fastmarkets risi global paper packaging outlook · fastmarkets risi global paper packaging outlook...

Fastmarkets RISI Global Paper Packaging Outlook

2020 | Fastmarkets | Global Packaging Outlook

Key issues from the seminar and conference

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Factors affecting the global paper packaging market in 2020-2021

• Shifts in the consumer product market

• A quick world tour of the economic landscape

2020 | Fastmarkets | Global Packaging Outlook 2

Multiple challenges for consumer product companies:

• Shifts in buying patterns

• Replacement of single-use plastic packaging


E-commerce, a North American case study


US box demand has jumped ahead of industrial production since 2014

NON-DURABLES PRODUCTION IS TRADITIONAL DRIVER OF US BOX DEMAND• Non-durables industrial production

growth can explain US box demand extremely well until 2014.

• Box demand was anemic through much of the past 20 years due to a weak nondurables sector and competition with plastics.

• Box demand has revitalized since 2014, posting its best string of growth performances since the 1990s.


Manufacturer/warehouse

Fulfillment center

Sorting center

Parcel delivery

Consumer

E-commerce retail uses seven times more corrugated per dollar than traditional retail

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Manufacturer/warehouse

Retail store

Consumer

BRICK-AND-MORTAR LOGISTICS E-COMMERCE LOGISTICS


90%Of box shipment strength since 2014 explained by e-commerce

12%Year-over-year e-commerce growth in first half of 2019

Up from 8% growth in 2018

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The e-commerce boost is alive and well E-COMMERCE BOOST EXPLAINS OVER 90% OF BOX SHIPMENTS STRENGTH SINCE 2014; STRONGEST PERCENTAGE GROWTH YET IN 2018


Packaging redesign will cut into the e-commerce effect

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• Reduced usage of overboxes for protection as primary packaging shifts to e-commerce orientation

• E-commerce packaging emphasizes protection, while in-store packaging competes for consumer attention and makes theft difficult

• SIOC will shift corrugated consumption from distribution centers to CPGs

• Overboxes will continue to be used for aggregation, anonymization

• Segments with greatest exposure: electronics, equipment and hardware, toys and hobby goods


Plastic products are beginning to be replaced by paper products

Single use plastic bags

Take home food containers

Beverage packs

Hot drink cups

Drinking straws

Water bottles?2020 | Fastmarkets | Global Packaging Outlook

Non-paper alternatives also exist

• Reusables top the list

• Formed fiber products for certain end uses

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A quick tour of the global paper packaging markets


Global packaging demand growth shifted dramatically in 2018-2019

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DRIVEN BY CHINA

• Where demand fell more than 7%

GROWTH IN MOST OTHER REGIONS ALSO DECELERATED IN 2018

• Asia outside of China was the exception

• Growth increased to 3.2% in 2018 before slowing to 1% in 2019


Global packaging demand growth reflects uneven economic performance in various regions

2016 2017 2018 2019 2020 2021

North America

Annual apparent consumption growth


Global paper packaging demand is dominated by Asia

GLOBAL DEMAND REACHED 267 MILLION TONNES IN 2018 WITH ASIA ACCOUNTING FOR 129 MILLION TONNES


Regional overview: Europe


European demand growth slowed in 2019 while capacity continued to expand

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PAPER PACKAGING GROWTH, THOUSAND TONNES


Capacity expansion in Emerging Europe will push more Western European exports outside the region

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NET EXPORTS, TOTAL EUROPE, MILLION TONNES


Regional overview: North America


US manufacturing confidence took a hit from mid-2018 to the end of 2019

SHARP ISM® PMI® DECLINE COINCIDED UNEXPECTED SLOWDOWN IN DOMESTIC DEMAND


Robust capacity expansion will keep North American paper packaging operating rates depressed through 2021


North American producers are not expected to expand their presence in the export markets


NET EXPORTS, NORTH AMERICA, MILLION TONNES

Regional overview: Latin America


Brazil and Mexico have a dominant share of Latin American demand

BUT EACH COUNTRY AND REGION HAS DIFFERENT DYNAMICS

• Brazil is self-sufficient

• Mexico has strong ties to the US

• Limited capacity in the rest of Latin America


Latin American demand remains choppy

UNEVEN ECONOMIC GROWTH ACROSS THE REGION EXPORTS WILL BECOME MORE IMPORTANT AS CAPACITY EXPANDS


Regional overview: Africa and the Middle East


Both Africa and the Middle East rely heavily on imports to meet demand LARGE INVENTORY SWINGS ARE COMMON

DUE TO TRADE FLOWS


Regional overview: Asia


Chinese RCP policies are changing the way companies are operating around the globe


China’s containerboard market is adjusting to new RCP policiesYear-to-year change

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DEMAND DROPPED IN 2018-2019 AND THE 2020 OUTLOOK IS GUARDED• Weak economy

• Fiber supply issues

PRODUCTION WILL FALL AND NET IMPORTS WILL CLIMB• Output constrained by fiber

• Market attractive to other Asian suppliers

• But can imports continue to climb that much?

OPERATING RATES ARE TUMBLING• Level dependent on capacity assumptions


Containerboard demand growth in the rest of Asia slowed in 2019 but should rebound in 2020-2021

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EXPORT-ORIENTED ECONOMIES HURT BY SLOWER GLOBAL PERFORMANCE

INDIA AND PARTS OF SOUTHEAST ASIA EXPECTED TO REMAIN RELATIVELY HEALTHY• Supported by rising incomes and growth in

FMCG

TOTAL GAIN, 2020-2021• 1.8 million tonnes

RISKS• Slower regional/global economic growth

• Trade wars


The smaller exporters to the world reaped most of the benefits from the shift in Chinese policy(net exports to world)


Chinese boxboard producers shifted from recycled to virgin production, leading to a one-time trade disruption(net exports to world)


What to watch in the global paper packaging markets

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1.7%Projected global packaging demand growth, 2020-2021

• WILL THE RESOLUTION OF THE TRADE DISPUTE BETWEEN THE US AND CHINA FUEL A REVIVAL IN GLOBAL MANUFACTURING ACTIVITY?

• SHIFTS IN RETAIL ARE PROVIDING A BOOST TO CORRUGATED DEMAND

• THE GROWING NUMBER OF BANS ON DISPOSABLE PLASTIC PRODUCTS ARE CREATING GROWTH OPPORTUNITIES FOR BOXBOARD AND KRAFT PAPER

• POLICY SHIFTS IN CHINA WILL CONTINUE TO ALTER GLOBAL TRADE PATTERNS


Thank you!

The Impact of E-commerce on North American Paper Packaging Markets

• Exhaustive dive into US and Canadian e-commerce statistics

• Risks quantified in three vectors (economy, e-commerce market share, e-commerce linkage with corrugated) and 27 scenarios

• Effect of e-commerce on containerboard/corrugated demand, operating rates, prices, profitability

• Forecasts through 2023 for economy, e-commerce spending, containerboard, corrugated, impact of e-commerce on box/containerboard markets

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For more:www.risi.com/e-commerce_study

Derek MahlburgEmail: [email protected]


fastmarkets risi global paper packaging outlook · fastmarkets risi global paper packaging outlook...

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