PAPER

Estimated at 416 million tons (+1%) at the beginning of 2019, global paper and board production hardly grew in volume last year. It is actually the upstream pulp subsector that got away with the difficult background that the whole paper sector has had to deal with for the last few years because of disrupting digitalization. In a nutshell, till last fall, pulp producers cashed in on rising prices that saw them re-inflate their profit margins as far as possible. 

The 2019 outlook for the paper industry shouldn’t be as robust as in 2018, when it benefited from higher prices that were driven by constrained supply, too. However, despite moderate to lower price expectations, papermakers’ earnings may remain at a good enough level. Pulp prices look likely to end the first half of 2019 with the tail-end of a correction but shouldn’t be really changed over the entire year. Printing and writing paper may fare a little better despite the ongoing share loss to digital media as better prices related to capacity cuts have carried into 2019.

Global pulp prices should stay favorable in 2019 despite a larger than expected correction that emerged in China at the end of last year and started spreading worldwide. The drop is being spurred by weak fundamentals in China – by far the first outlet in the sector - as papermakers proceed with cutting output, liquidating too high inventories and scaling back buying pulp commodity. Whereas price downturns have been smaller in the US and Europe than in China, more erosion is expected by the end of H1 2019. However, Chinese papermakers cannot help but restock and we should see this occurring from next summer. So we expect paper prices in 2019 to stay between 3% and 5% more than their prior four-year averages - fortunately - above production costs depending on region.