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Opportunities for Indonesian Paper Exporters in Europe: Trends, Markets and the Environment 2nd High Level Market Dialogue Jakarta, 20 March 2012

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Presentation on theme: "Opportunities for Indonesian Paper Exporters in Europe: Trends, Markets and the Environment 2nd High Level Market Dialogue Jakarta, 20 March 2012"— Presentation transcript:

1 Opportunities for Indonesian Paper Exporters in Europe: Trends, Markets and the Environment
2nd High Level Market Dialogue Jakarta, 20 March 2012

2 Topics Global and European demand trends
European market characteristics How does Indonesia stack up and what is the opportunity for its producers Concluding thoughts

3 Global paper and board demand has grown by nearly 25% in the last decade
Million tons Source: RISI

4 But growth has faltered since the financial crisis and outlook is tepid(% change) -covers newsprint, printing & writing, paperboard, tissue and specialities Source: RISI

5 2010 Europe c. 88 mn tons or 26% of Global
The longer term outlook shows growth below GDP but some grades have better prospects than others: Averageannual growth rates 2010 Europe c. 88 mn tons or 26% of Global Paper intensity of growth is reducing, Growth available concentrated in emerging markets Source: RISI 2010

6 Europe well illustrates the variable growth patterns for different paper grades
2009 2010 2011 2012 2013 P&W papers Europe (mn tons) 33.2 35.9 35.1 33.7 33.3 % change -14.4 8.1 -2.2 -4.1 -1.0 World (mn tons) 104.2 110.3 109.8 110.7 113.3 -9.0 5.8 -0.5 0.9 2.3 Europe’s share (%) 31.9 32.5 30.4 29.3 Tissue papers 7.7 8.0 8.3 8.6 8.8 4.9 3.0 3.4 3.1 27.9 29.2 30.5 31.7 32.9 1.1 4.5 4.1 4.2 27.5 27.3 27.2 27.1 26.8 Source: RISI

7 Taking a closer look, the EU paper industry is a EUR 72 bn sector
Taking a closer look, the EU paper industry is a EUR 72 bn sector. It is a large importer of pulp and a large exporter of paper EURbn 2006 2007 2008 2009 2010 Pulp Exports 1.1 1.0 1.4 Imports (4.6) (4.7) (3.4) (5.2) Net imports (3.5) (3.6) (2.4) (3.8) Paper 18.7 19.0 19.3 16.9 20.2 (6.6) (7.7) (7.4) (6.9) (7.6) Net Exports 12.1 11.3 11.9 10.0 12.6 c. 20% of pulp needs are imported And c. 20% of paper output is exported With an aggregate value of over EUR12 bn,the import market for pulp and paper is substantial Source: EU Market Access Database, CEPI

8 Pulp comes from the West but paper goes everywhere-major EU Trade partners(2010)
Pulp EUR bn Net exports Net Imports Brazil 1.9 USA 1.2 Chile 0.6 China 0.5 Canada Uruguay 0.3 Indonesia (EUR mn) 24 Gross exports/imports 72 48 % of EU total 5% 1% PaperEURbn Net exports Net imports Russia 1.8 Turkey 1.0 China 0.7 Ukraine USA 0.6 Australia India 0.4 Indonesia (EUR mn) 1 Gross exports/imports 172 171 % of EU total 1% 2% EU duties on imports of Chinese coated P&W papers wef will reduce the net import balance Indonesia is a net buyer of pulp and in 2010 of paper too. With waste paper on top, the EU is an important supplier of fibre Source: EU Market Access Database

9 Looking deeper at some European market trends, we can see the decline in end use consumption in publications Source: RISI

10 ..... as screens become the new paper
Source: Gerd Leonard PRIMA Berlin May 2011

11 The European supply base must still adjust to lower demand, notably in publication papers
Source: Cepiprint, Cepifine, UPM

12 And with sales prices lagging cost rises, European papermaking margins are under pressure
Source: Hawkins Wright Pulpwatch, March 2012

13 The EU Market is increasingly environmentally and socially concious
The end of waste Strong development of recycling, with European paper recycling rate now 69% (2010) , up from 52% in EU target of 70% by 2015 54% of paper and board made from the “urban forest” Forests are expanding- net forest expansion of 512,000 ha, Virgin fibre -legal and sustainable CEPI * Code of Conduct on Legal Logging(2005) adopted by all national assns 62% of wood virgin fibre usage is certified(2010), up 5% in two years Near 100% of corporate owned or managed forests in Europe certified 96% of market pulp, 70% of P&B capacity covered by C of C certification Broad stakeholder engagement For consumers, sustainability is increasingly taken as the new norm Companies engage in wide social dialogue with civil society including NGOs * Confederation of European Paper Industries

14 >3% of global pulp; 2.5% of global P&B
Getting Indonesia in perspective- Major pulp and paper producer countries (2009) Pulp (mn tons) Paper(mn tons) USA 48.3 China 20.8 Canada 17.1 Brazil 13.3 Sweden 11.5 Finland 9.0 Japan 8.5 Russia 7.2 Indonesia 6.0 Chile 5.0 Global total 178 China 86.4 USA 71.6 Japan 26.3 Germany 20.9 Canada 12.9 Sweden 10.9 Finland 10.6 South Korea 10.5 Brazil 9.4 Indonesia Global total 371 >3% of global pulp; 2.5% of global P&B Source: RISI

15 ...but loses out on wood costs
How competitive is Indonesia? BHKP *cash costs (delivered to W Europe cif) Indonesia compares well with its low cost peers in Brazil and Chile on in-mill costs ...but loses out on wood costs * Bleached hardwood kraft pulp Source: Hawkins Wright, Feb 2012

16 So how do Indonesia and Brazil compare?
Population (mn 2012 est) 248 206 Area (mn km²) 1.9 8.5 GDP ($ at official ex rate-2011 est) 834 billion 2,500 billion GDP per capita ($ at PPP 2011 est) 4,700 11,600 Ranking for ease of doing business( 2011 out of 184 countries) 129 126 Corruption perception index –rating out of 10 ( 2010 ranking out of 178 countries in brackets) 2.8(110) 3.7(69) Top environmental issue Deforestation Deforestation(of Amazon) Forest cover (% of land area with forest) 52 65 Planted forest area-mn ha( % of total forest cover in brackets) 3.5( 3%) 6.3 (3%) Plantations –certified area - mn ha est (% certified in brackets) 0.5( 14%) 2.7( 43%) Sources: CIA Handbook, Transparency Int’l, World Bank, FAO Resources Assessment 2010,FSC, PEFC, BRACELPA

17 The key Brazilian players are a mixture of domestic and foreign companies
Fibria ¹ Suzano¹ Klabin¹ Duratex ¹ Joint Ventures CENIBRA- Japanese consortium co Veracel- Fibria: StoraEnso(Finland) ² 50:50 Foreign Arauco (Chile)² CMPC ( Chile) ² Rigesa ( Meadwestvaco USA) ² International Paper (USA) ² ¹Publicly listed on the Brazil stock exchange .Most though remain close/family controlled ² Publicly listed on home stock exchanges; the two Chilean cos, are also NYSE listed although remain family controlled

18 Concluding thoughts EU is a large but mature market-some sectors in decline; others still growing EU an open market, with well developed trade channels internally and externally EU is oversupplied domestically. But there will be more disinvestment than investment , creating opportunities for competitive external suppliers Stakeholders in pulp and paper in the EU are environmentally and socially concious; EU corporates have a high degree of public accountability and responsibility Exporters to the EU will need to be competitive not just on price and product performance, but also in terms of corporate responsibility-the Latin American exporters are well down that road. Indonesia would seem to have the basis for being cost competitive in Europe but is this enough? Ensuring that pulp and paper supplies are sourced and processed from legally sourced and processed wood is a good foundation but only the start of the whole journey.

19 Key contacts Clive Suckling,
UK & Global Leader, Forest ,Paper & Packaging Industry tel: +44 (0) This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2011 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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