Paper Market Intelligence

Industry Outlook & Drivers

Global Paper Market Outlook

• The global paper market is witnessing decline, except for Asia and LATAM. Digital media usage has enormously increased globally and driven down by the demand for both newsprint and printing and writing paper grades
• The most affected grades are newsprint and office paper. Newsprint has been most severely affected, due to loss of advertising and readership. Office paper has been affected, due to the electronic exchange and storage of information
• NA and Western Europe are well matured regions, showcasing declines of 3–4 percent, characterized by slow demand, closure of mills, consolidation and conversions, while LA and Asia showcase a modest growth of 0–1 percent

Global Paper Market Overview

• Global demand for papers has been declining and among this, printing and writing paper demand is expected to decline at a CAGR of 2.2-2.9 percent until 2020, whereas Newsprint is expected to decline at a CAGR of 4–5 percent

• Demand for North American and European Printing and Writing paper is expected to decrease by about 5 percent/year, due to the rapid development of the internet and e-commerce business models

• Asia, LATAM, and MEA are the only regions witnessing positive growth in paper 

• In 2017, pulp witnessed a robust growth in the global demand as well as low pulp and paper inventories of Chinese paper and cardboard manufacturers, which, together with limited supply, created favorable conditions for price increas

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 NA 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