Market Forecast | Paper Industry Outlook for 2013
- Published: April 07, 2013, By Ian Lifshitz
Market and demographic trends bode well for the global paper products industry in 2013. Demand for paper products is steadily rising throughout Asia. Older mills are being replaced by new, state-of-the-art facilities that promise more efficiency, cleaner production, and improved balance between capacity and demand.
Public perception of the industry is changing as paper products manufacturers, to an unprecedented degree, adopt global standards for supply chain transparency and embrace sustainability as a core operating principle. High-profile conservation and carbon mitigation initiatives are casting the industry in a more favorable light among global purchasers and consumers.
Sustainability continues to be a defining trend. Import regulations, changing consumer preferences and limited natural resources are leading paper producers to increase their reliance on renewable resources like pulpwood plantations. Paper products manufacturers are forming multi-stakeholder alliances with governments, companies, NGOs, and community groups to meet conservation and resource management goals.
In 2013, paper producers will continue to invest heavily in research and development and in new equipment and technology. Developing and implementing best practices for sustainable forest management will remain a top priority.
Global demand for printing and writing paper is forecasted to increase by 2% in 2013, which is a modest improvement compared to the prior two years, indicating that the printing sector is stabilizing. Tissue and packaging products, especially containerboards, are expected to be the main growth drivers of the paper products industry, with projected growth rates of 4.5 percent, said Rod Young, chief economic advisor for RISI, a leading provider of information to the global pulp and paper industry.
Global trends are promising for the long term. Underlying market dynamics point to strong long-term growth driven by sustainable supply chain practices, a lack of alternative products, and rising consumer demand in developing nations, especially China.
“Per-capita income in China has reached a level where there is usually accelerating per-capita usage of tissue products, and this is proving to be the case once again,” said Young. Consumption of paper and board in developing nations surpassed that of developed nations in 2009 and is now much higher. As a result, developing nations will account for all of the growth in global demand for paper and board, including packaging board, in 2013, with a projected year-over-year increase of 6%.
Demand for paper and board in developed countries is projected to be flat in 2013, after a 2% decline in 2011-2012.
Market share loss of graphic paper to electronic alternatives is expected to start to stabilize in 2013, a positive trend for the paper industry and printing sector.
The Chinese Government has been aggressively shutting down older mills and replacing them with newer, cleaner facilities. Since 2006, more than 2,000 older mills, with a combined capacity of 10 million tons, have been closed. In July 2012, the government released a list of more than 600 additional factories slated for closing, equal to 8 million tons of capacity.
The new mills are far more efficient, with state-of-the-art pulping machinery and vastly improved capabilities for treating and recycling wastewater. The Chinese Government plans to have 20 modern, large-scale mills operational by 2015, double the number in 2010.
The global paper industry is at the center of multinational efforts to reduce greenhouse gas (GHG) emissions. As a result the industry is well-positioned in 2013 to attract increased government and private investment through the United Nations Program on Reducing Emissions from Deforestation and Forest Degradation (REDD+) and other global carbon mitigation initiatives.
Current laws and regulations require accountability and transparency in paper procurement supply chains. Under the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, forest products that cannot be verified as legal are prohibited from entering EU markets. In Australia the Illegal Logging Prohibition Bill prohibits illegally sources timber and timber products from entering the country, and amendments to the Lacey Act in the United States ban trade in illegally sourced wood products.
World-class companies are meeting or exceeding global standards and will continue to do so in 2013. For example Asia Pulp & Paper, the world’s third largest paper company, has suspended natural forest clearance, as of February 1, 2013, across its entire supply chain in Indonesia, as part of its new Forest Conservation Policy. The company has signed off on rigorous chain of custody supply chain standards and since the early 1990s has invested more than $850 million to upgrade facilities in China.
In another sign of continued strength for global paper markets and paper-dependent sectors, major service providers to the industry are investing in new facilities. International companies ABB, Nalco, Metso and Voith Paper all opened new facilities in China in 2012 to prepare for 2013. Sustainability and GHG reduction will remain a top criterion for consumers on the demand side; and paper products suppliers and service provides that invest in sustainability will have the highest return on investment in the long run amid the steadily rising global demand of paper products.
About the Author
Ian Lifshitz is the sustainability director for the Americas for Asia Pulp & Paper Group (APP). He is responsible for leading the company's sustainability and related stakeholder engagement programs across Canada, the United States, and South America. Ian is also charged with leading the company's North American CSR activities, translating many of APP's successful conservation, biodiversity and social community programs to American audiences.
