Industry Market Trends
Paper Price Forecast 2014: Conditions Favor Buyers, as Markets Plod Ahead
January 16, 2014
Even as it weathered a sluggish economic recovery, rising energy prices, sagging consumer demand, and continued challenges from electronic mediums, the global paper industry proved its resiliency in 2013. And more of the same is seen in the coming year. Consider only this: In an era that has seen the epic failures of bookstore behemoths, domino-like newspaper closures, and Internet paywalls, 2013 came to an end with a stunning early December announcement that Newsweek would resume its print publication in 2014 after a abandoning it in 2012. The paper industry, it seems, has taken a Twainesque position that reports of paper's demise are greatly exaggerated. Indeed, paper is doing quite well. Paper comprises one of the most stratified and clearly defined markets in the world. In addition to paper used for printed matter, pulp - the major ingredient - is a primary component in everything from tissue, to paperboard, to newsprint, to containerboard, to various commodities such as coated and non-coated free sheets. Prices Now In relative terms, most paper segments enjoyed a strong year in 2013. For buyers, prices remained relatively calm and stable. The Asia-Pacific markets in particular experienced overall double-digit growth, according to Research and Markets. Overall, global paper and board production hit record levels in 2012 despite sagging demand in North America and Europe, according to RISI. Tissue and packaging production, for example, soared, while global graphic paper production lagged, according to the firm. As it is in so many markets, China remains the global leader in production and demand (more than 25 percent in both areas) for paper and board. The U.S., meanwhile, remained the world's leading pulp-producing nation in 2013. But storm clouds may be gathering on the horizon, as many observers see a mild U.S. recession in 2014. A major indicator of the coming storm is weakening corporate bond prices, according to the National Paper Trade Association (NPTA) Alliance in its August 2013 Economic Report. Here's NPTA's general 2013 assessment by major indices (the information is provided in the Alliance's report):
- Paper & Products Production Index - The index rose following two straight years of decline and is expected to continue heading north by year end. U.S. imports of paper and board also are strong. "The annual average Paper Capacity Utilization Rate is at the highest level in 15 months, coming in 2.3 percentage points ahead of last year in July," the NPTA notes. "The 82.2% Utilization rate is just ahead of the 10-year average, indicating that manufacturers are getting idle machinery back online."
- Pulp, Paper & Board Mill Production Index - By mid-year, the index posted its first gain since November 2011, while domestic exports of paper and paperboard stabilized, suggesting increased foreign demand and a recovering domestic market.
- Paperboard Container Production Index - Freight movement reached a nearly seven-year high in 2013, spelling good news. In its August 2013 statistics review, the American Forest & Paper Association notes that total boxboard production increased by 2.8 percent compared to the same period the year before. Unbleached Kraft Boxboard production, Total Solid Bleached Boxboard & Liner production, and Recycled Boxboard all posted gains.
- Paper Bags & Treated Paper Products Production Index - NPTA reports that this index may have plateaued.
- Paper Producer Price Index - The index inched up in July and August, pointing to possible inflationary pressures to come, the NPTA notes.
- Bleached hardwood kraft pulp, where increased online capacity and sagging demand growth will "put production lines at risk around the world," according to RISI. Downward price pressures could lead to adjustments in 2014, the firm noted in a late-November news release.
- Increased interest in biofuels (primarily wood-based feedstocks) from non-paper-producing industries, which could impinge supplies of and lead to price increases for woodfibers, according to RISI.
- Radical transformation of global cut-size markets, which could have long-range implications for the copy paper market. According to RISI, while it remains a strong market even in the face of electronic media, the copy paper segment will undergo significant strategic changes in order to preserve profitability.
- Continued environmental pressures to produce sustainable paper and packaging materials could have an impact on prices in the coming years, according to Smithers PIRA.
Photo credit: Ikunl at FreeDigitalPhotos.netThis article was originally published at My Purchasing Center and has been republished with permission. For more stories, visit MyPurchasingCenter.com. John Hall is a freelance writer who reports on commodities markets and procurement and supply management topics for My Purchasing Center. His website is jhallmedia.com.