Graphic paper demand Europe down

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Europes deman in graphic paper in a downturn...

By Sampo Timonen, Director, European Graphic Papers, RISI

BRUSSELS, April 24, 2009 - European graphic paper demand will come down in 2009 maybe more than in any other year in history. This is in addition to the clearly (-4.5%) decreased demand of 2008 in all grades with the exception of uncoated mechanical papers. Our current estimate for 2009 apparent consumption is -10.3% below the level of 2008. In metric tonnes that represents 2.9 million tonnes less than in 2008 and 4.2 million metric tonnes less than in 2007.

Europe has enough problems of its own, but unfortunately that is not all. Because the implications of the financial crisis for paper demand are global, the drop in exports is even more dramatic. Net exports of European printing and writing papers during the past three months are down by 41.4% (Source: Cepiprint and Cepifine). On an annual level this corresponds to a drop of 1.94 million metric tonnes. The three-month average includes the relatively good month of December 2008, but since then the situation has worsened considerably. For example, in February uncoated woodfree net exports were down by 94%, coated woodfree exports by 72%, SC-magazine exports by 50% and coated mechanicals by 43%.

The financial crisis affects demand globally. When corporate profitability and business outlooks are plummeting, companies cancel and postpone all investments. In addition, because trust between banks is currently nonexistent, companies are having problems finding funding for even the most critical projects. Among the first investment cuts is advertising -- advertising expenditures have been hit hard and paper demand even more. When the base demand is lower, the level of necessary inventory is also lower. Throughout the supply chain everyone is seeking savings and pushes inventories even further down. Because information travels at the speed of light, all risks are fully adapted by all companies globally and at the same time. Contradictory to previous downturns (maybe with the exception of the oil crises and World Wars), demand will be declining in all markets and thus there is a global overcapacity situation. There is no demand anywhere.