Friday, 5 June 2009

World’s Demand for Paper Still at Downturn

In North America the demand for print-paper still showed signs of notable contracting. Demand by March 2009 showed a down-turn of 22% compared to March 2008. Paper factories continued to reduce production output and only utilized fixed capacity of 78% by March 2009 or a reduction of 1.5 million tons. Ir. H. M. Mansur, Chairman of the Indonesian Pulp and Paper Association disclosed this to Business News Monday [25/5].

Lowered demand was made worse by consumers acts of reducing paper stock in the past six months. Consumers stock of paper had been reduced greatly, whereby the market was expecting price improvement in Quarter II 2009. Reduction of production was important in the effort to balance supply-demand, but the most important thing was the increase of demand, which was expected to be jacked up by advertising campaigns.

In Europe the demand for paper was a downfall, which was made worse by export downturn in Quarter I 2009 the export of print paper to Europe showed a downturn of 40% against Quarter I 2008. Europe’s market share of paper was reduced, taken over by China.

In China the production of paper and board was up by 2% in March 2009. Although domestic demand for linerboard and carton was only small, demand for print paper grew significantly. But the price of paper in the domestic market was down in April 2009, except tissue paper which remained steady.

In Japan through January-February 2009 the production of paper and board was down by 28% or 1.1 million tons compared to same period of previous year. This was one of the factories’ efforts to balance supply-demand. The decrease of car and electronic goods sales, had its impact on the lowering of coated paper which were normally used for printing catalogue and pamphlets.

The wave of closing down paper factories continued. Nippon Paper announced the plan to reduce permanently their paper production capacity to the amount of 450.000 tons/year, in addition to reducing board capacity to 135.000 tons/year. Nippon paper would also reduce temporary its output capacity by 300.000 tons/year. The Tengo packaging company closed 2 of their board-maker machines at the capacity of 220.000 tons/year. Dalo announced closing down of 2 paper maker machineries at the Mishima factory.

Oil Paper also stopped the paper machine No. 3 [M-3] in Kushiro with the capacity of 150.000 tons/year planned to stop production before September 2009. MK-1 Kushiro [capacity 90.000 tons/year Corrugation medium] and the Pulp Kushiro Unit [capacity 150.000 tons/year].

Hokuetsu [ranks 7th in Japan] announced the plan to acquire Kishu Paper [ranks 10] through equity swap which was expected to be ready by October 2009. By acquiring the company, Hokuetsu would be in the 6th position in Japan. In the acquisition program, Hokuetsu would close 3 paper factories in Nigitaga factory and Chiba, i.e. MK-1 Nigitaga [2.000 tons/year specialty] and MK-2 Chiba [18.000 tons/year uncoated woodfree] respectively. Kishu paper would also close MK-2 and MK-3 in Osaka factory [total capacity 40.000 tons/year specially].

Advertising Expenditure at Downturn
Globally the reduction of advertising expenditure would continue in 2009, would plunge down again by 2010 a downturn of 4.4% in 2009 to a downturn of 6.8% in 2010. This recession in advertising in 2009/2010 would be worse than predicted. Switching of advertisements from print media to online media continued to go on. In the USA around 525 magazines were closed in 2008, and 89 magazines were closed through January 2009. Although some new magazines emerged, on-line advertising developed notably. In the USA expenditures for magazines was down by 16% in 2009 and would continue to decline in 2010. The same trend also happened in Europe.

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