Sign In  |  Register  |  About Burlingame  |  Contact Us

Burlingame, CA
September 01, 2020 10:18am
7-Day Forecast | Traffic
  • Search Hotels in Burlingame

  • ROOMS:

S&P Equity Research Issues Paper & Forest Products Industry Predictions for 2011

NEW YORK, Jan. 26, 2011 /PRNewswire/ -- Standard & Poor's Equity Research expects paper demand in 2011 to be generally positive, as it expects the economy to continue to expand modestly this year. S&P Equity Research says producers have taken aggressive steps to optimize output on both a temporary and permanent basis, and it thinks these moves will allow prices to remain at elevated levels.

In a sign that company managements are feeling better about the financial situation, dividend payouts have risen and, in some cases, significantly. In fact, two companies that had eliminated their dividends, Wausau Paper (WPP 9 ***) and Domtar (UFS 87 ****), reinstated their payouts, and Buckeye Technologies (BKI 21 ***) instituted a dividend for the first time in its history. International Paper (IP 29 ****) increased its payout twice in the past year.

"We expect the price for market pulp to remain near current levels, or decline somewhat in 2011, after a significant advance over the past couple of years," said Stuart Benway, Paper & Forest Products Equity Analyst at S&P Equity Research. "Pulp is used in all grades of paper and paperboard, and its price can be quite volatile. Inventories remain in balance by historical standards, which we believe will prevent a collapse in prices. We expect prices for fluff pulp, which is used in towels and tissues, to remain fairly steady, as demand growth in the worldwide economy and continued expansion in developing markets, is matched by capacity increases."

Mr. Benway's other predictions for 2011 in the paper and forest products sectors are listed below.

1.  For newsprint, we expect domestic demand to continue to decline. With the increasing use of alternative news sources, this category has been in a long-term downtrend. Producers in this grade have been acutely aware of the declining demand trends and have either shut down capacity permanently or shifted capacity to other grades. One positive factor for the newsprint sector is that demand is increasing in certain emerging markets where newspapers are still a primary source of information.

2.  Although we think the long-term outlook for printing papers is not promising given the secular impact of technology on demand, we think conditions will be generally favorable for higher profits in 2011. Prices remain at high levels and no new capacity is expected to be added to the sector. In coated papers, the shutdown of about 6% of North American capacity should lead to much higher prices in this category this year.

3.  We expect conditions in the containerboard market to remain fairly strong in 2011. Because boxes are used to ship a wide variety of consumer and industrial goods, this segment is one of the most economically sensitive. However, unlike some other paper grades, demand for containerboard has not been affected by secular changes in print communications. We expect linerboard prices in 2011 to hold onto their gains due to balanced inventories, capacity closures, and a gradually recovering economy.

4.  Most of the risk for paper producers in 2011 involves rising raw materials prices, in our view. Higher pulp prices are good for those producers that sell market pulp, such as Domtar, but it can hurt margins for those that do not, such as Wausau Paper. Costs for old corrugated containers (OCC) have also surged in recent months, as demand from China for the raw material has been very strong, as China has added significant paper making capacity over the past couple of years.

5.  In the forest products sector, we think demand this year will be largely dependent on the pace of recovery in the housing sector. A composite price of framing lumber peaked at $367 per thousand board feet in late April 2010, versus $210 in the prior year's period. Then, the price fell to $240 per thousand board feet last August, but it then rebounded to $305 as of the middle of January 2011. S&P economists expect a gradual recovery in housing this year, with a forecast of a 14% increase in starts to 670,000 units. We believe this will support the recent rise in wood products prices.

About Standard & Poor's Equity Research Services

As the world's largest producer of independent equity research, Standard & Poor's licenses its research to global institutions for their investors and advisors.  Standard & Poor's team of experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of multi-asset class securities across industries worldwide.  Follow Standard & Poor's equity analysts' U.S. market commentary each day at

The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's.  Standard & Poor's does not trade for its own account.  The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at or by clicking here.

For more information contact:

Marc Eiger, Communications, Tel.: 212-438-1280

All information provided by Standard & Poor's is impersonal and not tailored to the needs of any person, entity or group of persons.  Past performance is no indication of future results. Standard & Poor's and its affiliates provide a wide range of services to, or relating to, many organizations, including issuers of securities, investment advisers, broker-dealers, investment banks, other financial institutions and financial intermediaries, and accordingly may receive fees or other economic benefits from those organizations, including organizations whose securities or services they may recommend, rate, include in model portfolios, evaluate or otherwise address.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you nor is it considered to be investment advice. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice.

This material is based upon information that we consider to be reliable, but neither S&P nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. With respect to reports issued to clients in Japan and in the case of inconsistencies between the English and Japanese version of a report, the English version prevails. With respect to reports issued to clients in German and in the case of inconsistencies between the English and German version of a report, the English version prevails. Neither S&P nor its affiliates guarantee the accuracy of the translation. Assumptions, opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Neither S&P nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

SOURCE Standard & Poor's

Data & News supplied by
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Copyright © 2010-2020 & California Media Partners, LLC. All rights reserved.