Moody's Outlook for the Global Paper and Forest Products Industry Remains Negative

We expect that the industry's global operating income will decline 4 to 7 percent over the next 12 months. The coronavirus pandemic is pressuring demand and the oversupply across many regions will either limit price recovery or drive prices for most grades lower. Declining demand and lower paper packaging, commodity paper and market pulp prices will be only partially offset by increasing wood product prices.

Following a surge in paper packaging and tissue demand as consumers loaded their pantries amid the pandemic, we expect demand will slow and the ramp-up of recent and expected capacity additions will push pricing lower. The loss of demand from nonessential segments of the economy (such as restaurants) has been partially offset by higher e-commerce demand. We expect containerboard price declines will be small as market downtime has increased and some expected capacity growth has been pushed out.

We would change the outlook to stable if we believed that consolidated global operating income would grow 0 to 4 percent over the next 12-18 months. This would most likely result from a rebound in demand with the normalization of GDP growth and housing starts. In addition, product prices would need to recover through tighter supply as a result of increased market downtime or the cancellation or delay of expected new capacity expansion projects. We would change the outlook to positive if we expected consolidated operating income would increase by more than 4 percent over the next 12-18 months.

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