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Pulp and paper markets and forecastsBernard de Galembert
2
Top pulp producers Top pulp producers -- 20062006
+1.4%
+0.4%
+7.8%
+1.1%
+17.4%
+11.3%
-7.2%
+0.5%
+1.9%
06/05
7.4
10.9
11.3
12.2
13.1
18.2
23.7
53.2
192.3
Mt
Spain
Portugal
Norway
S. Africa
France
Germany
India
Chile
Indonesia
+3.3%2.0Russia
+3.8%2.1Japan
-6.3%2.3Brazil
+1.3%2.3Sweden
-3.8%2.5Finland
+2.0%2.9China
-3.0%3.2Canada
+6.5%3.6USA
+3.7%5.7World
06/05Mt
Source: RISI, CEPI
3
Top paper producers Top paper producers -- 20062006
+1.5%
+2.5%
+14.2%
-6.8%
+4.5%
+0.5%
+16.1%
+1.7%
+4.3%
06/05
Austria
UK
Spain
India
Russia
Brazil
Indonesia
France
Italy
+5.3%5.210.7South Korea
-7.5%5.612.1Sweden
+11.5%6.414.2Finland
+6.2%7.018.2Canada
+5.3%7.422.7Germany
+1.5%8.731.1Japan
+8.0%8.965.0China
-3.1%10.084.1USA
+0.1%10.0382.0World
06/05MtMt
Source: RISI, CEPI
4
Paper consumption Paper consumption -- 20062006
+2.9%
-0.4%
-0.3%
-1.4%
+5.8%
+0.2%
+11.3%
+1.1%
+4.3%
06/05
Thailand
Taiwan
Indonesia
Russia
Mexico
Canada
India
Brazil
Spain
+20.8%4.28.6S. Korea
-3.9%4.810.9France
+1.8%5.611.7Italy
+10.5%6.012.3UK
+5.6%6.720.9Germany
-2.2%7.131.5Japan
+6.6%7.666.0China
+5.1%7.790.5USA
+6.5%7.9381.8World
06/05MtMt
Source: RISI, CEPI
5
GraphicGraphic paperspapersWorldWorld capacitycapacity growthgrowth
Source: EMGE
6
GraphicGraphic paperspapersNet Net capacitycapacity increaseincrease by by regionregion
Source: EMGE
7
GraphicGraphic paperspapersDemandDemand forecastforecast by by regionregion
Source: EMGE
8
ContainerboardContainerboardMain trends and driversMain trends and drivers
• Global consumption was approximately 98 Mt in 2006
• The US has been the single largest consumer ofcontainerboard, accounting for over 25% of theconsumption
• China’s consumption will continue to grow and isexpected to overtake that of the US in the coming years
• Drivers and trends: food & beverage consumption, home delivery of products from increased on-line shopping, economic and industry activity
9
ContainerboardContainerboardWestern Europe capacity developmentWestern Europe capacity development
Yearly increase
10
Paper production by grade Paper production by grade -- 20062006
+4.7%
0.0%
+2.1%
+0.4%
+3.6%
+9.9%
+4.7%
06/05
0.2Australasia
0.3Africa
1.8S. America
14.9N. America
14.4Europe
17.9Asia
49.5World
MtCartonboard
Source: RISI
-2.6%
+2.9%
+2.7%
+0.1%
+3.2%
+9.0%
+4.3%
06/05
3.3Australasia
4.2Africa
18.3S. America
102.2N. America
113.2Europe
140.8Asia
382.0World
MtTotal P&B
11
CartonboardCartonboardMain markets and driversMain markets and drivers
• Food packaging accounted for largest share: 18 Mt in 2006
• Single biggest sector is pharmaceutical industry(10%), followed by dry foods, frozen foods and tobacco
• Consumption would rise by a yearly average of 5% through 2012 based largely on growing demand in non-food sector
• Drivers and trends: retailers’ behaviour towardssustainability and certification, multimedia, shorterbrandlife – constant need for new designs and graphics
12
Wood Pulp EuropeWood Pulp EuropeProduction and ConsumptionProduction and Consumption
30 000
35 000
40 000
45 000
50 000
55 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Production Consumption
13
Wood Pulp EuropeWood Pulp EuropeImports and ExportsImports and Exports
0
5 000
10 000
15 000
20 000
25 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Imports Exports
14
Wood Pulp North AmericaWood Pulp North AmericaProduction and ConsumptionProduction and Consumption
50 000
60 000
70 000
80 000
90 000
100 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Production Consumption
15
Wood Pulp North AmericaWood Pulp North AmericaImports and ExportsImports and Exports
0
5 000
10 000
15 000
20 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Imports Exports
16
Wood Pulp Russian FederationWood Pulp Russian FederationProduction and ConsumptionProduction and Consumption
0
2 000
4 000
6 000
8 000
10 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Production Consumption
17
Wood Pulp Russian FederationWood Pulp Russian FederationImports and ExportsImports and Exports
0
1 000
2 000
3 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Imports Exports
18
Trade Flows of Pulp to and from Trade Flows of Pulp to and from CEPI Countries in 200CEPI Countries in 20066
Other Europe: Exports to 515 Imports from 503
Asia: Exports to 1,320 Imports from 166
Rest of the World: Exports to 154 Imports from 405
Latin America: Exports to 23 Imports from 3,089
North America: Exports to 197 Imports from 3,394
'000 Tonnes
19
Paper Production and Consumption Paper Production and Consumption in CEPI Countries 1991 in CEPI Countries 1991 -- 20020066
60
65
70
75
80
85
90
95
100
105
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Mill
ion
Tonn
es
Paper Production Paper ConsumptionTrend in Paper Production Trend in Paper Consumption
+2.6 %
+3.0 %
20
Trade Flows of PTrade Flows of Paperaper to and from to and from CEPI Countries in 200CEPI Countries in 20066
Other Europe: Exports to 6,200 Imports from 1,727
North America: Exports to 2,973 Imports from 1,513
Latin America: Exports to 1,455 Imports from 439
Rest of the World: Exports to 2,363 Imports from 368
Asia: Exports to 4,675 Imports from 365
'000 Tonnes
21
Paper and paperboard EuropePaper and paperboard EuropeImports and ExportsImports and Exports
30 000
35 000
40 000
45 000
50 000
55 000
60 000
65 000
70 000
75 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Imports Exports
22
Raw Materials in Papermaking Raw Materials in Papermaking in CEPI Countries 200in CEPI Countries 20066
Total: 115.4 Million Tonnes
Non-Fibrous Materials
14.4%
Recovered Paper42.4%
Pulp Other than Wood
1.1%
Woodpulp42.1%
23
Wood consumption for pulp manufacturingWood consumption for pulp manufacturingin CEPI Countries 200in CEPI Countries 20066
Total: 158 Million Cubic metres in 2006 / +28% over last 10 years
0
20
40
60
80
100
120
1991199219931994199519961997199819992000200120022003200420052006
Softwood Hardwood
72%
28%
75%
25%
2006
1996
24
Paper and paperboard North AmericaPaper and paperboard North AmericaProduction and ConsumptionProduction and Consumption
80 000
90 000
100 000
110 000
120 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Production Consumption
25
Paper and paperboard North AmericaPaper and paperboard North AmericaImports and ExportsImports and Exports
0
5 000
10 000
15 000
20 000
25 000
30 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Imports Exports
26
Paper and paperboard Russian Paper and paperboard Russian Federation Federation -- Production & ConsumptionProduction & Consumption
0
2 000
4 000
6 000
8 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Production Consumption
27
Paper and paperboard Russian Paper and paperboard Russian Federation Federation –– Imports and ExportsImports and Exports
0
1 000
2 000
3 000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1000
mt
Imports Exports
28
Trade Flows of Trade Flows of RecoveredRecovered PPaperaper to and from to and from CEPI Countries in 200CEPI Countries in 20066
North America: Exports to 24 Imports from 230
Latin America: Exports to 1 Imports from 8
Asia: Exports to 7,655 Imports from 0
Other Europe: Exports to 340 Imports from 762
Rest of the the World: Exports to 180 Imports from 6
'000 Tonnes
29
China’s China’s dependencedependence on on importedimported fibrefibre
• Recovered paper account for more than 50% of the total fibre consumption, around 40% is imported
• The share of non-wood pulp is declining
Wood pulp consumption Fibre consumption Recovered paper consumption
Source: Poyry
30
PaperPaper production production forecastforecast -- 20202020
Source: Poyry
• 40% of the global production located in Asia
• China taking up 60% ofthe growth in new capacity
• Link between local demand and local supply disrupted
31
PapermakingPapermaking fibre fibre furnishfurnish in in thethe worldworld -- 20202020
Source: Poyry
• About 370 Mt of fibre used in the world in 2005
• Recovered paper share to increase from 50% today to 56%
• China utilisation of recovered paper from 35 Mt to 66 Mt
32
TheThe bigbig challenge challenge aheadahead: : bioenergybioenergy
Climate change considerationsClimate change considerations
Higher relevance of security of energy supply
Higher relevance of security of energy supply
Strong push for energy efficiency
Strong international actions to reduce climate change, e.g., CO2 abatement
Strong push for renewable energy sources for power and heat
Growth of biomass for power and heat production
Emergence of biofuels for transportation
Changing competitive landscape for traditional users of wood and RP
Political contextImplications – managing the transition to a low carbon economy
- 20 %
+ 13 % 20%
- 20 %
10%
33
CEPI-16, wood supply and demand; million m3 (under bark); 2020
Source: McKinsey/Pöyry team analysis
355–370
160–170 515–540
200–260 720–800 340–420
~380
Current forest biomasssupply
• Mobilization• Net imports• Recovered
wood
Estimated supply
Estimated gap Estimated demand
Non-traditional demand (energy)
Traditional demand• PPI• WPI
Supply Demand
Will wood supply match demand ?
34
Possible future Possible future scenariosscenarios
Source: McKinsey/Pöyry team analysis
Today:~6% RESToday:
~6% RES
No mismatch between demand and supply of wood biomass• Increased biomass supply• Other RES technologies
Mismatch between demand and supply of wood biomass
Current subsidy levels and structure
Enforcing RES target without closing demand-supply gap
Current policies and
technology expectations
• Some cost increase (regional mismatches/transportation)
• Limited impact on PPI• Rough costs involved
– Increasing supply of energy crops 1.5-2.0 billion EUR/year
– Non-biomass RES: 4-6 X
• Significant increase in cost of bio-mass (incl. pulpwood and logs)
• Some risk to paper industry competitiveness
• Significant risk of bio-energy not being fully produced (240 TWh or 8% of RES target)
• Large increases in wood cost (energy-content pricing)
• Significant part of EU PPI (and wood products) globally uncompetitive
• Rough cost of additional bio-energy incentives: 8-11 x
35
Source: CEPI bio-energy survey; SBB; McKinsey/Pöyry team analysis
7168
62
6101112
202124
3260
IT 0.92NL 0.7
UK 0.7DE 6.1FR 9.7PL 4.1ES 4.1
1
3.3CZ 1.4PT 2.7
0.47.40.3
7.5BEFI
SE
SR
AT
The PPI is already a substantial participant in bio-energy production…
Share of country primary bio-energy productionPercent; Mtoe
…and can be a key enabler for reaching future RES targets
The paper industry has:
The infrastructure
Biomass generation and sourcing organization in place (both RP and fresh fiber)
The locations
Network of installed assets that can be used for power, heat, and fuel
The efficiency
Very high efficiency in generating (and using) heat
The pulp and paper industry is not the The pulp and paper industry is not the problem … it is part of the SOLUTIONproblem … it is part of the SOLUTION
36
Outside PPI
“Close to home”“Close to home”
Continued aggressive energy-efficiency measures in PPI, e.g., replacing old recovery and multifuel boilers
Additional mobilization of round wood and residue
Other measures, e.g.,
Import more biofuels; efficient use of land for first generation biofuels
Free up additional land to grow more energy crops (estimated 6 million ha)
• Lobby for removing existing export tariffs• Decrease landfill of recovered wood
~10~10
30–3530–35
5–105–10
50–8050–80
115–175115–175
Up to 310Up to 310
Potential effect 2020Million m3
ThereThere are solutions to relief pressureare solutions to relief pressure
37
WaysWays forwardforward: : focusfocus on value on value creationcreation
Pöyry Forest Industry Consulting Oy & Foreco Oy
38
WaysWays forwardforward: : focusfocus on on keepingkeeping jobsjobs
Pöyry Forest Industry Consulting Oy & Foreco Oy
