Moody’s Investors Service said in a new report that the outlook for the global paper and forest products industry remains stable. In the next 12 to 18 months, overall operating income will increase moderately, but rising costs will offset the benefits of price increases. In the sub-sectors, packaging paper, tissue paper, wood and wood products, and commodity pulp continue to maintain stable prospects, while the prospects for paper are still negative.
Moody’s Senior Vice President Ed Sustar said: “We expect that in the next year or so, the combined operating income of 39 paper and forest products companies worldwide will grow by 2% to 4%. Increases in prices and productivity and synergies related to acquisitions The effect, as well as the strong demand for wood products and packaging paper commodity pulp, will drive profit growth, but will be partially offset by the impact of falling paper demand and rising freight, labor, energy and chemical costs."
At the same time, as the expansion of the US real estate market accelerates the demand for wood products such as wood, plywood and oriented strand board, the operating income of wood and wood products companies will increase by about 4%.
The price will remain close to the level of 2017, but the price of oriented strand board in North America will fall because the additional supply exceeds the demand growth. In Canada, because tariffs imposed on U.S. timber exports will continue for one year, timber producers will see a decline in operating profits.
The operating income of commercial pulp companies will increase by about 3% this year because of increased demand, while the average price of most pulp grades remains flat. The strong prices that appeared at the beginning of this year may be reversed in the second half of the year, as supply growth exceeds demand.