By Jennifer Ellson, News Editor, PPI Asia News, RISI
SINGAPORE,
Oct. 22, 2008 (RISI) -
Count the Asian pulp and paper industry as another casualty of the credit crunch, the equities collapse and the global economic slowdown. With the financial meltdown, paper and pulp producers are stuck between a rock and a hard place and many have already taken out their budget-cutting scissors to stay in the game.
Even the "it" emerging nations, China and India, have not escaped the financial turmoil’s fists of fury. The strong economies of both countries seemed to have put them on the global high ground when the financial tidal wave first rocked the world. But despite their initial resilience to credit crunch woes that affected powerhouses like the US and other industrial powers in Europe, the Indian and Chinese economies are starting to show signs of slowing down, just like the rest, amid the continuing global economic difficulties.
The credit squeeze has already contributed to delays in some ongoing expansion and modernization projects in both countries as firms have become tight-fisted, cutting back on spending due to the one-two punch of current market conditions and deteriorating economic outlook.
Giants such as Nine Dragons Paper (Holdings) and Lee & Man Paper Manufacturing have taken it on the chin lately and both have revealed plans to push back previously announced investments in China and Vietnam. Some smaller Indian companies have also announced startup delays of new and second-hand machines as economic uncertainties continue to throw rocks at them.
Even the Asian pulp and recovered paper sectors feel burdened by the slowdown but most traders believe that fiber prices may have hit rock bottom.
But in the midst of all the pessimism there may be some opportunities. “Businesses are likely to be involved in takeovers or failures in an economic downturn,” a Singapore-based analyst said. She added that some Asian pulp and paper companies may disappear as a result of consolidation and that firms must be properly funded and fully prepared to play the mergers and acquisitions game.
“Distressed companies may or may not be a bargain – some of these companies may have many problems hidden under the surface, while some are such good deals that firms will have to argue over rock-paper-scissors on who will buy the troubled company. It is just an elaborate game of chance,” the analyst explained.
“But in a game of chance, you risk a little to gain much more,” she added.
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