According to Moody’s, earnings from paper, paper packaging and market pulp are all set to decline in the coming year keeping the 2020 outlook for the global paper and forest products industry negative, says Moody’s Investors Service in a recently published report.

“We expect operating earnings for the global paper and forest products industry to decline by 2%-4% in 2020,” said Ed Sustar, a Moody’s Senior Vice President. “Lower prices across most sub sectors will be the

The outlook for the global paper and forest products industry in the coming year remains negative, Moody’s Investors Service says in its 2020 outlook for the sector. Earnings from paper, paper packaging and market pulp will all decline primarily as excess supply causes prices to fall.

“We expect operating earnings for the global paper and forest products industry to decline by 2%-4% in 2020,” said Ed Sustar, a Moody’s Senior Vice President. “Lower prices across most sub sectors will be the primary driver for lower earnings, as well as the on-going secular demand decline for paper, partially offset by lower costs for recycled fiber.”

In the paper packaging and tissue subsector, operating earnings will decline by about 2% in 2020 on the back of lower corrugated container prices, given capacity additions haven’t yet been absorbed by weaker demand growth. Consumer packaging and tissue prices will stay at current levels, while recycled fiber costs will remain below the long-term average.

Operating earnings for commodity and specialty paper firms, meanwhile, will fall by about 5%, with commodity paper consumption also set to decline by about 5% due to digital substitution. Prices will fall for most grades of commodity paper, as curtailments have not kept pace with declining demand. Nevertheless, specialty and non-integrated commodity paper producers will benefit from lower pulp and recycled fiber costs.

Market pulp producers will see operating earnings decline by around 9% in the coming year, Moody’s says. Although pulp prices will begin to rise as inventory levels normalize, average prices in 2020 will remain below 2019 levels. Demand for pulp will remain muted as orders from particularly China slow.

Conversely, operating earnings for the wood products and timberland subsector will increase by about 7% in the coming year. North American wood product prices will rebound as capacity curtailments remove some slack from the market. US housing starts likely will be flat, while US South log prices likewise will stay flat on the back of excess inventory of standing timber.primary driver for lower earnings, as well as the on-going secular demand decline for paper, partially offset by lower costs for recycled fiber.”