outlook for asian containerboard markets - fastmarkets risi...global containerboard demand is...

Outlook for Asian Containerboard Markets

Beth Lis

VP, Asian Paper & Packaging

2020 | Fastmarkets | Outlook for Asian Containerboard Markets

2

Agenda

2019 | Fastmarkets | Global Containerboard and Boxboard Outlook

• Economic overview

• Chinese containerboard demand

and supply outlook

• Developments and outlook for

Asia excluding China

• Risks and conclusions

Pace of economic recovery varies across Asia with China leading the pack

CHINA’S ECONOMIC RECOVERY

UNDERWAY AND GAINING MOMENTUM

• Seeing gradual revival led by supply side and from

infrastructure investment and government

spending

• Exports stronger than anticipated

• Initially aimed at maintaining employment with

less consumer stimulus than other countries

INDICATIONS OF IMPROVEMENTS IN

CONSUMER SPENDING AND SERVICE

SECTOR ACTIVITY

• Optimism is growing

2020 | Fastmarkets | Outlook for Asian Containerboard Markets 3

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Retail sales (YoY) Industrial production (YoY) Exports (YoY) PMI

Source: National Bureau of Statistics

Recovery in other parts of Asia on varying paths

ECONOMIES WITH BETTER CONTROL OF COVID-19

OUTPERFORMING THOSE THAT ARE STRUGGLING

• Dependency on the service industry and tourism for growth

is another factor causing variability

• India, Indonesia and Thailand faring the worst while South

Korea, Taiwan and Vietnam relatively better


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Retail salesPercentage change year-over-year

China IndonesiaSouth Korea TaiwanJapan ThailandVietnam

PATH OF RECOVERY WILL DEPEND ON SEVERAL

FACTORS

• Effectiveness of stimulus undertaken by governments

• Ability to bring spread of COVID-19 under control and

contain flare-ups

• Linkages to China’s supply chain and recovery

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Industrial productionPercentage change year-over-year

China IndonesiaSouth Korea TaiwanJapan ThailandMalaysia Vietnam

5

2.9% 2.3%

-4.4%

4.0%2.8%

2018 2019 2020 2021 2022

USA

1.9% 1.2%

-8.0%

5.1%2.0%

2018 2019 2020 2021 2022

Europe

0.3% 0.7%

-5.8%

2.4% 1.5%

2018 2019 2020 2021 2022

Japan

Economic outlook deteriorated as

COVID-19 extended its reach

6.6% 6.2%

2.3%

8.0%

5.6%

2018 2019 2020 2021 2022

China

Pandemic brought global economic

activity to a halt

▪ China

o COVID-19 hurt economy early, with Q1 falling 6.8%

(YoY), but bounced back 3.2% in Q2 and 4.9% in

Q3

o Momentum may be building, but some concerns

▪ Japan

o Already hurt by consumption tax implemented late

in 2019

▪ India

o Already losing momentum due to weak investment

and sluggish industrial activity

o Lockdown through early May devastated the

economy, but now mounting gradual recovery

▪ Southeast Asia

o Weakening conditions across the region

o Stimulus packages announced with varying degrees

of cash handouts, business support and tax cuts


6.8%5.0%

-9.5%

10.0%

6.0%

FY2018 2019 2020 2021 2022

India

5.1% 4.5%

-2.6%

6.2%4.9%

2018 2019 2020 2021 2022

Southeast Asia

Global containerboard demand is dominated by Asia

North America

18%

Latin America

8%

Europe21%China

28%

Other Asia20%

All other5%


GLOBAL DEMAND REACHED 171 MILLION TONNES

IN 2019, WITH ASIA ACCOUNTING FOR 83 MILLION

TONNES

6

China58%

Japan11%

South Korea, Taiwan,

Hong Kong SAR8%

Southeast Asia14%

India7%

Other2%

CHINA ACCOUNTED FOR 58% OR 48 MILLION

TONNES OF ASIA’S TOTAL

Snapshot of Chinese containerboard market: Weak demand and plenty of supply in 2020

Chinese containerboard markets have been on a roller coaster ride in 2020

• Demand already dropped in 2018-2019

Attributed to weaker economy, plastics substitution and use reduction

But really driven by RCP constraints

• Early this year, demand was affected by lockdowns but gradually

came back as activity levels picked up

Definite support from e-commerce, online food delivery

Exports better than once anticipated

Potential supplies have been ample

• Rising capacity, but domestic supplies still being affected by fiber

availability

• Imports available and climbing

2020 | Fastmarkets | Outlook for Asian Paper and Board Markets 7

Chinese containerboard demand projected to fall 2% in 2020

2020 | Fastmarkets | Outlook for Asian Paper and Board Markets 8

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

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2015 2016 2017 2018 2019 2020 2021 2022

BROADLY, GROWTH AFFECTED BY

• Sluggish consumer expenditures due to rising

job losses, reduced wages and uncertainty

• Reduced exports due to global recession

o Exports accounted for 18.4% of GDP in

2019, according to World Bank data

o Doing better than once expected due to

PPE and electronics exports to support at-

home school and work in other parts of

world

• E-commerce

• Competition with plastics

DEMAND PREDICTED TO POST SOLID

RECOVERY IN 2021-2022

Snapshot of containerboard markets in rest of Asia: COVID-19 has dramatically changed the outlook

Japan off sharply, but South Korea and Taiwan holding up remarkably well

• Japan already affected by rise in consumption tax, COVID-19 has made situation worse

• South Korea and Taiwan supported by growth in electronics demand and relatively good

control of the virus


Southeast Asia is a mixed bag, but seeing softening in demand

• Vietnam and Malaysia doing okay, while Indonesia, the Philippines and

Thailand struggle

• Negative impact on segments like beverages, electronics and

automotive sectors, but food and e-commerce offering some support

India hit hard as lockdown halts activity, consumers still hesitant even after reopening

Demand growth in rest of Asia will be sharply lower in 2020


-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2016 2017 2018 2019 2020 2021 2022

Japan South Korea, Taiwan and HK SAR

Southeast Asia India

Other Total percentage change

CONTAINERBOARD DEMAND IN

ASIA EXCLUDING CHINA PREDICTED

TO FALL 7% IN 2020

• Second quarter will be the worst, followed

by a slow, gradual recovery in second half

LOCKDOWNS THROUGHOUT THE

REGION SPARING NO ONE

• Global recession translates to bleak

outlook for export-oriented economies

• Flare-ups inhibiting service sector and

consumption

REBOUND IN 2021-2022 AS

ECONOMIES GRADUALLY RECOVER

10

Asian containerboard demand loss in 2020 will be unprecedented

-4%Significantly worse than global

economic crisis of 2008-2009

-3.2 MT0.85 MT loss for China and 2.3

MT loss for rest of Asia

5% per yearRebound in 2021-2022 for

combined increase of 7.5 MT

-12%

-9%

-6%

-3%

0%

3%

6%

9%

12%

15%

-8,000

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

Thousa

nd t

on

ne

s

China tonnage change Rest of Asia tonnage change %ch China %ch Rest of Asia


New RCP policies are changing how companies operate

Constrained fiber supplies in China driving up containerboard imports and reducing production• Benefitting exports by other Asian suppliers

Many companies are making investments in light of the new policies• Policy changes initially caused delays in Chinese projects, but seeing wave of projects in

late 2019 and 2020

• Numerous containerboard projects in the works in Asia outside of China in 2020-2022

• New investments in wood pulp capacity in China and RCP pulp outside China

Other Asian countries also imposing new RCP policies• Ban on mixed paper in India

• Greater scrutiny in Indonesia, Vietnam and Taiwan


Chinese linerboard imports climbing again in 2020

2019 | Fastmarkets | Asian Containerboard Markets

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Asia North America Western Europe Oceania Other

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Chinese corrugating medium imports also soaring


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Asia North America Western Europe Other

14

Changing trade patterns for containerboard in AsiaThousand tonnes


0

2,000

4,000

6,000

8,000

10,000

12,000

2016 2017 2018 2019 2020 2021 2022

Chinese imports

Asia North America Western Europe Oceania Other

0

1,000

2,000

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5,000

6,000

7,000

8,000

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2016 2017 2018 2019 2020 2021 2022

Asia excluding China imports and exports

Imports Exports

Chinese capacity: Rising or falling?Change in million tonnes


50%

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Demand Capacity Tracked Operating rate

DESPITE THE NEW RCP POLICIES, NEW

MACHINES ARE STILL COMING ON

• The list of announced projects is long

• Initially many were delayed, but 28 projects

started or are slated to start in second half of

2019 and 2020 (total of about 9 million tonnes)

• Another seven projects (2.5 million tonnes)

look set to start in 2021

TRACKED INCREASES ARE BEING

OFFSET BY ASSUMED CLOSURES

• Otherwise, operating rates would be even

lower than shown

16

Operating rates in Asia excluding China retreating from 2018 peak


80%

82%

84%

86%

88%

90%

92%

94%

96%

-3.0

-2.0

-1.0

0.0

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3.0

4.0

5.0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Demand Capacity Net exports Operating rate

SUBSTANTIAL AMOUNT OF CAPACITY

ON TAP

• Numerous containerboard projects in the

works in Asia outside of China in 2020-2022

• Conversions of graphic paper capacity

• Projects intended to feed rising demand

across the region

PROJECTS INCLUDE

• Five projects with 3.6 million tonnes of

capacity by Chinese producers

• 15 projects with 3.7 million tonnes of capacity

by non-Chinese suppliers (excluding India)

NET EXPORTS EXPANDING SHARPLY

BUT NOT ENOUGH TO OVERCOME

WEAK LOCAL DEMAND IN 2020

17

Key takeaways

Asian markets are oversupplied and operating

rates have collapsed

01


02

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04

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There are robust capacity expansion plans in

every world region

Asian containerboard demand will fall sharply

in 2020, before rebounding in 2021-2022

Level of uncertainty is high as fears of a

recurrence remain, hampering true recovery

until vaccine can provide more confidence

outlook for asian containerboard markets - fastmarkets risi...global containerboard demand is...

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