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| Summary: Global Dynamics & Forecast |
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Even though this lively evening continued into the small hours of the night for many delegates, the second day of the Conference began with hardly an empty seat. The presentations on Tuesday dealt with markets, including the impact of the energy market on the global economy and examinations of the Eastern European and Asian paper markets. These were topped off with forward-looking presentations on the global pulp, paper and printing businesses.
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The first presentation on Day 2, which was chaired by Robert Wilson of Pöyry Forest Industry Consulting UK, ensured that any delegates who were short of sleep were swiftly brought to full wakefulness by the hi-energy presentation of Professor Andrea Boltho, who examined World Economic Developments and the Impact of Energy. Returning for the second year, the ever-entertaining Professor Boltho again combined humour, clarity, energy and a deep knowledge of his subject to keep the audience spellbound. He pointed out that despite currently high energy (oil) prices, inflation has not been the problem during this economic cycle as it has been historically, at times of high oil prices. This, he argued, is partly because we now use less oil per percentage point of GDP growth, partly because central banks (which control interest rates) have become independent of governments, partly because upoward wage pressure has reduced along with the power of trade unions and partly because globalisation has increased competition, which tends to keep a lid on prices generally. In fact, Boltho argued that recent oil shocks have hardly been felt economically (compared with past shocks), and that they may now even be a good thing, as they stimulate energy savings and research into alternative energy sources. More generally, he said global economic prospects are very good in the short term, although interest rates and the US dollar exchange rate remain risks in the short term, while energy supplies are a risk in the medium term and global warming could be the big risk in the long term.
The unenviable task of following a world-class speaker like Boltho fell to Mondo Business Paper´s Mark Ushpol, who did an excellent job with his presentation on Eastern European paper markets. He initially used the examples of the automotive and airline industries to demonstrate the transformation of business and industrial fortunes in Eastern Europe, before highlighting unbelievable growth in printing in Central and Eastern Europe in the past 5 years. And further strong growth is also expected in the coming few years, he added. Eastern European printing and writing paper consumption is also expected to grow strongly in the coming years, and he also pointed out that high growth in demand for PCs is expected to drive consumption of Cut-Size papers, although he admitted that demand growth looks flat for UWF Reels. Ushpol then looked at some economic issues in Eastern Europe, noting that many Eastern European countries rank perhaps surprisingly highly in global competitiveness comparisons, and that more Eastern European countries are catching up with the leaders than are losing ground. On a more cautious note, he pointed out that environmental issues in the region, including intensity of energy consumption, do require some attention.
The focus then moved to Asian markets, with Sunil Sood, Vice President Sales & Marketing for APRIL, taking the speaker´s stand. A market which already accounts for some 36% of global paper and board consumption and which has been growing at around +5% for the past decade and a half, is expected to grow at almost the same rate up to the end of this decade, he noted. He agreed with earlier speakers in that growth prospects look good especially in China and India, and pointed out in particular expectations for very strong growth in per-capita consumption in China in the next few years. This is forecast to drive Asian consumption growth particularly in Coated Woodfrees, Newsprint, Tissue and Containerboard, he added. He also touched on the subject of shifting paper production towards Asia, using the example of the Uncoated Woodfree sector, where multiple closures are expected in the USA and Europe this year, while Asian capacity is expected to rise by around a quarter of a million tonnes in 2007. The world´s largest importing region in that sector will remain the Middle East, he said.
Tom Wright of pulp industry consultants, Hawkins Wright, then examined global pulp markets. He pointed out that an increasing proportion of the world´s woodpulp is market pulp, partly because China is a large consumer with limited fibre of its own and partly because papermakers from mature markets are increasingly looking to satisfy their pulp requirements from sources in lower-cost regions in the southern hemisphere. He also noted that, as the pulp price (in US$) has risen, markets paying for pulp in US dollars have felt the full effect, whereas Canadian and European mills, with strong currencies versus the US dollar, have been more cushioned from the effect. At the same time, many North American mills have become uncompetitive, said Wright, partly because of mills size, lack of investment and high costs, as well as weak North American demand for paper, and Canadian pulp mills have also suffered because they have benefited less from price increases because of the strong Canadian dollar. This led to 2.7 million tonnes of woodpulp capacity being closed in 2005-2006, and more North American closures will follow, he predicted. In Europe, there have been no pulp mill closures yet, but with paper capacity being closed, some European pulp capacity is vulnerable, he argued, with birch pulp mills in competition with Latin American hardwood pulp mills. He also highlighted two global trends, which are the move of production to the south, and the substitution of hardwood (with its significantly lower supply costs) for the more expensive softwood. He also looked at the rise in pulp (and other) costs, compared with relatively flat paper prices, causing low profits and paper capacity closures and warned that for some paper producers, it is crunch time!
Taking up the theme of paper itself, Martin Glass, Managing Director of paper-industry consultants, EMGE, forecast that global graphic paper demand growth would fall from an average of +3.1% in the past decade and a half to +2.4% from 2006-2011. In particular, this will be due to slow growth in the North American market, he predicted, despite stronger growth prospects in Asia and particularly China. Against the background of slower global growth, he noted pressure on paper-based media particularly from screen-based media, as well as dramatic reductions (-65%) in printing waste in recent years, all of which have a dampening effect on paper demand. Having said that, global paper capacity growth is currently historically low, Glass explained, and even though it is forecast to accelerate in the coming years, it will, on average, remain below demand growth. As such, he predicted that the global graphic paper supply/demand balance would generally be on a tightening tendency between now and 2011. As an aside, Glass also pointed out that there is potential for significant uncertainty in the immediate term - in just over a year from May 2007, there will have been leadership elections in France and the UK (two countries where the leadership has just changed), as well as Russia, China and the USA.
The closing presentation was delivered by Robert Crooker of Heidelberger Druckmaschinen, who looked at sheet-fed offset printing and insisted that The Sky Is Not Falling. It is a fact, he said, that global growth in print has slowed, having fallen below GDP growth in the new millennium. Print demand growth will remain robust in emerging markets, he predicted, but from a very low level, and although there was potential for demand in these markets to progress in the direction of Western markets, he said this would take time. Having said that, with commercial print products accounting for most print production, printers in mature markets face challenges from off-shore print competitors in many sectors. Looking then at technological developments, the move to digital printing is at hand, but the transition will take time, he predicted. A further important development is digital technology of inkjet, which could change the rules of the game in the long term, he argued, depending on exactly how costs of the competing technologies develop. Crooker also mentioned the challenge to printed media from online advertising and promotion and the need to increase the attractiveness of print media for advertising. Having mentioned the challenges, he then insisted that after a tough start to the new millennium, the printing business is recovering on a global basis, and that print media still offers a variety of sustainable attributes, also citing several examples of printed advertising campaigns delivering sales growth. Despite this, he admitted that printers have to adapt to the new landscape, by increasing their productivity, differentiating their offerings and adapting their business models.
All in all, delegates were left with the distinct feeling that they had been given a focused and relevant review of the current issues facing, and the prospects for, the paper and related industries - hence the overwhelmingly positive response in the post-conference survey.
The whole event was rounded off by an interesting and informative visit to Mondi Business Paper´s Ulmerfeld-Hausmening paper mill.
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Session chairman Robert Wilson
Robert Crooker, Andrea Boltho, Mark Ushpol
Sunil Sood
Tom Wright, Martin Glass
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