Hawkins Wright on the future and pulp industry

Ahead of PRIMA 2017, we spoke to Pierre E Bach, Research Manager from Hawkins Wright, UK on the future trends for the paper and pulp industry over the next 5 years alongside a preview of what his presentation on the ‘The outlook for market pulp’ will cover. 

Hear more from Hawkins Wright by regsitering here for PRIMA >>

How do you foresee the future of pulp/paper industry over the next 5 years?

The pulp and paper industry remains in transition and will look very different in five years from what it was five years ago. The sector as a whole continues to show promise as contractions in some areas and grades are being more than offset by growth in others. As in many industries today, developments in China set the mood for markets everywhere. On the paper side, China has almost caught up with North America and Europe in terms of production volumes, and as the share of contracting grades (e.g. newsprint, graphic papers) diminishes relative to that of growing ones (e.g. tissue, packaging), overall production is set to increase for the first time in over a decade. On the pulp side, demand continues to be a very positive story as China grows increasingly reliant on high quality virgin fibre imports, while capacity growth in the four years 2015-2018 is at a record high. Although we expect increased volatility on pulp markets in the near-term while demand absorbs the ongoing surge in capacity, this will allow market pulp to gain market share against recovered fibres, integrated fibres and non-wood pulps whilst forcing ageing assets to close. In summary, the outlook remains largely positive for our sector, and forecast risks are increasingly weighted towards the upside.

Can you provide a brief summary of what your presentation will cover and why it’s important for delegates interested in Prima to attend?

The presentation I will be giving at Prima will focus on the long term outlook for market pulp, which will begin with an overview of the key trends shaping the industry today and informing our views for the future. Starting with an analysis of demand fundamentals, I will attempt to demonstrate China’s growing importance as the biggest growth market in recent years, highlighting both structural and organic drivers in order to assess its sustainability moving forwards. It will also be useful to look at how market pulp competes with other fibres, and understand that demand is also partly price-driven, or supply-driven. The discussion will then move on to supply-side dynamics, and here too a review of historical trends will allow us to understand how we are today in the middle of an unprecedented surge in capacity, and what implications this may have in the short and longer term. The key message to understand here is that supply growth lags capacity expansions, and some time will also be spent in understanding the importance of ‘swing’ capacity – those mills that are able to swing in and out of papergrade pulp production by producing other niche grades such as fluff or dissolving pulps. In conclusion, I will briefly mention other factors that warrant attention when making price forecasts, hoping to leave the audience with all the tools to make their own forecast!