By Renata Mercante, Editor, PPI Latin America News, RISI
SAO PAULO, Oct. 10, 2008 - Here I am at RISI’s third Latin America Pulp and Paper Outlook Conference in São Paulo, Brazil and my goodness it’s interesting stuff! The first day of presentations has been full of the main topic dominating all the main stream media worldwide - the possible changes that the industry may have to make in order to minimize the US financial crisis effects on the global commodities demand.
José Luciano Penido, Votorantim Celulose e Papel (VCP)’s CEO, who was here to receive RISI’s CEO of the Year award for the second consecutive time, emphasized that all pulp and paper producers will have to take mill downtime in an attempt to balance the market by reducing supply. The market is already seeing a rise in global inventories, which has been worrying many players.
According to the Pulp and Paper Products Council (PPPC), bleached hardwood pulp inventories increased from 35 days in June to 41 days in July and 47 days in August. Meanwhile, bleached softwood inventories rose from 29 days in June to 31 days in July and 36 days in August 2008.
Penido also mentioned that companies will be forced to review their expansion capacity plans already announced to the market in order to bring them up to date with the new reality the world will find itself in after the current crisis. According to Penido, many announced projects will probably not be accomplished in the expected timing. “VCP is soon going to announce some changes in its future project schedules,” he anticipated.
Suzano’s CEO, Antonio Maciel Neto, agreed with Penido and said that his company may also take extra downtimes in order to balance supply and demand. Mario Garza, CEO of Smurfit Kappa Cartón y Papel Mexico, commented that they have already been noticing a weaker demand for packaging paper in Mexico. As a consequence, according to the executives, pulp and paper prices may fall in the next months and just recover after the industries reach a balance in the market.
Besides the reduced demand, Penido also commented that the new scenario after the crisis will create a more complex process for companies to get credit from financing institutions. “Credit is already hard to obtain and banks will surely claim for more guarantees from clients,” Penido stated.
In this sense, Geraldo Ferreira, Asia Pulp and Paper (APP) Brazil’s general manager, added: “Companies will have to adapt and transform their business to maintain a good growth level in the future, always having in mind that consolidation is essential for the pulp and paper sector“.
There is clearly a lot of work to do ahead, but at this conference there are few convictions about what is really going to happen when the market recovers its stability. One thing for sure is that pulp and paper companies will do their best to adjust and transform their business to the scenario, whatever that scenario might be.
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