Paper

Global Paper Market Outlook

• The paper market is likely to grow at a rate of 3–4 percent from 2023 to 2026, attributing to rising demand for paper packaging in the FMCG, retail, hospitality, healthcare, quick service restaurant, and pharma industry, along with increasing consumer environment sustainability concern and awareness issues, like biodegradability, health problems, and global warming produced by plastic, leading to a higher shift to paper packaging

• The COVID-19 impact has changed the consumer buying preference to online from in-premise, leading to increased e-commerce and restaurant takeaways, increasing the demand for paper packaging

Global Paper Market Overview

• The paper is expected to grow at a rate of 3–4 percent from 2023 to 2027, driven by the rising demand for packaging paper by major companies in the retail, FMCG, pharmaceutical, and hospitality industries. Increasing concerns over the environment sustainability, such as biodegradability, health problems, and global warming produced by plastic, are leading to a higher shift to paper packaging

• There is a huge demand from the e-commerce and QSR industry, especially after the onset of the COVID-19 pandemic, the consumer habits changed faster than ever, and e-commerce driving the paper packaging market extensively

Cost Structure Analysis : Paper

• Asia does not have a cost competitive feedstock, yet the prices and margins of paper are the lowest, given its excess capacity

• Margins for the North America and Europe paper producers are high, due to high feedstock prices, which, in turn is driven by the regions’ structural capacity deficit

• The recent capacity additions and increase in exports from Asia could increase the level of competition in North America and European regions, which could open up a scope for price negotiation

• Raw material, pulp accounts for 60–65 percent of the raw material cost, which is the key cost driver

• Prices are expected to increase further in the coming months, as the supply is expected to remain tight. Lack of railcars and shipment delays are also expected to continue

Paper Price Drivers

Raw Material Cost

• Raw material is one of the key cost drivers for paper. This is because it constitutes 60–65 percent of the total cost of production. In case of paper, the cost of procuring pulp is an essential element to determine cost structure of different grades of paper. Different quality of paper have different requirements of either virgin pulp or recovered pulp, according to which the final cost is arrived

Labor Cost

• The impact of the labor cost is moderate. However, during bulk production, it might have a significant impact on the overall cost. Labor cost varies from region to region depending upon the availability and skills. Countries like India and China would have cheap manpower due to abundance. On the other hand, countries like North America and Europe would have expensive manpower. Therefore, labor cost is one of the cost drivers for paper production

Energy and Chemical Cost

• Utility cost including electricity, maintenance, fuel and other related cost which directly impacts the cost of production. This is considered to be the driver as these cost are added to the total cost in order to determine the overall cost of production. Though these are considered to be the variable cost, it has enough affect on the spend of the company for producing the product

Demand and Supply Dynamics

• Supply-demand is one of the key and foremost drivers of price in the paper industry. Any increase/decrease in demand from the end-user segment will lead to manufacturers announcing price changes, even without an movement in the other costs

• Supply disruptions like down time, mill closures by manufacturers or natural disasters would lead to shortages or a tight supply, attributing to price fluctuation. Similarly, weak demand could lead to price declines

• Key Drivers: Downtimes, closures, new capacity, order backlogs, lead time

Exchange Rate and Inflation

• China, being the major exporter of paper, has large demand for pulp which it generally procures from North/LATAM but due to recent fluctuations in the US dollar, production costs are expected to vary. Therefore, this cost of procuring the pulp from a foreign country in terms of foreign exchange value indicates as to how much would be the total spend of the company to produce paper

Porter’s Five Forces Analysis: Paper

Supplier Power

• The pulp producing industry is fairly consolidated, with the top 10 players accounting for 45 percent of the market share, of which only a few large suppliers of are forward integrated with paper production

• Major end-use industries of market pulp are P&W paper, and tissues, which account for 80 percent of the market value. Hence, the dependency on demand from P&W paper is high

Barriers to New Entrants

• Huge capital investment is the primary barrier

• The market is already consolidated with 75 percent market share held by the top five players in the coated grade and 60 percent in the uncoated side

• Most importantly, the market is in a declining phase and the margins are not attractive. Hence, this market is not favored for the new entrants

• Acquiring FSC, PEFC certifications can also be a barrier as it is a must have during supplier selection

Intensity of Rivalry

• There is high level of rivalry in the domestic as well as the export markets in Europe mainly because the European supply of P&W grades is higher than the market demand

• suppliers take constant effort to gain market share in the domestic market and find new customers in export market as well

Threat of Substitutes

• Digitalization is the major threat for P&W papers. The rise in technology and evolution of smart phones, advanced computer hardware and storage systems will decrease the demand for P&W papers. While coated paper might still be used for high end printing requirements such as magazines and brochures, office paper and other uncoated paper used for books and notebooks will decline sharply and replaced by digital world

Buyer Power

• The buyer power in the region is high as there is good availability of paper in the region. Also imports coming from South East Asian market has increased the domestic availability

• Board suppliers are trying to push tonnage in to the market with rebates and discounts, and they are also flexible with payment terms due to declining demand conditions and excess capacity

Why You Should Buy This Report

• This report on the paper industry offers information about the market size, regional and global industry outlook, industry trends, and price drivers. 
• It provides Porter's five force analysis of North America, LATAM, Asia, as well as key countries in these regions.
• It provides supplier profiles of major players such as Propal/Carvajal Pula y Papel, Lecta, and Sappi Europe, among others.
• Furthermore, the report on the paper industry trends details the major innovations in the global market.