Pricing panic in the Swedish forest
Excess capacity in the paper industry will continue to plague the market, analysts say, although others claim the worst is over.
| Related news: • Paper giant Stora Enso to shut plants • Paper maker UPM reports switch into loss • Paper maker Stora Enso hit by newspaper crisis |
It’s been rough years for the Swedish and European paper industry which suffers from overcapacity and weakening demand, resulting in low prices and low earning.
Although more and more companies say the worst is over and the market has reached the bottom, analysts warn for continue price pressure, Reuters reports. In a desperate move to muddle through the economic downturn, there are many small loss-making mills that churn out paper, regardless of the price, to try to cover some costs.
Swedish forest companies, such as the country’s largest forest owner state-owned Svea Skog, have been hit by low sales volume to the pulp and paper industry, resulting in thinning profits.
Last week Europe's leading paper maker Swedish-Finnish Stora Enso said it would shut down several plants in Finland in response to a fall in demand because of the global economic crisis, affecting more than 1,000 jobs.
Still, the tones were more upbeat at Reuters Paper and Packaging Summit in Helsinki on Monday and Tuesday than in a long time.
"Generally, it doesn't feel like the market is continuing down. I would say that it is reaching the bottom," said Jan Johansson chief executive officer of Swedish hygiene and paper product maker SCA, adding that costumers had run down their stocks.
Jan Johansson expects paper volumes in the second half of this year to be the same as in the first. He has no plans to cut paper prices next year.
Also Rynning-Toennesen, chief executive officer of Norway's Norske Skog, said the steep drop in demand for newsprint probably has ended although the outlook is still frail.
"It looks like the steep fall in demand is behind us on the volume side”, he told Reuters at the summit.
"It's impossible to be certain, but in China the consumption of newsprint has regained the level from before the financial crisis. In Europe the steepest decline is behind us, and has bottomed out in several markets. U.S. demand will still decline, but by less than in the last six months", he added.
Finnish UPM-Kymmene and M-real also struck a more cheerful tone on the industry outlook. UPM-Kymmene said it plans to be an active player in the consolidation of the struggling paper and packaging industry.
"Definitely this industry needs to consolidate. Our role will be of an active player," Jussi Pesonen, chief executive of the world's third largest firm in the sector by capacity, said at the summit. "There will be swaps or share deals. We most probably won't see any cash deals in this industry for the next year or two”.
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Last Updated (Tuesday, 25 August 2009 17:42)
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