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Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. pulp and paper companies will see strong demand for cartons and other packaging materials, along with elevated demand for tissue paper through the second half of 2020 and into next year. But those companies will likely defer non-essential capital expenditures as they recover from the economic turmoil that has marked the first half of the year, according to Randy Godet, Industrial Info vice president of research for the Pulp, Paper & Wood and Food & Beverage industries.
Godet was one of the speakers at Industrial Info's 2020 Industrial Market Outlook Mid-Year Update webinars that took place June 3-4. Industry experts presented updated forecasts for North America that reflect the impact of the COVID-19 pandemic and the subsequent economic upheaval.
Click on the image at right showing COVID-19's impact on the Pulp and Paper industry.
At the beginning of the year, parts of the Pulp, Paper & Wood Industry were already experiencing soft market conditions due to high fiber costs and weak pricing, and producers of printing-grade paper continued to see demand deterioration as a result of global digitization and the migration to online communications, Godet said.
The market situation changed dramatically as the year progressed, with a panic-driven consumer run on tissue paper and paper towels at grocery stores and supermarkets across the U.S., which in turn spurred paper towel and tissue mills to at full capacity.
Market uncertainty caused by the lockdowns and the shock to the economy prompted companies to idle their plants and cut back on planned capital spending. Second-quarter 2020 project expenditures amounted to $686 million, less than half of the project spend of second-quarter 2019, Godet said.
Some parts of the Pulp, Paper & Wood Industry have been hit much harder than others.
The wood sector is expected to have a slower recovery, as demand for construction material isn't expected to pick up until well into 2021, Godet said. Consequently, "It's very likely we may even see some plant closures."
For the entire industry, capital expenditures are expected to start to bounce back late in the third quarter of this year, Godet said. For second-half 2020, capital projects worth $2.5 billion and maintenance projects worth $833 million are expected to kick off construction.
However, the availability of skilled labor is a cause for concern as project activity increases.
"If you really think about it, pulp and paper mills require millwrights, electricians, plumbers and mechanics," Godet said, noting that these skilled trades also are needed in other industries.
On the positive side, in the paper segment, "we see not just new paper machines being installed, but the conversion of existing paper machines away from those grades that are no longer in demand into grades that are in demand; for example, your container and packaging board grades," Godet said. Many of those grades are used by the Food & Beverage Industry for dried goods and frozen food cartons.
Another driver of container and packaging paper demand is the e-commerce industry, Godet continued. "Consumers have really taken to using the online tools to order products, whether it's food products or household products; but also, we see a trend where nontraditional products are ordered online -- tools and equipment -- are being delivered in greater numbers."
Industrial Info is forecasting an overall top-line spend of nearly $16 billion by the industry for 2020-21.
By geography, the U.S. Southeast traditionally has been a strong investment region, owing its wealth to an abundance of raw materials.
However, a surprising amount of investment can be found in other places, such as Utah, where two projects with a combined worth of more than $600 million are in the planning stages, Godet said. This includes a paper mill complex expansion by Procter & Gamble Paper Products Company (Cincinnati, Ohio) and a grassroot recycled fiber pulp and containerboard mill by Crossroads Paper LLC (Salt Lake City, Utah). For more information, see Industrial Info's project reports.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Godet was one of the speakers at Industrial Info's 2020 Industrial Market Outlook Mid-Year Update webinars that took place June 3-4. Industry experts presented updated forecasts for North America that reflect the impact of the COVID-19 pandemic and the subsequent economic upheaval.
At the beginning of the year, parts of the Pulp, Paper & Wood Industry were already experiencing soft market conditions due to high fiber costs and weak pricing, and producers of printing-grade paper continued to see demand deterioration as a result of global digitization and the migration to online communications, Godet said.
The market situation changed dramatically as the year progressed, with a panic-driven consumer run on tissue paper and paper towels at grocery stores and supermarkets across the U.S., which in turn spurred paper towel and tissue mills to at full capacity.
Market uncertainty caused by the lockdowns and the shock to the economy prompted companies to idle their plants and cut back on planned capital spending. Second-quarter 2020 project expenditures amounted to $686 million, less than half of the project spend of second-quarter 2019, Godet said.
Some parts of the Pulp, Paper & Wood Industry have been hit much harder than others.
The wood sector is expected to have a slower recovery, as demand for construction material isn't expected to pick up until well into 2021, Godet said. Consequently, "It's very likely we may even see some plant closures."
For the entire industry, capital expenditures are expected to start to bounce back late in the third quarter of this year, Godet said. For second-half 2020, capital projects worth $2.5 billion and maintenance projects worth $833 million are expected to kick off construction.
However, the availability of skilled labor is a cause for concern as project activity increases.
"If you really think about it, pulp and paper mills require millwrights, electricians, plumbers and mechanics," Godet said, noting that these skilled trades also are needed in other industries.
On the positive side, in the paper segment, "we see not just new paper machines being installed, but the conversion of existing paper machines away from those grades that are no longer in demand into grades that are in demand; for example, your container and packaging board grades," Godet said. Many of those grades are used by the Food & Beverage Industry for dried goods and frozen food cartons.
Another driver of container and packaging paper demand is the e-commerce industry, Godet continued. "Consumers have really taken to using the online tools to order products, whether it's food products or household products; but also, we see a trend where nontraditional products are ordered online -- tools and equipment -- are being delivered in greater numbers."
Industrial Info is forecasting an overall top-line spend of nearly $16 billion by the industry for 2020-21.
By geography, the U.S. Southeast traditionally has been a strong investment region, owing its wealth to an abundance of raw materials.
However, a surprising amount of investment can be found in other places, such as Utah, where two projects with a combined worth of more than $600 million are in the planning stages, Godet said. This includes a paper mill complex expansion by Procter & Gamble Paper Products Company (Cincinnati, Ohio) and a grassroot recycled fiber pulp and containerboard mill by Crossroads Paper LLC (Salt Lake City, Utah). For more information, see Industrial Info's project reports.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
