The likelihood of more profits from the wood products and paper packaging businesses offsetting declines in the printing and writing paper segment will keep the outlook for the global paper and forest products sector stable in 2017, says Moody's Investors Service. Toronto, Ont., Canada, in a special report published this week.

Moody's report, titled Paper and Forest Products—Global: 2017 Outlook—Wood Products Growth Offsets Paper Decline, is available online. The report is part of a series of 2017 Credit Outlooks that provide insight into next year's credit conditions across all sectors. 

 

"We expect global paper and forest products overall to remain stable in 2017, driven mainly by 2% - 4% growth in their earnings in the U.S., Europe. and Latin America, as wood products and packaging growth offsets declines in the printing and writing paper products business," saids Ed Sustar, a Moody's SVP and author of the report. 

The stable outlook on the sector also balances the projected 8% growth in U.S. housing starts, which will benefit North American wood product producers, and anticipated global GDP (G20) growth of about 3% in 2017, against the expected 5% decline in printing and writing paper demand as digital alternatives gain in popularity; and flat or declining prices across most product grades in the industry.

Three subsectors (paper packaging and tissue, wood products/timberland, and market pulp) will benefit from operating earnings growth of 0% - 4%. This growth comes from increasing containerboard prices, stronger tissue demand from improving global hygiene standards, growing log and wood product demand with rising U.S. home construction, and a ramp-up in pulp production offsetting earning declines.

On the other hand, the printing and writing paper segment faces a more subdued outlook, reflecting the expected 1% - 4% decline in operating earnings in 2017 as paper demand wanes and prices fall as capacity reductions fail to offset demand declines.