Pulp and Paper Industry Outlook - Prepared for the Maine Forest Products Council September 20th, 2021 - Maine Forest Products ...
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Pulp and Paper Industry Outlook Prepared for the Maine Forest Products Council September 20th, 2021
We Help Companies Use Data to Make Exponentially Better Decisions Pulp / Paper Value Chains Forest Value Chains Chemical Value Chains
Pulp and Paper Industry Trends
Containerboard and e-Commerce
Investment and Conversion
China
Sustainability
Maine
Over the Long Run, the Industry Is Still Growing 2.0% Annually
Fueled by Packaging, Far and Away the Largest Segment in the Industry
Global Market Pulp, Paper and Tissue Capacity
700 400
2.0% CAGR
600 350
Million Tons
500 300
Million Tons
250
400
200
300
150
200
100
100
50
0 0
2021e
2022e
2023e
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2014
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
2021e
2022e
2023e
Packaging Market Pulp Newsprint
Africa Asia Pacific Europe Latin America Middle East North America
Printing and Writing Specialties Tissue and Towel
Source: FisherSolve™ Next. Fisher International, Inc. 4
Containerboard Mill Capacity in North America Is Now Expanding
(and Also, Expanding Globally)
North
6.0%
American Containerboard Capacity Change YoY
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
-1.0%
-2.0%
Source: FisherSolve™ Next. Fisher International, Inc. 5
More Than 2MM Tons of Net New Containerboard Capacity Has Been Added
in 2021 with More Than 1.5 MM Tons on the Way
North America – Containerboard Net Capacity Change (Q2 2021)
Source: FisherSolve™ Next. Fisher International, Inc. 6
One of These Things is Not Like the Other
→Not Your Normal Recession
U.S. Corrugated Demand Growth Less US GDP Growth (2006-2020)
10.00%
Box Demand
Beats GDP
8.00%
6.00%
4.00% 2020
2.00%
0.00%
Box Demand
Lags GDP
-2.00%
-4.00%
-6.00%
-8.00%
-10.00% 2008
FRED, FBA, FIsher
E-Commerce Saved Corrugated and Containerboard from a Certain
Downturn in 2020
The Three Main Drivers of U.S. Corrugated Demand (2019=100) During the Pandemic
160
Industrial Production or Sales
140
120
(E-Commerce)
100
80
60
40 E-commerce accelerated,
Durable and non-durable goods (about offsetting declines in other sectors
20
85% of demand) behaved as expected
0 during the first economic shock
Non-Durable Durable E-Commerce
FRED, Fisher-STE System Dynamics
E-Commerce and Containerboard
• How much penetration will E-Retail sales
reach?
• Does e-commerce packaging evolve so
that less paper is needed?
‒ Ship in own container (SIOC)
‒ Right-sizing (less box area per package)
‒ Lightweighting (lightweight liners and
mediums)
• What happens as e-commerce becomes
an increasingly larger share of
containerboard demand, AND its
packaging gets optimized to result in a
lower box intensity?
The Answer Is (Very) Important
What Will U.S. Containerboard Demand Be in the Future?
Fisher Modeled U.S. Containerboard Cut-Up By E-Commerce Box Optimization Assumption*
1.5 MM st additional containerboard demand
1.5 MM st of containerboard not needed
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Box Intensity the Same Optimization at 1% p.a. Optimization at 2% p.a. Optimization at 3% p.a.
Source: FisherSolve™ Next. Fisher International, Inc. *Also assumes e-commerce sales grow at pre COVID rate. 10We Know That Packaging Will Change As E-Commerce Growth Continues:
Changing Substrates, Packages, and “Merging” of Consumer and Industrial
Retail Ready to “E-Retail Ready” Merging of Substrates
Coated
Recycled CUK /
Board Linerboard
“The Package Becomes the Symbol that Implies
Favorable or Unfavorable Meaning About the Product”
Underwood, et al, 2001
11Investment and Conversion
Every Reaction…
No Office or School: No Copy Paper Contracts Don’t Need Paper, Either
Estimated Paper Consumption
(lbs / year)
Office Workers At Home Workers
Fisher, DocuSign company filings…Has An Equal and Opposite Reaction
North American Printing and Writing and Newsprint Paper Machine Capacity
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: FisherSolve™ Next. Fisher International, Inc.There Are Approximately 65 Pulp Integrated Sites Producing
"Stressed Grades" in North America
Integrated Printing & Writing and Newsprint Mills
Recycled Integrated
Virgin & Recycled Integrated
Virgin Integrated
Sites with viable pulp assets could be excellent acquisition or conversion candidates
15Is a Different Landscape Emerging in North American
Containerboard?
North American Containerboard – Operated Capacity Evolution by Company
2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: FisherSolve™ Next. Fisher International, Inc. 16Is A Different Landscape Emerging in North American
Containerboard?
North American Containerboard – Operated Capacity Evolution by Company
50% growth in smaller player capacity
2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: FisherSolve™ Next. Fisher International, Inc. 17Investments in Recycled Containerboard products – Present and
Future
Source: FisherSolve™ Next. Fisher International, Inc.Paper Excellence Acquisition of Domtar Continues a Trend of Growth
in Private Ownership in NA
Share of PPI Capacity Owned by Private Companies in North America
70%
60%
50%
40%
30%
20%
10%
0%
Containerboard Cartonboard Market Pulp P&W Specialties T&T
2016 2021
Source: FisherSolve™ Next. Fisher International, Inc. 19China
China’s Pulp and Paper Industry Continues to Grow
Actual and Announced Capacity Changes in China 2020-2022
Source: FisherSolve™ Next. Fisher International, Inc.OCC Exports from the US Rotate Away from China and toward SE Asia, as
China OCC Ban and Relocation of Chinese Manufacturing Continues
2017 – 2021 YTD US OCC Exports (short tons)
4,000
3,500
US OCC Exports (000 - ST)
3,000
2,500
2,000
1,500
1,000
500
-
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021
China India Indonesia Korea, South Taiwan Thailand Vietnam ROW
Source: USATradeOnline 222021’s Full Ban on Recycled Paper Imports Has been a Game Changer in
China
• Producers are scrambling to use
alternative furnish sources, although
long-term quantities & supply remain in
some doubt
– Nine Dragons announced 3
agriculture/wood waste mechanical pulp
lines in Chongqing and Dongguan
– Lee & Man announced two NSSC fiber
lines from Andritz for Dongguan and
Jiujiang sites
– Sun paper is using wood waste in
production of corrugated medium
• Chinese paper manufacturers are also
investing in infrastructure in Southeast
Asia
23Asia Has the Highest Carbon Emission Equivalent
per Ton of Paper Compared to Other Regions
According to Fisher’s carbon emission model, the carbon emission equivalent per ton of paper in Asia is the
highest in the world.
Source: FisherSolve™ Next. Fisher International, Inc. © 2021 Fisher International, Inc. 24Sustainability
Sustainability Issues – Which Were Already Becoming “Real” Are
Being Accelerated by COVID
Following The Money
Of global fund managers representing $12.9 trillion
71% in assets believe COVID-19 will lead to increase in
actions designed to tackle climate change and bio-
diversity losses
Major Brands with Significant Zero Carbon Initiatives (and Year of Target)
2030 2040 2039 2050 2050
Financial News (11/12/2020), web search. Starbucks, Nike targets are based on “Net Zero Initiative”
26It Is a Matter of “When”, “Not if”, Carbon Will Hit Your Bottom Line • President Biden wrote one of the first climate bills in the U.S. Senate. • He has promised an “enforcement mechanism” to limit carbon emissions. • He has promised to cut U.S. Greenhouse emissions in half by 2030. • Janet Yellen, the new Treasury secretary, favors market-based mechanisms • The administration has said that a system targeting sector-specific standards is Janet Yellen, Treasury Secretary preferred. (Similar to California ETS)
Carbon Taxes (or Their Equivalent) Could Create Wide Differences in
Costs for North American Mills
North American Containerboard Greenhouse Gas Emissions by Mill
4X as much carbon for highest emitting mills
Source: FisherSolve™ Next. Fisher International, Inc.Carbon Taxes Will Increase the Cost of Doing Business for Some
Firms: We Don’t Know Yet Exactly Who, How, and How Much
North American Corrugators and Containerboard Mills (FisherSolve)
Carbon Due To Rollstock Transportation – Delivered to Chicago
Source: FisherSolve™ Next. Fisher International, Inc.Bioproduct Facilities and Anti-Plastic Measures Seem Promising for the
European Industry of the Future, but Will Regulation Continue On?
• Initial studies have identified that
roughly one-quarter of EU plastic
packaging use could be cut
reduced without significant
compromise, representing ~4.5 Mt
of packaging
• New EU single use plastic tax 80
€/t is expected to accelerate the
shift in demand from plastics to
fiber-based materials
• Initial increases are expected in
bags segment
While the initial thinking could be a positive for the industry, future phases of discussed
regulation may enforce limits on single use products… of any type
Source: https://materialeconomics.com/publications/sustainable-packaging 30Maine
Is Maine’s Pulp and Paper Industry Stabilizing?
Maine’s Capacity Trends for all products 2007 to 2022
Source: FisherSolve™ Next. Fisher International, Inc.Printing & Writing Continues to Decline at a Rate of 1.5% Per Year
2020 Global Printing & Writing Capacity: 85 million tons
120
100
Million Tons
80
60
40
20
0
2021e
2022e
2023e
2008
2013
2020
2007
2009
2010
2011
2012
2014
2015
2016
2017
2018
2019
Africa Asia Pacific Europe Latin America Middle East North America
Source: FisherSolve™ Next. Fisher International, Inc. 33Maine’s Capacity Evolution in the 2000’s – Moving away from
Printing and Writing
2007 2021
Source: FisherSolve™ Next. Fisher International, Inc.Kraft Market Pulp products show increasing trend
Average price (USD/FST) of Market Pulp products from 2017 to 2021
Source: FisherSolve™ Next. Fisher International, Inc.Specialty Grades – Particularly Release Paper – Are Displaying Steady Growth with
Asia, Europe and North America Announcing Additional Capacity
2020 Global Specialties Capacity: 25 million tons
30
25
Million Tons
20
15
10
5
0
2021e
2022e
2023e
2007
2019
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2020
Africa Asia Pacific Europe Latin America Middle East North America
Source: FisherSolve™ Next. Fisher International, Inc. 36Maine’s Pulp and Paper Industry Moving Forward
• Pulp and Paper production less concentrated in Printing and Writing
– Diversification into grades in markets exhibiting growth
• Market Pulp
• Specialties
• Containerboard
• Tissue & Towel
• Potential for investment
– Virgin pulp availability continuing to decline
– Stressed assets/grades can be attractive for investors
– Availability of raw materials could attract other forest bioproducts investment
• Challenges
– Impact of EPR legislation
• What does it mean for current producers?
• How will this impact decisions for potential investors?
– Impact of Carbon legislationBETTER INTELLIGENCE. BETTER DECISIONS.
NORTH AMERICA • LATIN AMERICA • EUROPE • NORDICS • ASIA
Sage Duguay
Business Intelligence Consultant
sduguay@fisheri.com
Corporate Headquarters
15720 Brixham Hill Ave #550
Charlotte, NC 28277 USA
T +1 704.540.1440
www.fisheri.com
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