MEDIUM RISK for entreprises
Pulp and paper must not be mixed up with the wood sector as the latter depends more on demand from construction. The downstream sector of pulp and paper has more weight. It also depends mainly on household consumption. That is why world paper output increased +0.8% y/y to 410 million tons in 2017. Asia accounts for the bulk of the market with near half global output (and consumption) of paper and board.
The paper sector which has been under severe pressure from electronic media may have entered 2018 on better conditions after significant capacity withdrawals continued throughout the industry in recent years. More specifically in North America, the US paper market is benefiting from a positive impact from USD weakness on industry trade, and also from higher import duties for imports from Canada.
Pulp prices as much as downstream corrugated paperboard ones have been rising again for two years as a result, and led to margin expansion across the sector. However, it shall be insured that contractions in paper output brought on by digitalization do not outstrip the rise in demand caused by ever more e-commerce packaging provided plastics does not stand in for paper. Overall, the paper’s era has not come to an end.
Newsprint and printing papers: Digitalization has been eating away at this range of papers
Corrugated paper(board)s: It depends on the packaging outlet which is itself dependent a lot on e-commerce and retail growth rates
Tissue papers: These high-added-value paper products appear to be a market segment enjoying strong enough margins
Contact Euler Hermes
Economic Research Team