By Based on various reports and forcasts of RISI's economists and analysts
BRUSSELS,
Jan. 10, 2011
(RISI) -
In part II of a two part series, Graeme Rodden, Executive Editor of PPI and Mark Rushton, Editor take a look at what the next year has in store according to RISI economists. In Part II, we focus on the outlook for graphic papers in the major papermaking regions. Part I, which focused on tissue, pulp and recovered paper, can be read here
North America
Graphic paper demand in actually looking quite buoyant in the US, despite the supposed onslaught of the "new media", however it is not all rosy in the garden. RISI economists predict that after falling consistently for years, North American graphic paper demand should finally post a positive increase in 2010. Coated paper demand is snatching back a portion of what it lost over the past few years and will post a gain of 10% in 2010. The slide in newsprint and uncoated freesheet demand has slowed considerably.
The net result is that graphic paper demand should gain about 1-2% in 2010, the first growth year since 2004.
Considering that the average decline for the last five years (2005 to 2009) has been 7.5% per year, the small growth in 2010 is greeted with somewhat overrated enthusiasm. In total, the graphic paper market lost 15.7 million tons its peak in 2004 to the trough in 2009. The meager increase in 2010 recoups only 0.5 million tons of that decline and is really no more than an inventory induced hiccup in the longer-term declining trend. A few end uses are actually growing in 2010, such as magazines and catalogs, but others such as newspapers, directories and office reprographics continue to decline.
Newspapers should drop paper usage another 5% in 2010 while directories should shed another 8%. While still very significant, these declines are much smaller than the slide of the past few years for these markets.
The economic recovery will falter slightly in 2011, dropping 2.6% growth in 2010 to 2.1% in 2011. This will take some of the wind out of the recovery in some markets such as advertising. However, employment is expected to rise, and this could lead to improvement in the demand for office reprographics. The initial inventory bounce between 2009 and 2010 is over, so we are expecting a slight 1% drop in graphic paper demand for 2011. The primary area of decline will continue to be newspapers, although the decline will be far more moderate than the recent trends.
Even though the economic outlook is fairly strong for 2012-2014, our economists expect that overriding structural declines will push graphic paper demand down in these years.
Latin America
The Latin American region has witnessed something of a bounce back, in printings and writings. Demand declined in 2009 7% and our economists in the region have projected a 7% growth in 2010, or a roughly 390,000 tonne gain.
Latin American printing and writing demand is projected to average 3.5% annual increases in 2011-2015, slowing mildly the 4.2% average annual increases achieved over the past 15 years. This slowdown is mainly due to the rise of electronic information exchange in the business sector and competitive pressure alternative media in the advertising sector, particularly increasing Internet penetration.
Printing and writing paper producers in Brazil were worried about their domestic market share loss in 2010 and Brazilian authorities have said that they will investigate possible dumping of lightweight coated (LWC) paper imports the US, Finland, Sweden, Switzerland, Belgium, Canada and Germany. Brazilian producers are also evaluating the possibility of requesting anti-dumping measures against imported coated woodfree paper. Besides Brazil, Argentina is the only country in the region working on the possibility of an anti-dumping measure against coated woodfree papers imported Asia, Austria, Finland and the USA, as requested months ago by the Argentine paper producer Ledesma.
Our economists in the region expect to see Latin American net imports of printing and writing paper reach 1.7 million tonnes in 2015 after growing 2.3% annually 2011 to 2015. Latin America will still rely heavily on imported paper over the next five years, but the net import share of total demand will slip slightly 26.3% in 2010 to 24.8% in 2015.
The people in the region love their newspapers, and total demand represents 6% of global newsprint consumption worldwide, but as the region matures, Latin American advertisers have been changing spending patterns which might affect consumption. According to RISI economists in the region newspapers advertising share declined by 26.7% to 18.6% and is forecast to drop to 15.7% by 2012.
Asia Pacific
It comes as no surprise that out of all the paper making regions, Asia Pacific has fared the best over the last tumultuous couple of years. Asian graphic paper markets posted solid gains in 2010, rising an estimated 6-7% this year. Newsprint and printing and writing paper markets both benefited from the economic rebound, which has fostered a recovery in advertising and raised printing and business end use markets. Inventory shifts also contributed to the recovery in demand. The healthy growth has translated into 780,000 tonnes of additional newsprint demand and 2.9 million tonnes of printing and writing paper demand (1.2 million tonnes of uncoated woodfree and 1.35 million tonnes of coated paper).
The recovery was widespread, led by India and China, who combined accounted for an estimated 550,000 tonnes of added newsprint demand and 2.1 million tonnes of printing and writing paper demand. Most other countries saw demand bounce back from sharp setbacks in 2009. The main exception has been Japan, where newsprint demand is edging lower while printing and writing paper demand is flat.
Across the four main printing and writing paper grades, the mechanical grades are seeing more rapid growth, but the woodfree grades are accounting for most of the volume. Coated woodfree paper demand advanced an estimated 6% in 2010 (versus a 7% loss in 2009), a gain of 710,000 tonnes. Asian uncoated woodfree demand rose an estimated 5% in 2010 a gain of about 1% in 2009. Coated mechanical demand should have climbed 19%, supported by healthy growth in China.
Over the medium term, total Asian demand for printing and writing grades will rise at an average rate of 4.2% per year, raising the total volume to 53 million tonnes in 2015, a 10 million tonne increase 2010. China will dominate the region's growth, accounting for 67% of the increase as its demand advances 6.7 million tonnes 2010 to 2015. India will rank second in terms of volume increase thanks to its huge population, accounting for 15% of the region's growth or nearly 1.5 million tonnes over the medium-term forecast period.
Europe
The year 2010 was a challenging one for paper producers in Europe. Paper prices plummeted below 2009 cost levels in the beginning of the year. Prices of chemical pulp and recovered paper simultaneously skyrocketed due to the tight supply and healthy demand. Despite a strong recovery in operating rates, paper producers have been operating at a loss.
Paper demand in most grades started recovering during the summer of 2009 and continued to be strong until the third quarter of 2010. Paper markets are showing signs of softening due to the weak economic development and the fact that inventories have recovered to normal levels. Pulp prices have peaked and thus the increasing price related inventory building in fine papers has come to an end and paper production should start shrinking when buyers buy less. The Western European market is saturated. Recessions and rapid development in e-readers like the Amazon Kindle and Apple iPad will start to effect paper demand...permanently.
The post-recession rebound is over and our economists expect European printing and writing paper demand to be rather flat until 2014. By 2015 at the latest, the market will turn downward Demand in Central, Eastern and Southeastern Europe (CESE), however, which now includes Turkey, is still expected to grow by 4% per annum on average.
Demand in CESE is expected to grow by 1.3 million tonnes 2010 levels to 7.2 million tonnes. The forecasted level is 641,000 tonnes more than during the pre-recession peak year of 2007. Demand in the Western European markets is expected to decrease by 1.6% annually. By 2015, demand is expected to be at 22.7 million tonnes, some 1.9 million tonnes below the 2010 levels and 690,000 tonnes below the levels seen in 2009.
Part II of the Outlook Series can be read here
