According to a forecast made by the analyst RISI, cellulose and paper manufacturers will be better off this year than in 2002, yet will fail to realize the profit they had targeted.
The improvement of the paper industry´s situation is essentially dependent on how the general economy fares. The players of the industry can still win fame if they continue to pursue an aggressive strategy to synchronize production and demand, and - where necessary - make the difficult decision to reduce capacity.
The global economy took a rather rough start at the beginning of the year, but RISI expects it to pick up pace in 2003.
According to the prognoses for 2003, low interest rates and the financial incentives of governments - particularly those of the USA and China - will constitute the main economic growth factors.
As far as the world economy is concerned, China continues to be the nation realizing the most dramatic growth. North America is expected to return to its usual growth rate (3-3.5%/annum) in the second half of the year. The ailing European economy is also expected to grow by more than 2% in the second half of 2003. It seems that Japan is still unable to cope with its economic problems, expecting to realize 0% growth this year too.
According to RISI´s forecast, the global economy is expected to grow by 3.5% during the year, in contrast with last year´s rate of 2.7%, and a mere 2% in 2001. Several factors, however, could bring about adverse effects this year. The most obvious disturbing factor is the protracted war in the Middle East and massive acts of terrorism threatening. In the same way, there is a danger of the remainder of the developed world following Japan in its deflationary spiral, but it seems that the US Federal Reserve is going to do all in its way to prevent this from happening. The European Central Bank, on the other hand, is also fighting deflation.
Rising demand: Global paper and cardboard demand is expected to progress hand-in-hand with the general economy this year, production having fallen short of expectations in the past two and a half years. Corporate profitability will boom in the developed world, with companies spending more on advertisements, which will increase paper consumption. The number of printed ads is already up in the United States, which RISI believes will herald recovery in the remainder of the developed world. Moreover, paper packaging use will increase even further because of increased industrial output and also due to distribution systems improving in the developing regions of the world. Finally, the paper and cardboard end-users are expected to accumulate stocks in the second half of 2003, as soon as prices begin to rise.
The world´s paper and cardboard demand according to forecasts will grow by 3.5% this year, accounting for 11 million tons (In 2002 growth was 2.1%, while in 2001 there was a decrease of 2.7%). Global paper and cardboard production capacities are expected to be utilized more completely and a rapid increase in demand is expected this year. Capacity expansion rates will remain low throughout the year all over the globe, though it will slightly pick up pace compared to last year, as fewer plants are intended to be closed in the United States´ paper industry.
The driving force behind the world´s production is the fact that Chinese producers are continuing to invest. Eighteen new paper and board machines are scheduled to be commissioned in China this year, which represents 3.1 million tons of new capacity. North America´s paper and cardboard production will continue to be on a decline in 2003, however, at a slower rate than last year. The rate of capacity expansion in Western Europe is on the decline for the third consecutive year now - this is the manufacturers´ response to decreased profitability. New capacities accounting for 1 million tons less than in China will be launched in the region this year.
The utilization rate of the world´s paper and cardboard production capacity in 2003 will be 89% on average, after a slump of 86% in 2001. As far as prices are concerned, most kinds of paper and cardboard will stabilize in Q1 2003, and prices are expected to rise from Q2 onwards. The force driving paper and cardboard prices upwards is primarily the rise in the price of fiber stuff, particularly that of secondary fiber. The majority of the machines to be put on line in Europe and China will process waste paper, which will put major pressure on already meager waste paper stocks. Waste paper prices will probably rise for this reason this year.
In the second half of 2003, this will be manifested in the rise of paper and cardboard prices.
PPI This Week, Vol. 18., No. 5., 10-14 February 2003, p. 4. |
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