Cash cost to Dubai, UAE Cash cost to Port Said, Egypt

Recycled medium

Cost of production: how competitive are the MENA producers?

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Recycled linerboard

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Take home points

Containerboard demand growth is slowing Deceleration in the global economy

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2019 | Fastmarkets | MENA Containerboard Market Outlook

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European market sets the tone in MENA Musical chairs: MENA markets witnessed waves of excess imports GCC-TSAIP imposed antidumping duties on Spanish and Polish producers Tight capacity-demand gap opening door for capacity expansion Operating rates are expected to decline due to imports growth MENA producers are competitive in the global market GCC has an advantage in energy costs, while labor costs are lower in North Africa

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Thank you

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MIDDLE EAST & NORTH AFRICA PAPER PACKAGING OUTLOOK

risi.com/MENApackaging /