Global paper, forest products outlook raised to ‘stable’

The global paper and forest products outlook was changed to stable from negative, based on Moody's expectations for slightly better business conditions for the sector worldwide in 2010.
"Our assumption for 2010 is for overall demand to remain at low levels, roughly in line with what we saw in 2009," said Ed Sustar, Moody's Vice President – Senior Analyst. Overall, prices are also expected to remain the same or firm slightly across most grades and regions in the sector, he added.
The decline in demand for most products in this sector has slowed and even improved for some grades, said the report. While the U.S. housing market — which affects companies with building-products exposure — remains challenging, operating conditions are not expected to get materially worse.
Recent permanent capacity closures in North America should benefit the sector's operating rates, and cuts in fixed costs should improve further as more capacity closures take effect and companies optimize their ability to operate at lower demand levels.
Across regions, industry conditions are expected to remain relatively strong in Latin America and Asia, while stable trends are expected in North America. The outlook for Europe is more volatile given the pricing pressure and excess operating capacity in many of the paper grades.
Overall, demand for paper and forest products remains weak, said Moody's, with significant secular decline in the demand for newsprint and many other printing and writing paper grades in the mature markets of North America and Europe, and slight improvements in emerging markets such as India and China.