Outlook for the global paper industry

Print Solutions

The outlook for the global paper and forest products industry is stable, says Moody's Investors Service. The ratings agency noted that its outlook reflects expectations that the consolidated operating income of the 46 paper and forest product companies that it rates globally will increase by 0% to 2% over the next 12 to 18 months. (companies include Norske Skogindustrier, Mondi, Smurfit Kappa, Metsa Board, ENCE Energia y Celulosa, Portucel, WEPA Hygieneprodukte, UPM-Kymmene, Stora Enso, Sappi and Lecta).

Matthias Volker, vice president – Senior Analyst, said: ‘In Europe, earnings growth for Moody's rated European producers will be 0% to 2%. The producers account for nearly 25% of the industry's total operating income.

‘Within the region, increased operating earnings from packaging and tissue operations will outweigh those from paper operations, which continue to face the continued secular decline of paper consumption in developed markets.’

The organisation reports that the outlook for the paper packaging and tissue sub-sector remains stable. Most companies in this sector will generate flat to modestly stronger operating earnings in 2016. Product prices will decline as excess supply that entered the market last year is absorbed, offsetting modest increases in demand. Cost improvements and synergies from recent acquisitions will contribute slightly to operating income growth, offset partially by slightly higher recycled fibre prices.

A decline in paper consumption will continue to weigh on producers. The outlook for the paper sub-sector remains negative as operating income for most producers will decline due to both declining demand and product prices. Paper consumption will decline as electronic forms of communication, such as smart phones and tablets, continue to gain popularity. This will be compounded by weaker prices in regions where paper producers have not kept pace with declining demand by aggressively idling papermachines or converting them to produce other paper grades.