Moody’s Outlook for Paper and Forest Products Changes to Positive

The outlook for the global paper, packaging and forest products industry has been changed to positive from negative, Moody’s Investors Service has noted. The change to a positive outlook for the industry is driven by expectations that the consolidated operating income of the 41 paper and forest product companies rated by Moody’s globally will increase by 6-8 percent over the next 12 months.

By region, Moody’s says that the consolidated operating income from rated producers in North America and Latin America is anticipated to increase 12 and 9 percent, respectively, even as the consolidated operating income from rated producers in Europe will decline. This is primarily driven by the flow through of current peak North American prices for most wood products, as well as rating agency analysts’ expectation of modestly higher global market pulp prices.

“We anticipate demand for most paper and forest product grades will increase in 2021 as the global economy emerges from the coronavirus recession,” said Ed Sustar, a Moody’s senior vice president.

Meanwhile, the outlook for the paper packaging and tissue subsector is negative, with operating earnings of the 14 rated companies that are primarily driven by paper packaging and tissue operations declining by about 2 percent over the next 12 months. Following a surge in paper packaging and tissue demand as consumers loaded their pantries amid the pandemic, Sustar says demand will slow for the balance of the year. Nevertheless, the loss of demand from nonessential segments of the economy, such as restaurants and sporting events, has essentially been offset by higher e- commerce demand. At-home consumption trends brought about by the pandemic have also helped to keep paperboard markets in balance, while stronger retail tissue demand has been partially offset by weaker away-from-home tissue consumption. Tissue demand is expected to normalize in the second half of the year as consumers look to use what’s in their pantries rather than buying additional products.

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