1. Market pulp Outlook, and impact of India
Utipulp meeting
Barcelona, 18th September 2014

2. Pulp prices versus other commodities

4. Current problem is demand, rather than supply
includes India, Thailand, Indonesia, Vietnam. Also Korea, Taiwan. And Turkey
Demand averages 1.2 million tpa over past ten years, but has slowed over past 2 years

5. Chinese monthly import
+5% v 2013= 0.4Mt in 7 months
Russia +38%
Indonesia +7%
Brazil +33%
Indian imports

6. Net capacity additions average 1. 4 million tpa for next five years
Net capacity additions average 1.4 million tpa for next five years. Mostly BHKP
Recent closures of Huelva and Old Town reduce the surplus for 2014 and 2015, but further closures will be necessary to restore balance
Capacity surplus based on current plans:
Where? When? Who?

7. Impact of exchange rates - softwood

8. Impact of exchange rates - hardwood

9. Impact of exchange rates
Since January, NBSK PIX has risen by $24 but €55
European dollar denominated costs are falling with weaker euro…

10. Defining the Indian market for Pulp & Paper
Hawkins Wright published mullti-client report on India in 2008 and 2013
Similar approach to China research…
Market remains relatively small in absolute terms, but has been developing steadily
Furthermore, analysis is useful in understanding the drivers of China and other emerging markets

11. Comparisons with China…population
India v China population, (f)
Indian population is only 31% urbanised compared to 45% in China, 44% Indonesia, 78% in Mexico, 87% in Brazil.
Urbanisation should further boost economic growth, but lack of investment in infrastructure such as transport, housing, and basic sanitation is a major problem.
Of the 1 billion people in the world who have no toilet, India accounts for nearly 600m.
Problem is partly economic, partly cultural.
Indian per capita income is $1500pa in 2013 ($5350 by PPP) and unevenly distributed. Some states are $1000pc
Households are larger, so household income is higher
China per capita disposable income was US$3000 in 2013

12. Comparisons with China…GDP
India v China GDP growth, (f)
India v China GDP,
Indian per capita income is $1500pa in 2013 ($5350 by PPP) and unevenly distributed. Some states are $1000pc
Households are larger, so household income is higher
China per capita disposable income was US$3000 in 2013

13. India is world’s 3rd largest economy by PPP (10th in absolute dollar terms)
GDP compared, 2012 (PPP basis):
In 2013, IMF estimates China $13.4 trillion and India $5.1 trillion
Not GDP

14. So, why is paper production lagging??
Indian tissue demand <150,000tpa compared to 6 million t in China

15. Importance of China’s export sector
India runs a current account deficit of per cent of GDP in 2013, whilst China has a surplus of per cent.
China exported $2.2 TRILLION (=$2,200,000 MILLION) in last twelve months…textiles, footwear, furniture, toys, electronics. i.e. Mostly packaged goods. (Spanish GDP is $1.3 trillion. German GDP $3.6trn).
China exports ~17 million tonnes of P&B in converted form
India exported $320 MILLION. Mostly engineering goods, gems and jewellery, chemicals, agricultural products and textiles (9%)….this sector is not a driver of P&B demand

16. Services account for 56 per cent of the Indian economy (43 per cent in China), whilst industry accounts for just 26 per cent (47 per cent in China).
Composition of GDP, India
Composition of GDP, China
These differences explain the different scale and structure of the paper industries…. e.g. Packaging grades account for two thirds of Chinese consumption, compared to only 40% in India.

17. Paper consumption is related to spending (rather than population or GDP)
GDP compared, 2012 (PPP basis):
Not GDP

18. Paper consumption is related to spending (rather than population or GDP)
Spend ~$115,000 to generate 1 tonne of paper demand, and the “yield” is falling

19. Paper consumption is related to spending (rather than population or GDP)

20. Geography & Industry fragmentation
(China development was concentrated in coastal provinces)
17 Indian companies have annual capacity >100,000t/y. Combined output is 4.6 million t/y.
Remaining 6 million tonnes of production is very small scale and impossible to measure output accurately
Largest paper machines are 200,000t/y or less
Average order size = 1/3 container
Lack of merchants and intermediaries. Difficult to build brand
Geographically dispersed across 35 locations (opposite)
Average distance for BILT CWF: 1200km

21. Fibre demand, 2013
Forestry – Industrial plantations are prohibited. Farm forestry schemes with local farmers.
Even so, BILT, JK Paper, ITC, Century, West coast have installed 1 million t/y pulp capacity since Most pursue a strategy of integration
Fibre deficit…wood chip imports are expected to reach 1 million BDMT in 2014.
Low wastepaper recovery rate (<30%)

22. Pulp imports BSKP imported from North America, Nordic, and Chile
APRIL controls BHKP market. BILT brings in tied volume from Malaysia
BEKP import ~50,000t/y
Limited opportunity to displace local non-wood and wood pulp (less than in China)

23. Opportunities and challenges
India’s population is young and growing, and less urbanised
Income per capita remains very low even compared to China, Indonesia
Positive economic outlook
Investment in infrastructure is crucial. Roads, ports, warehouses. Also power generation and network, drainage & sanitation. Access to capital?
Restrictive labour laws and bureaucracy discourage industry and labour intensive manufacturing…bold reforms required
Land reform (plantation ownership)
Fragmentation, opportunities for consolidation are limited
Whilst China aims to reduce investment and promote consumption, India must do the opposite
Big things are expected of Mr Modi…GDP has started to rise, rupee has stabilised, and BSE is at record highs.
Can he deliver?

24. Outlook P&B grew by 7% 2007-2012 = 3.2Mt in 5 years
Pulp imports grew by 0.4Mt
Assuming Indian paper demand grows by 0.8 million tpa, how is this achieved?
What percentage of P&B growth taken by imports? (over-supply globally)
Of local P&B production, what percentage of fibre is virgin v recycled?
Of virgin fibre, what proportion is imported pulp v local pulp; local plantations v imported chips and logs?
Outside of China, India remains an important emerging market for pulp. However, fundamentals of population, geography, culture, and economy suggest a very different path to China. Slow and steady rather than explosive?