Mineral demand outlook for global paper & packaging ...

Mineral demand outlook for global paper & packaging markets

Ian Wilson, Consultant, UK

Ilari Valkeinen

Wisdom Intelligence Eileen Hao

Mossman Resources Richard Flook

Masato Katayama, President

ACKNOWLEDGEMENTS

Ismene and Mike

Nick Wilshaw

Ghulam Mohammad, CEO

TD Vietnam Ms. Thu Vu

AGENDA o Some minerals used and shape and size o Some details on kaolin and PCC , particulary Specialty Minerals (MTI) o Market view from Valmet who make paper machines o A producing paper/board company - Stora Enso mineral use o Situation in Japan - use of some pigments for paper o Situation in China - reasons for 7% decline in output for P&B

Crystals and types of Calcium Carbonate (CaC03)

Rhombohedral Calcite Scalenohedral calcite Aragonite needles

Chalk Cocoliths

Lamellar nature of talc from Afghanistan

Markikhel Mine

SCALENOHEDRAL CALCITE RHOMBHEDRAL CALCITE ARAGONITE NEEDLES

PRISMATIC CALCITE SPHERICAL CALCITE CLULTER ACICULAR ARAGONITE

Some PCC morpholgies produced by Specialty Minerals Rhombohedral, Scalenohedral and Aragonite

KAOLINITE STACK 10 MICR0NS KAOLINITE PLATES 2 MICRONS

SHAPES OF BLOCKY,PLATY KAOLINITE AND TUBULAR HALLOYSITE

THIN PLATELETS 2 MICRONS

HALLOYSITE 500nm

PAPER TYPES

NEWSPRINT – MAINLY MECHANICAL PULP OR RECYCLED FIBRE UWF (UNCOATED WOODFREE) – PRINTING & WRITING PAPER WOODFREE PAPER - <10% MECHANICAL PULP. WF INCLUDES COATED (CWF) AND UWF. (WF = FINE PAPER, US - FREE SHEET) CWF – COATED WOODFREE PINTING AND WRITING PAPER LWC – LIGHT WEIGHT COATED. USUALLY MECHANICAL PRINTING PAPER <60gsm USED IN PUBLICATION PAPER SC - SUPERCALENDERED PULP TYPES BHKP - BLEACHED HARDWOOD KRAFT PULP BSKP - BLEACHED SOFTWOOD KRAFT PULP BCTMP - BLEACHED CHEMI-THERMOMECHANICAL PULP KRAFT PULP - REMOVE LIGNIN LEAVING FIBRES BEFORE BEING USED IN SOME PAPERMAKING KRAFT PAPER - MADE FROM KRAFT PULP – STRONG PAPER USED MAINLY IN WRAPPING / PACKAGING

PAPER AND PULP TYPES

KAOLIN

DELAMINATION OF STACKS OF KAOLIN - UK

>10 Micron stacks in overflow second stage

of classification

PLATES, FROM DELAMINATION

OF STACKS – HIGH ASPECT RATIO/ SHAPE FACTOR

MEDIA GRINDING TO PRODUCE HIGH ASPECT RATIO CLAYS FOR SC (SUPECALANDERED PAPER)

10 mic

1 mic

STACKS PLATES

DELAMINATION

MEASUREMENT OF SHAPE FACTOR AND ASPECT RATIO • ECC (NOW IMERYS) DEVELOPED A STOP-FLOW CONDUCTIVITY

MEASUREMENT INSTRUMENT WHICH GIVES A SHAPE FACTOR. THE METHOD IS KNOWN AS

PANACEA: PARTICLE

ASSESSMENT (by)

NATURAL

ALIGNMENT (and)

CONDUCTIVITY

EFFECT

ANALYSIS

ASPECT RATIO CAN BE MEASURED BY THE TEM

SHADOWING TECHNIQUE

For a given shadow angle, particle thickness proportional to shadow length

• One of main roles of a paper coating is to provide optical and physical coverage of the base paper providing a high quality surface for printing

• Main difference between kaolin and carbonate in paper coating is particle

shape. The platy nature of kaolin gives a smooth surface for printing whilst carbonate is added for brightness (and is generally much cheaper)

• Generally the higher the aspect ratio of kaolin mixed with calcium carbonate

(GCC) will give better printability.

• IMERYS developed new coating pigments from mid-Georgia called “E-TYPE”

PAPER COATING

Pigment GE Brightness % <2um Shape Form Slurry % solids

Premium Fine Platy Pigments

Contour™ Xtreme HS 90 97 Platy Slurry/Dry 69-69.5

E100™ 88 91 V.Platy Slurry/Dry 67

E170™ 88 90 V.Platy Slurry/Dry 63.5

Premium Coarse Platy Pigments

E300™ 87.5 84 V.Platy Slurry/Dry 62

E500™ 87 78 H-Platy Slurry/Dry 61

E800™ 87 72 H-Platy Slurry/Dry 59.5

o Premium Coarse Platy Pigments – provide good coverage and developed for use in pre-coating and work well blended with other pigments such as GCC. Improved coverage allows papermakers to reduce calendering and improve sheet bulk

o Premium Fine Platy Pigments work well in single coated applications and can be blended with GCC. Can be used in coated board precoat applications to improve

coverage on darker base boards. Work well blended with calcined clays. E800™ Hypa-platy.

PLATY PIGMENTS

IMERYS North American Kaolin Value in Coverage

SURFACE GLOSS

STIFFNESS PRINT QUALITY

SOURCE: CHRIS NUTBEAM, IMERYS

COATING CLAY - SHAPE FACTOR AND FINENESS d50

Bakery/Bread Bag

o IMERYS produce BARRIKOTE™ which is a water-based barrier coating (WBBC) using hyper-platy kaolin in formulated coatings for use in various packaging applications.

o The barrier solution can be regulated, by varying the coat weight, to enable the bread to breath at the required rate to extend shelf life and maintain freshness.

o Imerys’ solution is a press applied WBCC that enables flexibility to convert any bread pouch according the specific needs of the bread.

o By using water based barrier coating the bread bags are recyclable

PCC Precipitated Calcium Carbonate

Chemistry Ideal Range TD Vietnam

CaCO3 95-98% 98.50%

MgO 0.5-1.0% 0.05% max

MgO 0.5-1.0% 0.05% max

S 0.01-0.03% 0.02% max

Fe2O3 0.05-0.08% 0.02% max

Mn 0-30 ppm 30-40 ppm

Acid insolubles 0.3-0.6% 0.03-0.05%

LOI 42-43% 42-43%

Greyish limestone, Arcos, Brazil

Limestone from TLD Vietnam, Hai Duong Courtesy: Ms Thu Vu. TLD Vietnam

Chemistry suitable for PCC with range and details of a Vietnamese limestone deposit

LIMESTONE SUITABLE FOR PCC FOR PAPER

o Calcination of limestone in a kiln to drive off carbon dioxide and produce lime (CaO)CaCO3 + Heat » CaO (lime) + CO2 (Calcination)

o Lime delivered to Satellite plant, lime slaked (water added) CaO + H2O » Ca(OH)2 (Hydration or slaking)

o Carbon dioxide bubbled bubbled through in a carbonator to give precipitated carbonate Ca(OH)2 + CO2 » CaCO3 + H2O (Carbonation)

o Screening to further purify the PCC to remove coarse particles. Most grades have a minimum purity of around 98% with magnesium carbonate, silica and unconverted lime as the main contaminants

o In a satellite plamt PCC is then used in the manufacture of the paper. Particle shape and size (crystal engineered PCC) can be determined during the processing

Production of PCC from Limestone

Paper PCC 29%

$377.7

Specialty PCC 5%

GCC 6%

Talc 4%

Performance

Materials 56%

(mainly bentonite)

MTI - MINERALS BUSINESS 2017 $1.320 BILLION REVENUE

Performance Materials $734.8 (56%) Specialty Minerals $584.8 (44%)

(millions of dollars)

Paper PCC – 29% Revenue 29% of total

Specialty PCC is for non-paper uses

MTI (Specialty Minerals) is the largest producer of PCC for paper and mainly produce in Satellite plants at paper mills

Country Satellites Tonnage, kt

China 9 767

India 5 210

Indonesia 2 140

Japan 1 50

Malaysia 1 50

Thailand 3 200

USA 18 1565

Canada 2 150

Finland 2 165

France 3 140

Germany 1 75

Poland 1 75

Portugal 1 125

Slovakia 1 100

Brazil 5 300

South Africa 1 100

Total 56 4212

Asia 34%

North America 41%

Europe 16%

Brazil 7%

South Africa 2%

Source: MTI Annual Report 2018

56 PCC Satellite Plants for paper, 2018 – 4,212ktpa

• PCC is designed to provide optimum balance of paper properties including brightness, opacity, bulk, strength and improved printability.

o Research and development and technical service staff focuses on expanding sales from its existing and potential new satellite PCC plants, as well as, developing new technologies for new applications.

o These technologies include, among others, acid tolerant ("AT® ") PCC, which allows PCC to be introduced to the large wood-containing segment of the printing and writing paper market.

o New Yield®, a technology that converts a paper and pulp mill waste stream into a functional pigment for filling paper.

o FulFill® family of products, a system of high-filler technologies that offers papermakers a variety of efficient, flexible solutions which decrease dependency on natural fiber

o OPACARB® PCC, a family of products for paper coating

MTI LOOKING AHEAD

Location Paper Company Capacity, tpa

Dagang. Jiangsu APP, Gold East Paper (Jiangsu) Co. Ltd 100,000

Zhenjiang APP, Gold East Paper (Jiangsu) Co. Ltd 100,000

Suzhou Gold Hua Sheng Paper Co. Ltd 100,000

Yanzhou, Shandong Shandong Sun Paper Industry Co. Ltd 100,000

Jiaozuo City, Henan Henan Jianghe Paper Co. Ltd 22,000

Nanning, Guangxi Nanning Jiangxing Paper Ind. Co. Ltd 45,000

Zhejiang - PCC coating Zhengda Paper – cartonboard packaging 50,000

Changshu, Jiangsu UPM-Kymmene Corporation 100,000

Shouguang, Shandong Melium Paper Co (Chenming Paper) 150,000

Total 767,000

Source: MTI Annual Report 2018

Nine MTI PCC Satellite plants in China 2018

Country Company Plants PCC capacity (kt)

Europe

Austria Omya 2 122

Finland Omya 2 190

France Omya France 1 26

Netherlands Omya Netherlands 1 100

Portugal Omya Comital 1 30

Russia ooo Unikristall Komi 2 80

Sweden Omya AB 2 36

North America

USA Omya North America 1 200

South America

Argentina Omya Argentina 1 30

Brazil Mogi Guacu 1 100

Asia

India Omya India 1 60

South Korea Omya Hankuk Chemical 1 50

Total 16 1024

Source:

OMYA PCC

SATELLITE PLANTS

Region Mill Paper Company Tonnage, kt

Europe

Sweden Hosum M-real 50

USA Canton Blue Ridge Paper 54

Somerset Sappi Fine Paper 82

Bennettsville Domtar 36

Asia

China Yueyang, Hunan Tiger Forest & Paper 90

India Bhadrachalan ITC 20

Indonesia Riau Asia Pacific Resources 120

South America

Argentina Capitan Bermudes Cellulosa Argentina 10

Ledesma Libertador General 10

Brazil Limeira Ripasa 150

Santanesia Schweitzer-Maudut 15

Total 637

IMERYS PCC

Satellite Plants

Source:

Company Tonnage kt

MTI 4,212

Omya 1,024

Imerys 637

Okutama Kogyo 288

Schaeffer Kalk 217

Others 422

Total 6,800

MTI 62% Omya

15%

Imerys 10%

Okutama Kogyo 4%

Schaeffer Kalk 3%

Others 6%

PCC Satellite plants for paper, 2018

6.800 kt

Source: MTI,

92 82

33 20

1

4

5

14

6 13

62 63

1 1 3

0

10

20

30

40

50

60

70

80

90

100

1972 1988 1996 2001

%

KAOLIN GCC PCC TALC

NORTH AMERICA % OF FILLER USED FROM 1972-2001

Most of filler kaolin from Georgia, USA was replaced by

Specialty Minerals PCC Satellite plants

Source: Ian Wilson

Pigments used by Stora Enso

No TYPE FORM

1 Carbonates

- GCC (Ground Calcium Carbonate) marble Slurry

- Chalk Powder

- Limestone Powder

- PCC (Precipitated Calcium Carbonate) Slurry (CaO)

2 Kaolin

- Hydrous Slurry, Powder

- Calcined Slurry

3 Lime

4 Talc Slurry, Powder

5 Bentonite Powder

6 Special Pigments

Source: Ilari Valkeinen, Stora Enso, Presentation: Imformed Recycling 2016

STORA PAPER GRADES COATED AND UNCOATED

• Uncoated WFU (Wood Free Uncoated), SC (Supercalendered), Newsprint fillers

o Grade Type function - WFU; PCC, GCC bulk, opacity - SC; Kaolin and talc printing properties - Newsprint “PfR’ (Paper for Recycling) printing properties

Coated CWF (Coated Woodfree), CM (Coated Mechanical)

o - CWF; GCC printability - CM; Kaolin printability

Source: Ilari Valkeinen, Stora Enso, Presentation: Imformed Recycling 2016

1,256,000t 67%

368,600t 20%

18,300t 1%

1,000t 0%

214,500t 12%

8,100t 0%

Carbonate GCC+PCC

Kaolin

Talc

Special Pigments

Lime

Bentonite

Source: Ilari Valkeinen, Stora Enso, Presentation: Imformed Recycling 2016

Pigments, Lime and Bentonite for Stora Enso Total 1,867,000 tonnes

REPLACING

PE-FILMS IN CUPS

POUCHES FOR LOW TO

MEDIUM SHELF LIFE

POUCHES WITH HIGH

BARRIER PROPERTIES REPLACING

ALUMINIUM FOIL

CAPS, CLOSURES

& PACKAGING

COMPONENTS TRAYS

CAPS WITH

HINGES

LIDS

BIO

-BA

RR

IER

S

AN

D F

ILM

S

BIO

-CO

MP

OS

ITE

S

GLOBAL

MARKET SIZE

~80 Bn EUR

~25 Bn EUR

2019-2021

RIGID

CONTAINERS STRAWS

2021-2023 2023-2025

Storaenso target is 25% of sales from new products and services (2018 level is 15%)

Source: SmithersPira, internal analysis,, 21 March 2019.

Stora Enso Varkaus PM3 grade conversion rebuild

Growth in traditional retail and e-commerce is increasing global demand for sustainably produced packaging materials. In 2015, Stora Enso’s Varkaus mill in Finland converted their existing paper machine into a board machine to produce linerboard to better meet the market need for renewable packaging. They chose Valmet as their partner for this challenging rebuild.

STORA ENSO VARKAUS PM3

Grades AvantKraft Brown (kraft liner)and AvantKraft White Top (whitetop liner) Basis weights 80225 g/m2 Wire width 8 400 mm Design speed 1 200 m/min Annual capacity 395 000 t/a

CONVERSION FOR STORA ENSO

o Established in 1987 as WGCC supplier for paper coating o Leading producer of GCC in Japan o Four plants in Japan for WGCC, and one dries to produce powder WGCC. o Formed JV with SMI in 1996, and built one satellite plant in 2000

Slurry

Confidential

Fimatec Soma Plant

Main office at Kanda, Tokyo

Soma Plant + Production Technology Development

Fuji Plant +Paper Customer Support Lab

Okayama Plant +R&D

Shiraoi Plant

Plant Locations, Japan

KAOLIN COATING CLAY IMPORTS USA BRAZIL TOTAL

2007 750,000 250,000 1,000,000

2018 377,000 10,002 388,002

o Kaolin use in paper in 2018 Significant decrease in kaolin imports into Japan from USA and Brazil Less kaolin is used in coating formulations – formerly 50% blends with GCC now 20-30%

o GCC production for paper in 2018 Filler and coating applications around 910,000 tpa in 2018

o Paper Production in 2018 Japanese Coated paper production is decreasing year on year at 3-4% per year Coated board is increasing but slightly. FMT have narrow distribution type product.

Source for 2018 figures

Situation in Japan for paper

CHINA 100BC- AD105

KOREA JAPAN

600

TIBET 650

INDIA 600

IRAQ 793

EGYPT 1000

N. AFRICA 1100

SPAIN 1085

PHILADELPHIA 1690 BATTLE

TALAS 751

ENGLAND W. CAXTON

1476

GERMANY GUTENBERG

1447

SPREAD OF PAPER FROM CHINA

FRANCE 1190

YEAR 2011 2011 2012 2013 2014 2015 2016 2017 2018

Production (million t) 100.4 110.3 113.8 115.1 117.9 117.7 123.2 125.4 116.6

% change year on year 9.9 3.1 1.2 2.4 -0.1 4.6 1.8 -7.0

90.0

95.0

100.0

105.0

110.0

115.0

120.0

125.0

130.0

2010 2011 2012 2013 2014 2015 2016 2017 2018

China P&B Production 2010-2018 (millions tonnes)

Significant drop of 7.0% in 2018

compared to 2017

Why is this?

Source: National Statistics Bureau, P.R. China

Reasons for the decline in Chinese paper industry output in 2018: 1. Internal reason: Strict environmental inspection led to o Small paper mills with heavy pollution have been forced to withdraw from

the market.

o 2018, there were 6,704 papermaking enterprises and 1,045 loss-making, up 23.5% year on year

o In 2018 losses reached 8 billion yuan, up 58.3% year-on-year

o Fuyang district of Hangzhou, the hometown of papermaking in China, has shut down 66 papermaking enterprises, eliminated 4.9 million tonnes of production capacity and cut 62.8% of the total papermaking capacity since November 2017,

2. External reasons: Sino-US trade friction, resulting in the import of raw materials blocked

o Since 2018, the overall price of waste paper (raw materials) has been affected by the tightening import policy and Sino-US trade friction.

o In In the first 11 batches of 2018, 114 companies were approved to import a total of 10.7901 million tons of waste paper, a sharp decrease of 61.61% compared with the 11 batches of 2017.

3. The decline of the industry boom, weak market demand o Profits of Chinese paper companies have fallen in 2018. o The total profit of papermaking enterprises dropped from 83.78 billion yuan in 2017 to

76.64 billion yuan in 2018, a decline of 8.5%. Data sources: 1. China environment news and China paper network "66 paper mills in Fuyang district of Hangzhou have been closed in a year and a half with a capacity of 4.9 million tons" in March 2019; 2. China business industry research institute ”Business data analysis of China paper industry in 2018 and market forecast in 2019" in February 2019 - acknowledge Eileen Hao and Angela Chen of Wisdom Intelligence

o MTI already has 9 satellite plants at paper mills in China.

o The waste stream in question is predominantly in China where environmental regulations prohibit burning or landfilling the material.

o NewYield®,provides papermakers with a number of benefits. It eliminates landfill costs, provides an effective paper filler and reduces emissions and energy costs.

o The prospects for these new technologies in China are bright and MTI are pursuing

more than 20 opportunities in the region for PCC filler and new satellites.

MTI in China developments

Source: MTI

The Confederation of European Paper Industries (CEPI)

Key statistics report 2017 Each year in July CEPI publishes the latest preliminary market and production data for the previous year. The latest data whether it is production, added-value or exports all indicate positive trends. Investment: more than 5bn, a 7.5% increase from 2016 Exports: up 5.4% Paper & Board consumption: up 0.5% Paper & Board production: up 1.5% (92.3 million tonnes) Employment: up 0.1% CEPI covers 18 countries – Austria, Belgium, Czech Republic, Finland, France, Germany, Hungary, Italy, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, The Netherlands and UK.

Newsprint, 6.1%

Uncoated Papers 15.2%

Coated Papers, 13.5%

Sanitary and Household

8.1%

Case Materials 32.6%

Wrappings 4.6%

Other packaging

Papers 15.3%

Other Paper & Board

4.6%

Production of P&B by grade in CEPI Countries 2018 – 92.3 million tonnes

2018 Production 92.3 million tonnes (compared with 2017)

Packaging +1.2% (52.5%) Sanit Hou’ +1.0% (8.1%)

Other P&B = 4.6% Graphic -1.4% (34.8%)

=

o Uncoated WF Mechanical +1.2% o Coated CM paper unchanged o Uncoat’ WF (office paper) -2.5% o Coated WF grades -7.4% o Newsprint (newspapers) -8.9%

www.cepi.org/topics/statistics-

Increased production of packaging and board offets the decline in

production of graphic papers

o The production stability observed in Europe contrasts with the reduced global paper and board production, -0.6% in 2018 compared to 2017, to 417 million tonnes according to very first estimates.

o This reduction was mainly driven by China, whose production decreased by close to 4%. Paper and board production in Japan, South Korea and the United States has also declined.

o Production in Canada, Russia and several emerging countries, India, Indonesia and Mexico increased.

The Confederation of European Paper Industries (CEPI) Preliminary figures

National Statistics Bureau, P.R. China

Production in 2018 in China was 116.6mt, a decrease of 7% from 2017

o World demand for paper and board is forecasted to grow 1.3% pa reaching 486 million tonnes in 2030

Consumption growth per paper grade 2016A-2030F

Containerboard +62 million tonnes +2.4%

Fine papers - 10 million tonnes -0.3%

Cartonboard +15 million tonnes +2.0%

Tissue +17 million tonnes +2.9%

Newsprint - 8 million tonnes -2.8%

Source: RISI, Valmet Paper business line, Capital Markets Day, September 18, 2018

Valmet forecast for paper and board to 2030

0

50,000

100,000

150,000

200,000

250,000

2005 2010 2015 2020 2025 2030f

CONTAINERBOARD FINE PAPERS CARTONBOARD TISSUE NEWSPRINT

Global consumption of P&B 2016-2030f (ktpa)

130,000 140,000 152,000 180,000

200,000 230,000

111,000 110,000

105,000

100,000 90,000

80,000 40,000 50,000 55,000

60,000 70,000

75,000

25,000 30,000

35,000

40,000

50,000

55,000

40,000 33,000

30,000

25,000

20,000

15,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2005 2010 2015 2020 2025 2030f

Consumption for paper and board 2005-2016 and forecast until 2030

CONTAINERBOARD FINE PAPERS CARTONBOARD TISSUE NEWSPRINT

China 28%

Rest of Asia 19%

North America 20%

Europe CEPI-18

22%

Rest of Europe 4%

Latin America 5%

ROW 2%

Global estimated production

of Paper and Board (based on 420 million tonnes)

Thanks to Mike and Ismene and all others for a very

good meeting