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| Summary Day II |
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The second day of the Conference was packed with facts and figures, as this was the Global Dynamics & Forecast session. Moderated by Robert Wilson, the Chairman of Pöyry Forest Industry Consulting, the session was begun by Erik Bruce, Chief Analyst of Nordea Markets, whose presentation was entitled "Economy: US in recession - the rest of the world will be affected". He explained that what began with credit worries has now moved on to an inflation issue, but the markets are actually quite confident, because the US Federal Reserve has convinced investors that it will not allow the system to fail. Despite this, Nordea expects further falls in US house prices and a shallow recession in the US economy in the first half of 2008, followed by a very slow recovery. Growth in the booming Chinese economy is also expected to slow slightly, to some +8% in 2009. Still, as long as high commodity and food prices do not translate into higher wage claims, then the expected recession in the USA will actually moderate the effects of inflation, which should not become a major problem, argued Bruce.
Robert Wilson then made a presentation on behalf of his absent colleague, David Powlson, who was becoming a father for the second time. The paper was entitled "Global pulp & paper industry sustainability" and looked at a number of concerns regarding the sustainability in and of the industry. Regarding environmental sustainability, concerns over water and air quality will increasingly be joined by the need to assure sustainable food availability, Wilson predicted. However, the relevant measures that must be taken by the paper industry must also show better returns on the related investments, he argued. At the market level, paper and board demand is no longer getting the same share of economic growth that it did in the past (the company´s forecast is for +2.1% pa to 2020). An additional issue for companies in the West is that mature markets are not even getting an equal share of these lower growth rates. Wilson predicted that demand in North America, Western Europe and Japan would be broadly stagnant in the period to 2020, while emerging markets would show growth of +4% to +5% over the same time frame. A further concern is the availability of fibre, with Chinese demand for recycled fibre an area of stress, while changing waste management systems will offer both threat and opportunity for the paper industry, which needs to react to the changes. Meanwhile, virgin fibre supply could become restricted for the Nordic region, although supply potential looks better from plantations in Latin America, Southeast Asia, China, Oceania and possibly also Russia and Africa, Wilson predicted.
Paul Sheridan, Managing Director and Co-founder of StepChange Consulting then took the podium to ask the question "Merchant - Quo Vadis?" and to look at challenges and development in the merchant industry. He argued that the long list of challenges currently facing paper merchants is also a source of some opportunities. Between owners, suppliers and customers, the paper merchant must balance the conflicting interests of his stakeholders, in a tough market where the merchant is just one of the supplier options available to his customers. Sheridan argued that advantages of scale are desirable, with a high level of concentration in the business, while high speed and volume are also secrets to success. Sales focus should combine customer needs but also the costs of providing for those needs, and low-volume products should be avoided. According to a survey of mainly paper merchants, the best prospects for growth to 2013 are packaging, followed by printing papers, while office papers are seen as a low-growth segment.
Mayr-Melnhof´s Franz Rappold then took the stage again, to deliver his second presentation of the Conference, this time on "Carton Board Packaging: Global Packaging Trends & Supply Chain Dynamics". Growth factors for packaging demand are a diverse group, including not only economic development, but also an ageing world population living in smaller households, using smaller-sized packages. Environmental issues and regulations and development of new packaging materials are also key. For example, Rappold warned that carton board packaging cannot win the battle with plastic on price, and instead, producers should be looking to combine carton boxes with an internal barrier to the product, possibly a barrier made of plastic. In a business where 75% of purchasing decisions are made on the spot at the time of purchase, plastic packaging is forecast to see its market share grow in the short to medium term, while the market share of paper and board packaging is expected to slip slightly. Rappold predicted that the carton board business would show only slight growth in 2008, with European companies facing tough competition from South America and Asia, at a time of high fibre, energy and chemicals costs. In an uncertain period, with market conditions changing ever more rapidly, Rappold argued that a company needs to have leadership both in costs and on the market side, in order to achieve success.
The focus then switched to publishing, as Marieke van der Donk, Senior Manager of Entertainment & Media at PricewaterhouseCoopers presented a paper on "Publishing in the digital age - The Outlook for Magazine Publishers". Two main conclusions of the study, van der Donk explained, were that much of the growth in consumer magazines is coming from the BRIC (Brazil, Russia, India & China) countries, particularly Russia, but also India. However, there is also a shift in advertising towards digital media. In Anglo-Saxon countries, magazine circulation and advertising revenue will be limited, as readers migrate to the Internet. In Europe, however, this will be counterbalanced by new launches, which are becoming cheaper, thanks to the digitalisation of printing processes. In addition, despite an expectation that revenue models will move towards on-line, she said printed media are expected to remain core business over the outlook period (the next five years). Indeed, revenues from circulation and advertising have remained fairly constant, and the quest for growth is focusing across multiple media platforms, which implies that digital content can extend the life of printed content, according to van der Donk. On the reader side, consumers are willing to read magazines on digital platforms, although women less so, and although most respondents to the survey expect to increase the time they spend reading magazines digitally, hard copies are currently still the preferred medium for reading magazines, and there is a higher willingness to pay for printed magazines than there is for digital, particularly in Western countries and among older readers. Van der Donk concluded with some thoughts for paper suppliers, a few of which include: Although magazine paper consumption is rising in the BRIC countries, these markets cannot be relied upon to compensate for the slower, developed markets. It may be advisable to get closer to more magazine media stakeholders (e.g. media buyers and advertisers, as well as publishers) than has been the case in the past. How can the print experience be enhanced to increase its appeal compared with digital media?
The final presentation in this session and the Conference as a whole went to Chairman, Emanuele Bona, who presented "World Trends for Graphic Papers", according to the Pulp and Paper Products Council. Bona looked at current and forecast supply and demand both globally and in several major regions of the world for all major paper grade groupings in a very comprehensive presentation, meaning that there is only space here for a very few selected highlights. Although demand is on a long-term upward trend for all grades on a worldwide basis, Newsprint and Uncoated Woodfree are losing market share. Global Newsprint demand is being depressed by the decline in North America, although the picture in the rest of the world is more positive, albeit less so in Western Europe. With capacity forecast to grow on trend, the global prediction is for a weakening supply/demand balancing towards 2010. Meanwhile, the global picture for other Graphic Paper grades (i.e. Printing/Writing Papers) shows a rising demand trend, with current weakness in mature markets being outweighed by growth in the rest of the world, in all grades. Demand in Western Europe is flat or negative and more capacity closures could lie ahead, said Bona. North American demand is falling, but capacity closures have resulted in a higher shipments-to-capacity balance. In Japan, meanwhile, flat demand plus new capacity will cause a rise in exports, Bona explained. In the rest of Asia, both demand and shipments are expected to rise by +4% to +5% over the next three years, with more paper being exported. For 2008, the PPPC expects virtually no growth in global Printing/Writing paper demand, with capacity to decline. Over the coming three years, the PPPC forecast is for the supply/demand balance to creep gradually upwards, Bona added.
Concluding his presentation in the forecasting session, Bona then drew the main proceedings for the Conference proper to a satisfactory close, and invited delegates to look out for the PRIMA Trend Tracking Seminar in Copenhagen on 1 September, which will have a focus on Russia this year. He also proudly reiterated the decision to hold the PRIMA 2009 in Turin, inviting Andrea Frattapasini, representing the main sponsor, Burgo, to give a warm invitation to come to Turin for the PRIMA´s 40th anniversary Conference next year.
Having accomplished this, a large proportion of the attendees set out in stout shoes and warm clothes for a forest field trip hosted by Viken Skog for the afternoon, which was both fascinating and well-received.
All in all, the visit to Norway amounted to another successful PRIMA Conference, with greatly-appreciated support from the hosts, Norske Skog and Nordea, as well as Gold Sponsor, StepChange Consulting, the Silver Sponsors, Systems Thinking Europe and Omya, as well as the Conference´s Media Partners, which were RISI, Pap´Argus, Euwid and 4C.
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Chairman Robert Wilson
Erik Bruce
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