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1st PRIMA-MomentuM Trend Tracking Seminar
Monday, 2 September, 2002
Copenhagen Airport Hilton
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Supported by Södra, Cellmark and Svensk Papperstidning
The Trend Tracking Seminar for professionals in the forest-based industries was the first to be run jointly by PRIMA and MomentuM and took place on September 2, 2002. It was held at Copenhagen´s Hilton Hotel to allow delegates to fly in and out in a single day. With an invitation lunch and evening dinner, there was also ample opportunity for networking as well as information gathering.
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The ever more complex economic conditions make it increasingly difficult to make accurate forecasts, so seminar delegates heard both "bullish" and "bearish" outlooks. However, on balance, the bulls had the edge. They found cause for optimism in signs that the confidence factor is returning to the corporate world, and in the staggering potential for growth in Asia, particularly China.
After Bernt Stenberg´s welcome, Rob MacKenzie (Chief Economist, AMEC Forest Industry Consulting, Canada) set the scene with a world economic outlook. He highlighted existing evidence of a U-shaped recovery in the global economy as a whole, predicting GDP growth of 2,5% for 2002. As well as suggesting that a "double dip" now seemed unlikely, the correlation between world GDP and paper consumption should give heart to the industry. Rob also saw the US economy as the barometer to watch for indications of how the recovery will progress.
The seminar moved on to cover raw materials. Christian Naydowski (Senior Vice President, Business Development Paper & Board, OMYA AG, Switzerland) highlighted new business opportunities for mineral and chemical suppliers in "tech-onomic" relationships with customers. They could provide added-value R&D services, developing the additives to satisfy the current need in papermaking for lighter grammages, faster machine speeds, and multiple coatings to improve brightness and printability, all of which are not possible without increasing the percentage by weight of chemicals and minerals used in the mix.
Talking about the global pulp market, Brian McClay (President of Terrachoice Market Services Inc., Canada) took a positive view. Up to September 2002 world demand was up 8% and, even with the seasonal dip in the fourth quarter, he expected the massive expansion in Asia to continue to drive growth and strengthen prices in 2003.
Given that the long-term price trend line for recovered paper (unlike pulp) is upward, Ilpo Ervasti (Senior Consultant with JP Management Consulting (Europe) OY, Finland) argued this fibre source is underexploited by the paper industry. He claims that poor sorting methods and the lack of adequate information on current processing procedures causes top-quality fibre to be diverted into non-recoverable secondary uses, such as tissue, and aggravates price fluctuations.
To begin the discussion about specific paper grades, Pentti Arvela (Senior Vice President Global Marketing & Customer Management, UPM-Kymmene, Finland) challenged the traditionally held belief that demand for publication papers is linked inextricably just to advertising activity. He believes the growing "commercial" end-use market (catalogues, direct marketing, inserts, PR material) will react quickly to improving business confidence and is not advertising-driven. Paper companies serving this market will enjoy a 4% growth in demand for the next decade, double what can be expected for the publication sector.
In the fine papers sector, Karl-Johan Lindborg (President & CEO of MAP Merchant Group, U.K.) joined other speakers in pointing to evidence of improving corporate profitability as a sign that the all-important confidence factor is returning, which in turn will boost advertising levels and demand. He predicted 7% growth for 2003 but added that there is still a problem for fine papers in that capacity utilisation is currently well below 100%.
Hans Wittefeldt (Manager Marketing Services, M-real Corporation, Sweden) identified technology as the most important driver for office papers, particularly cut sizes. Although paper is losing share to electronic media in the information communication market, the volume of information is increasing exponentially so demand for paper will also continue to grow. Predicting an increase of 4% for cut-size during 2002, Hans points out that the home-use market is still in its infancy and could expand massively, not only in the established markets but also in the developing nations.
Looking at the prospects for containerboard Niklas Dahlin (Business Intelligence Manager, SCA Packaging Business Group, Sweden) suggested that oversupply could be a problem in the next three years as new capacity comes on stream but consumption has shown higher than average growth over the long term and this is expected to continue. Packaging materials will continue to be needed for shipping manufacturers´ goods, so as the world economy grows and output increases, containerboard demand will also rise.
In the final presentation, Brian McClay summarised the most important global trends. Like many of the speakers, he picked out the massive growth in China as having the greatest implications for paper and pulp companies, especially those working with recovered paper. He also highlighted the latest US census, which shows that, unlike in Europe, there will be an unpredicted population increase - 150 million more "rich" Americans by 2025. After much cost-cutting, the paper industry is already lean and mean. With flourishing markets in China and Russia, and even now it seems in the USA, paper business is looking towards the year ahead with guarded optimism.
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