2019 global containerboard industry review and 2020 outlook

North America

Although the US economy is still on a relatively stable basis compared with many other large economies, GDP growth has converged to a long-term trend of 2%. Factors affecting the region’s economic growth include: consumption and employment growth trends have weakened but remained stable; business investment has weakened; residential investment has rebounded, and continued monetary easing policies.

The American Forest and Paper Association (AF&PA) released the October 2019 "U.S. Containerboard Statistics Report", which showed that the production of containerboard in September decreased by 2% compared with September 2018, and the year-to-date output Compared with the first nine months of 2018, it was down 5.0%.

The containerboard paper operating rate (utilization rate) was 93%, a decrease of 4.0 points from September 2018, and a decrease of 6.1 points year-to-date. The containerboard mill inventory decreased by 22,000 short tons from the previous month, and compared with the total inventory in September 2018, it only increased by 27,000 short tons.

Due to China's import restrictions on waste paper, the demand for OCC and blended paper exports to China has dropped sharply. The decline in demand has caused an oversupply of waste paper, especially in North America, which is the largest exporter of recycled fibers to China.

North America is expected to remain the main export destination of virgin containerboard, including Central America, Asia and Western Europe. In the past few years, North American exports have increased by about 3.5%, but due to weak global demand due to trade uncertainty and economic weakness, the growth rate has slowed in 2019. The trend toward lighter cardboard products is still vibrant, partly because the industry continues to strive to provide sustainable packaging solutions.

Latin America

After experiencing the weakness in 2019, it is expected that regional growth in 2020 will resume its vitality. Thanks to loose monetary policy and confidence in the revival, the recovery of the Brazilian economy will be the main driving force. The International Monetary Fund forecasts growth in Mexico, Peru, and most of the rest of Latin America. However, due to high inflation and policy uncertainty, Argentina is still expected to be in recession. Protests and political uncertainty may inhibit the economic growth of several countries in the region.

For example, according to Chile’s new Finance Minister Ignacio Briones (Ignacio Briones), after the protests in the Andean countries lasted for more than two weeks, economic growth in 2019 may slow to between 2.0% and 2.2% (low The 2.6% increase previously predicted).

Elsewhere, Brazil remains the main containerboard producer in the region. So far in the third quarter of 2019, the delivery volume of cardboard paper has increased by about 3%. In the first nine months of 2019, recycled carton board (RCCM) increased by 2.5%, while kraft paper and semi-chemical core paper increased by 3.8%.

We see new players in the international packaging industry operating in Latin America, mainly because of the high demand for packaging in the region. In Brazil, the region's main source of income, industry players are increasing their business by expanding existing production plants or through acquisitions.

From 2019 to 2023, more than 1 million tons of production capacity has been announced in Brazil, and there are also projects announced in Mexico. The growth rate of containerboard demand in the region is expected to be moderate, which reflects the economic development of most Central and South American countries.

European region

The European economy continues to maintain moderate growth. The European Commission recently released its economic forecasts with little change for 2019: the EU is expected to grow by 1.4%, and the Eurozone as a whole will grow by 1.2%. By 2020, the EU is still expected to achieve growth of 1.6%, but growth in the Eurozone may slow to 1.4%. The situation across Europe is different, as the growth rate this year is expected to grow by only 0.7%.

It is expected that the total demand for cardboard paper in Europe in 2019 will show a moderate growth. Minor changes in substitutes may continue, in favor of recycled cardboard and stay away from the original cardboard. Due to the declining demand for virgin fiber, recycled cardboard paper has grown to nearly 82% of total consumption. Like many other regions, with the rise of multiple projects, the production capacity of containerboard in Europe is also increasing. However, although supply appears to exceed new demand in the next few years, changes in consumer behavior and the potential impact of European restrictions on single-use plastics may prompt an increase in demand for corrugated cardboard and containerboard.

Asia region

The long-term policy uncertainty of important trading partner economies, distorted trade measures and unfavorable factors brought about by slowing growth are inhibiting economic growth in Asia and the Pacific. Growth in Asia is expected to slow to approximately 5.0% in 2019 and drop to 5.1% in 2020.

China

China's economy continues to mature. Its real GDP growth rate has dropped from 14.2% in 2007 to 6.6% in 2018, and the International Monetary Fund predicts that this growth rate will drop to 5.5% by 2024. In terms of future global containerboard production capacity, the Asia-Pacific region will continue to be the strongest growth region in the world. If economic and trade uncertainties can be resolved, China is expected to once again contribute to regional growth.

However, due to the government's restrictions on the import of waste paper, China will face many major production obstacles in the short term. Almost all of China's nearly 500,000 tons of containerboard production capacity are made from recycled fibers. However, due to the reduction in import licenses, OCC imports have dropped from about 25 tons before the restriction to the expected total of 11 tons in 2019, and it is expected to further decrease in 2020 and beyond.

Japan

According to data released by the Japanese Cabinet in November 2019, the Japanese economy is the world’s third largest economy after the United States and China, with an annual growth rate of 1.8% in the second quarter of 2019. This figure exceeded the expectations of economists, who have eased due to slowing global demand. It is estimated that GDP will grow by 0.6% in 2019 and 0.3% in 2020.

Despite the declining birth rate and the aging population, personal consumption in Japan is recovering, which helps to promote the growth of corrugated packaging demand. In fact, Japan’s demand this year is expected to reach a record 14.1 billion square meters. In addition to the increase in domestic demand, China's restrictions on the import of waste paper may bring more export substitutes to Japanese cardboard manufacturers.