Xerfi Global has recently published a report on the Global Paper Industry, which has been undergoing a major transformation over the last few years.
Global production volumes of paper products have been stagnating, with annual average growth of less than 1% over the 2006-2016 period. This does not reflect a stable market but rather a delicate balance between growth in some segments and declines in others.
Growing digitalisation and the development of electronic media and communications have been a thorn in the side of printing and writing paper and newsprint, particularly in mature markets such as North America and Western Europe, which have seen a structural decline in graphic paper demand since 2009. This downturn has been only somewhat offset by increasing demand in Eastern Europe and Asia, driven by greater economic activity in these regions.
On the other hand, tissue paper has seen the highest growth of late, primarily due to growing demand for hygiene products on emerging markets, although it remains a fairly small sub-sector – albeit one with high added value. What has really been keeping the industry buoyant as a whole is greater packaging needs, driven by growth in e-commerce and general retail, leading to expansion in corrugated and sackkraft paper and paperboard.
Paper manufacturers are adapting to this structural shift by boosting their production in packaging and tissue and investing in innovative specialty papers to ensure differentiation and customer loyalty in a business in which switching costs are relatively low. In a limited-growth market, they are also engaging in cost containment and moves to make production plants more efficient, as well as adapting their business structures to make them more efficient via mergers and acquisitions, joint ventures, spin-offs and divestments and tapping into high-potential geographical markets.
These strategies seem to be bearing fruit. Top paper groups have seen their profitability rise from 8.5% in 2013 to 10.6% in 2017.