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January 22, 2001

International Status

United States of America is the worlds largest market for paper and paper boards accounting for nearly 40% of the total world demand. USA consumed approximately 98 million ton of paper and paper board for the year 1995 aggregating to $ 73 billion. The demand for paper and paper boards in the US is expected to increase by 2.5% to 111 million ton aggregating $ 73 billions by year 2000.

In developed countries the demand for recycled paper is increasing at a much higher rate than average paper demand. This trend is expected to continue in the future as recycling of waste is gaining further momentum in these countries eg. : the share of recycled paper as a proportion of total paper and paper board demand in the US is expected to increase from 30% in 1995 to 35% in year 2000.

In 1998, the Asian crisis led to a drop in the demand for paper and the excess supply has all been diverted to the export market. In combination with stagnation in demand in the US and Europe, this led to a further fall in international paper prices.

Since the second quarter of 1998, paper mills have been undertaking shut downs, slowing down production etc. in order to reduce supply.

The economic situation in South-East Asian countries has improved in the past few months and it is expected to improve further. This may reduce the extent of oversupply. But the take-over of Korean paper manufacturers by world paper majors and the revival of dormant production facilities may lead to continuation of excess capacity in the world.

Recently, the international prices of pulp have increased from around US$443 per tonne in May 1999 to US$550 per tonne in November 1999. The uptrend is expected to continue for another two years and the cycle is currently expected to peak by the end of 2001/ early 2002. The printing and writing paper (PWP) and paperboard prices have been lagging pulp prices but they are expected to move up backed by improvement in fundamentals of Asian region. Asian region accounts for 30 per cent of the global pulp, paper and paperboard consumption. The domestic prices of PWP have shown improvement since June 1999 and they are expected to remain firm with demand growth of 6-7% in next two years without commensurate increase in supply. The demand of industrial paper has also picked but the prices of kraft paper and paperboards have been unable to move up significantly due to increase in supply.

Courtesy: Indiainfoline