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| 3rd PRIMA Trend Tracking Seminar |
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PRIMA is proud to announce that the 2004 Trend Tracking Seminar in Copenhagen on Monday 6 September attracted more delegates than ever.
The Seminar featured a broad-ranging line-up that covered not only the essential paper and board sectors, but also the global macro-economic situation, the latest developments for a range of raw materials, plus downstream market driving forces and merchanting and service.
PRIMA Chairman and Cepifine Managing Director, Frank Leerkotte, opened and closed the Seminar, which was hosted by Södra and smoothly chaired throughout the day by paper industry consultant and tissue industry figurehead, Hugh O´Brian.
At one end of the paper chain, the Nordea bank´s Chief Economist, Helge Pedersen, gave an insightful and generally optimistic assessment of the World and European Economy in 2005. Pedersen said current high oil prices should hardly slow the global economy unless they go above $60/barrel, and although there are potential problems, such as the "huge" economic imbalances in the USA that require a correction, Nordea has upgraded its GDP growth estimates for Japan, the Euro area and the Nordic countries this year, and for the USA, the Euro area and the Nordic countries next year.
Moving on to more specific driving forces for paper, Georg Svensson, Head of Sweden´s MindShare ATG Nordic, reviewed trends in advertising. He pointed out the strong correlation between advertising expenditure and household expenditure and noted that private consumption is on the increase. He also illustrated that consumers have faced an explosion of choice of how to receive input, but have no more time to consume it than they ever did. That makes the content of advertisements more important than ever. What it all means to the paper industry is a fast-changing climate, in which new media are gaining ground, and Svensson´s presentation showed magazines and newspapers with slowly declining shares of the advertising market. However, free distributed newspapers and customer loyalty magazines are doing well, and with advertising expenditure on the increase, advertising spending on newspapers and magazines will still probably grow slightly faster than inflation. The "old" media will not die, he said.
Top Grades
Roman Hohol, Marketing Director of Canada´s AMEC Forest Industry Consulting, echoed Svensson´s message of a changing situation, but went perhaps even further, arguing that the fundamental drivers of graphic paper demand have changed. Consumer spending on media is on the increase, but print media show the slowest growth; advertisers have more choice than ever and are changing their habits, looking for a return on their investment - direct mail did not suffer nearly as badly as newspaper and magazine advertising during the last downturn. Add to that the fact that traditional distribution channels are changing with the widespread use of broadband internet connections and wireless telephony, and the question of publishers´ strategies arises too - what media will they choose? He said five key trends worth tracking are: economic growth, which is now harder to predict than it used to be; evolving advertiser strategies; consumer media spending patterns; changes in traditional distribution channels and end-user (publisher) strategies. Ultimately, however, he said the most important trend to track is your customers´ strategies.
Change was also at the core of the presentation on Office Papers by Michael Wittmann, Brand Manager at Grupo Portucel Soporcel. He argued that office paper is changing from what was once a commodity to a fast-moving consumer good (FMCG), and said all the end-user indicators point to a very positive outlook. The trend towards more service-oriented economies and the SoHo & Home market development will help to drive office paper consumption, and the "paperless office" is a myth, he said, as a scenario of peaceful coexistence is likely. Email is, for example, driving office paper consumption. He further predicted the emergence of global brands in the office paper business, adding, however, that the whole business model is likely to change considerably with the emergence of B2C relationships, with major impacts on brands, products and distribution channels. He raised the question of whether B2B and B2C business will live in peaceful coexistence, and whether the paper industry is ready for these changes.
Tero Kaleva, Vice President of Business Intelligence at M-real, gave a market outlook for cartonboards and containerboards. In cartonboard, the news for producers is mixed, as reviving demand in 2004 and 2005 (led by Asia, as well as Eastern Europe) will be accompanied by increasing capacity (some in Western Europe, but particularly in Asia). This will keep operating rates down, particularly for recycled-fibre cartonboard, which will probably restrict any price rises that would be required to restore previously shrunken profit margins.
In the case of containerboards, he said demand has been strong in the USA and presumably also in Asia, and sluggish demand is expected to improve in Europe. However, while the supply/demand balance in North America is currently "very tight" (partly due to numerous closures of inefficient capacity), new recycled containerboard capacity in Asia is substituting some imports. In Europe, meanwhile, operating rates are likely to be low for several years, due to "very robust" capacity expansion in 2004-2005, which will make it difficult for Western European producers - especially recycled containerboard producers - to increase their prices significantly.
Further downstream, Hubert Duijsens, Secretary General of EUGROPA, the confederation of paper merchants, covered a very wide range of topics.
From general and specific consolidation among papermakers and merchants changing the playing field in Europe, to the global distribution of paper consumption and the need-to-know facts about the merchant business, including ownership and increasing globalisation, his presentation then turned to expectations for the coming 3-5 years.
He said we should expect further consolidation of suppliers, merchants and also printers/publishers. For the latter sectors, he also noted that a large part of the printing business in Sweden has been moving to the Baltic states and Eastern Germany, and that the indent business is down by 20% in Sweden. He also commented that in Europe, there are big differences in business conditions in different areas, that there is no such thing as a European market, and that it is hard for merchants to survive in some countries.
Key players will, however, strengthen their global position, he predicted, pointing out that European papermakers are now predominant globally, adding that European merchants are taking a leading role too.
He also took a look at how the business has changed. Where once sales growth used to be double the GDP growth, now it is not even 1:1. And where in 2000, average prices rose by +12%, not to mention +25% in Italy, (a situation he described as "absurd"), prices are now still lower than they were in 2000. Merchants have now been cutting costs for 3-4 years, and there is "no longer flesh on the bone."
Duijsens then also went into very great detail on this year´s sales of individual paper grades, in many cases including inventory data by individual country, to complete a highly detailed analysis.
Raw Truth
Moving upstream, three speakers dealt with raw materials, specifically recovered fibres, pulp and chemicals.
Anders Luthbom, Vice President of Business Intelligence at SCA, gave an outlook for recovered paper and market pulp. While most long-term prices are trending downwards, he suggested that prices for recovered paper might be trending upwards in real terms, as the industry approaches saturation of those resources.
He cited Asia, and particularly China, as major drivers of consumption of both recovered paper and market pulp, adding that buying patterns of countries such as China add to price volatility. The mismatch between strong pulp production periods (winter and summer) and stronger fibre demand periods (spring and autumn), also adds to volatility, but in recovered paper too, recovery is weaker in early spring and early autumn, he noted.
In the very short term, he said that strong supply is influencing the pulp market, and short-term price moves are likely to be negative, while in recovered paper, the balance is more fragile, with any price move likely to be upwards. Looking to 2005, paper demand is improving, new capacity will drive recovered paper demand, and pulp markets will also be fairly well balanced, he predicted. However, he warned that China (are they drawing down inventory or is demand cooling?) is only one of a number of uncertainties that could affect the market.
Staying with pulp, Ulf Edman, Marketing Director of Södra Cell AB, made a presentation on Service in the pulp industry. While much time is spent on discussing fibre types, costs and prices, no-one can be sure how the future will look. What Södra believes is sure, however, is that service will be an important issue in future. He gave examples: pulp inventories cost millions, but if Södra can provide better and more delivery security for its customers, they could significantly reduce their working capital. Also, pulp makes up a very high part of papermakers´ costs, and volatility makes it hard for papermakers to know what fixed price to offer their own customers. By providing papermakers with a fixed pulp price, Södra can help papermakers to secure their own profit margins. These are two of the results of research that Södra did on its customers´ wishes. Besides the traditional requirements of low price, consistent quality and environmental care, Södra´s customers also had "New Demands," which Södra used to formulate what is now the company´s PulpServices package. The papermakers requested not only the fixed/indexed prices (now called "PulpHedging" at Södra) and delivery and stock management ("PulpLogistics") mentioned above, but also the lower costs and easier administration that IT links make possible ("PulpIT"), technical projects and advice between themselves and Södra ("PulpAcademy"), as well as a lot of pulp market information ("PulpUpdate").
Also on the supplier side, Johan Landfors, Vice President & General Manager of Pulp and Paper Europe at Eka Chemicals AB, looked at chemicals used in the pulp and paper industry. He focused on bleaching chemicals, paper chemicals used for strength and printability, and coating chemicals. Looking at external factors, he pointed out that the current high oil and energy prices have a big effect on chemicals production, because many of the products are based on oil and gas derivatives, while electrical energy is the major cost in producing sodium chlorate for bleaching.
He gave an illuminating roundup of regional and sectorial markets. Besides summing up the demand and supply, he predicted higher prices for chemicals in regions or sectors where supply and demand are in balance. These included particularly caustic in North America and Europe, sodium chlorate/chlorine dioxide in North America, hydrogen peroxide in Europe (prices are also moving up in North America), latex in Europe and possibly also North America. His presentation was further rounded out by a look at technological and applications trends and short- and medium-term predictions on a range of market and related issues.
After the Seminar, many of the delegates then attended a jazz evening and dinner hosted by CellMark, where old friendships were cemented and new contacts made, making a combination of business and pleasure!
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The seminar programme
Advertising
Georg Svensson, Reserach Director, Head of MindShare ATG Nordic, Sweden
Recovered fibres and pulp
Anders Luthbom, Vice President Business Intelligence, SCA, Sweden
Chemicals to the pulp & paper industry
Johan Landfors, Vice President & General Manager Pulp and Paper Europe, Eka Chemicals AB, Sweden
Service in the pulp industry
Ulf Edman, Marketing Director, Södra Cell AB, Sweden
World and European Economy 2005
Helge Pedersen, Chief Economist, Nordea Denmark
Graphic and Publication Papers
Roman Hohol, Marketing Director, Amec Forest Industry Consulting, Canada
Office Papers
Michael Wittmann, Brand Manager, grupo Portucel Soporcel, Portugal
Packaging
Tero Kaleva, Vice President Business Intelligence, M-real Corporation, Finland
Merchanting
Hubert Duijsens, Secretary General, EUGROPA, The Netherlands
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Download presentations (delegates only)
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