Moody’s Outlook For Global Paper, Forest Products Industry Is Negative The Moody‘s outlook for the global paper and forest prod- ucts industry remains negative. This reflects Moody’s ex- pectation that the industry’s global operating income will decline 5-7 percent over the next 12-18 months. Declining demand and lower paper packaging (both corrugated and consumer packaging), commodity paper and market pulp prices will be only partially offset by increasing wood prod- uct prices and modestly stronger demand for tissue. Coronavirus will pressure demand and drive prices lower. The global economic outlook is deteriorating as the outbreak spreads. While logistics disruptions may tempo- rarily slow paper and forest product exports to and from China and other affected areas, such as Korea and Italy, the impact on global demand will be worse than on global production. This will result in oversupply across many re- gions, which will drive prices for most grades lower. Paper Packaging And Tissue The outlook for the paper packaging and tissue sub- sector remains negative. Lower corrugated and consum- er packaging prices, as recent capacity additions cause an oversupply, will be partially offset by lower fibre costs. E-commerce growth and environmental pressures to re- place plastic packaging with paper-based alternatives will be partially offset by right-size packaging.
Despite a recent spike of bath tissue and paper towels in reaction to the coronavirus, Moody’s expects demand will normalize during the second half of the year and North American tissue earnings will decline as the ramp up of new capacity causes average prices for the year to fall. Paper Our outlook for the paper subsector remains negative. Secular decline in demand for commodity paper and lower prices will drive paper earnings lower, as consumers con- tinue to turn to digital substitutes like electronic storage and e-books. Paper capacity reductions through mill/ma- chine closures or conversions will likely fail to keep pace with demand declines, leading to lower prices for most paper grades. Demand for several specialty paper grades will increase as consumers switch to paper-based substi- tutes for single use plastics, such as cups and straws. the coronavirus after several years of growth. Market Pulp Moody’s outlook for the market pulp subsector remains negative. Although prices for most grades of pulp in 2020 will rebound slightly from the troughs experienced in 2019, average commodity pulp prices this year will be lower than 2019 average prices. Logistics obstacles and weaker Chi- nese demand because of the coronavirus will push out the price recovery to the second half of 2020. Pulp supply disruptions coupled with limited new capacity growth until after 2020, should allow market pulp inventory levels to normalize in the second half of 2020.
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www.boardconvertingnews.com
April 13, 2020
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