At the world level, demand fell by 3.6% in 2009 and with the older industrialized countries suffering the most in the crisis. Demand in Asia was up 3%, driven namely by China. Despite this rise, the Chinese market is now in a state of overcapacity with the growth in production capacities ahead of demand since 2006. There will be an initial rebalancing in 2010, but the level of new capacities will continue to be significant in 2010 and 2011: Ken Waghorne estimates that there will be in excess of 7 million tonnes of new capacity over these two years.

In 2009, North America supplied 45% of the kraftliner imported in Asia, followed by Oceania with 20%, Russia with 16% and the rest of Europe with 13%. For China alone, Russia had a slightly larger market share. For Asia as a whole, Ken Waghorne is predicting a slight easing in imports. In terms of recycled corrugated board, Asia will become a net exporter in 2011. Asian imports of recovered fiber based CCM have however never been very high as the producers tend to import unprocessed recovered paper and board.

In Eastern Europe, recycled products account for 62% of the market. The market recorded its first contraction since 1996 in 2009, with demand down 7.5%. Capacities increased significantly at the end of 2009, including a new machine for Mondi in Poland. Net imports of recycled CCM reached a peak in 2007, at 810,000 tonnes and are now set to fall. According to RISI, these will come to only 410,000 tonnes in 2011. The East European region is still a net exporter of virgin fiber based CCM, at around a half million tonnes a year. These exports could increase slightly with the upturn in European economic growth.

Western Europe: Recycled CCM exported as means of dealing with overcapacities

The market in Western Europe is dominated by recycled board at approximately three-quarters. Demand, after two year of decline, -4% in 2008 and -10% in 2009, is expected to return to better levels in 2010, at 4%. Even combined with 2011, any expansion in volumes will still not offset the quantities lost during the crisis. Producers withdrew a lot of capacity in 2009 but new production facilities will come onto the market in 2010 and 2011.

As for almost all other paper industry grades, whether publication of packaging papers, the scale of the overcapacities has driven West European producers to try and boost their exports. In this they have benefited from the booming economies of the former Eastern Bloc, as well as of Africa and the Middle-East. In terms of recycled CCM, between 2000 and 2007, annual exports to Eastern Europe rose from 350,000 tonnes to 1.4 million tonnes. Exports to Africa and the Middle-East went up from 150,000 tonnes to 750,000 tonnes by 2008. Exports to Asia and Oceania however declined between 2002 and 2007, before showing slight growth in 2008 and 2009. For last year, they were around 180,000 tonnes.

The outlook for exports in 2010 and 2011 is gloomy. Following the peak in 2009 at 2.3 million tonnes, exports are expected to fall to just 1.5 million tonnes. These will then account for just 9% of European output. In Africa and the Middle-East, new capacities will be meeting growing local consumption and this will put further limits on exports. New capacities in Oceania are also going to be shipping to the Asian market.

In terms of kraftliner the balance of trade is in deficit and imports are much more stable. Between 2000 and 2008 these accounted for 26% to 30% of demand in Western Europe. In 2009, the lower prices and large drop in demand reduced the attractiveness of the market for non-European exporters and imports fell below the 1 million tonne mark. According to RISI these will continue to decline into 2010 as a result of poor demand and prices being driven down because of overcapacity, but they will pick up again in 2011. In 2009, the two leading suppliers were North America and Eastern Europe countries, with imports at around 500,000 tonnes for each of these regions.

For the producers the level of overcapacity and the decline in exports is going to lead to worsening utilization rates. In terms of recycled products, these were at 83% in 2009, and at 75% for kraftliner. These rates are now back at more sustainable levels for the producers, at around 92% and 87% respectively. They are however still below their long-term rates and they are hampering any return to profitability for papermakers.

In the United States, demand in 2009 held up slightly better than in Western Europe but it was also lower than in 2007. Ken Waghorne expects a significant catch-up in 2010, with an expansion in demand of 6% reflecting essentially the rapid recovery in the manufacturing sector, and stock building. US producers are also benefiting from the strong level of demand in South America.