Recovering from the economic downswing, the pulp and paper industry got back on track and saw a little positive growth in 2011. Suppliers enjoyed a moderate spike in incoming orders in 2010, which translated to a growth in shipments in 2011. The recovery was experienced across all regions, although the pace of recovery slowed as the year progressed. Despite the return to positive growth, risks remain.
According to ARC Advisory Group’s recent report: ‘Automation expenditures in the pulp and paper industry global market research study’, automation expenditures in the pulp and paper industry will grow at a compound annual growth rate (CAGR) of 2,8% over the next five years. According to Allen Avery, senior analyst and co-author of this study, the pulp and paper industry has to overcome challenges on multiple fronts, such as improving energy efficiency and production flexibility, monitoring and managing emissions and addressing the current skills shortage, particularly in the emerging economies. To meet these challenges the industry needs to deploy appropriate automation technologies and this growing trend creates good business opportunities for automation suppliers to capture market share.
Dynamics of the global pulp and paper industry
Markets in western Europe, Japan, and North America are stagnating or shrinking across the board. In general, the global market for newsprint is shrinking, tissue paper is more-or-less stable, and only the market for specialty papers is growing. Since manufacturing tissue and other specialty papers involves more frequent grade changes than required for the high-volume commodity papers that used to dominate the industry, operations in paper mills need to become more flexible.
In addition to growth in niche products, ARC is also seeing growth in new production capacity in emerging markets, primarily Brazil, India, China and Southeast Asia. In many cases in these regions, mill owners face challenges obtaining skilled professionals to manage the capital projects and subsequent mill operations.
Energy prices and raw material prices are also rising globally, further squeezing paper industry profits. Prices for both virgin wood fibre and recycled paper are determined by market movements, resulting in high price volatility for these feed-stocks. While the energy intensive pulp and paper industry has already implemented numerous measures to reduce energy consumption, energy remains a major cost component.
Asia and Latin America offer good growth opportunities
Regionally, average growth rates will occur in Asia followed by Latin America. Major growth will be driven primarily by emerging economies, such as Brazil, China, India, and Indonesia. Despite the average growth rates in the Asia and Latin America regions, the Middle East and North America regions will grow at below average rates.
For more information contact Kim Coffman, ARC Advisory Group, +1 781 471 1000, kcoffman@arcweb.com, www.arcweb.com
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