By Sakari Suoninen
HELSINKI (Reuters) - Papermakers are seeing signs of weakening demand as economic growth slows in Europe, but the weaker euro might make up for that as paper flows shift, papermakers told Reuters Summit.
The euro has fallen 7.3 percent in the last five weeks against the U.S. dollar after a slew of weak data from major euro-zone economies, the fall offering relief for European papermakers already battling rapidly rising input costs.
"The movement itself is important in the view of pricing discussions; the feeling is the dollar is going in a stronger direction and that might change the balance a little bit," said Magnus Hall, chief executive of Sweden's Holmen (HOLMb.ST: Quote, Profile, Research, Stock Buzz).
Hall said the current drop in the euro had not changed much yet, but that was not all that mattered.
"Of course the dollar movement of 5 percent is a 5 percent price change in relative terms," he said.
Price differences between regions were getting big enough for paper flows to change, Hall said, adding Asian newsprint markets looked interesting.
Paper flows, in other words the direction of exports, contribute to markets strengthening or weakening.
Despite weakening demand, company officials were upbeat about prices, especially for magazine paper, used also in advertising and catalogues. They also expect newsprint prices to rise.
Europe has had an oversupply in many paper grades, especially fine paper, and the situation has been aggravated by the strong euro, which had attracted imports from North America.
Much of the European oversupply was built at a time when one euro was worth less than one dollar.
"It is good news that the dollar is now getting stronger. There is a big improvement but it does not solve problems in European fine paper," M-real (MRLBV.HE: Quote, Profile, Research, Stock Buzz) Chief Executive Mikko Helander said.
Packaging maker Huhtamaki's (HUH1V.HE: Quote, Profile, Research, Stock Buzz) CEO Jukka Moisio said a weaker economy would ease pressure on input costs, but have little impact on demand. "When the economy is going down, we don't see a huge dip (in demand)."
He said purchasers of packaging in big European economies were cautious, but it could also be due to overstocking earlier in the year.
Tissue paper makers say they are almost immune from business cycles.
"The last thing you probably stop buying is toilet paper," said Jan Johansson, chief executive of Sweden's SCA (SCAb.ST: Quote, Profile, Research, Stock Buzz). Continued...
© Thomson Reuters 2009. All rights reserved.
| Aerospace and Defense | Dec 15 - 17, 2008 | Aerospace/Defense |
| Investment Outlook | Dec 08 - 11, 2008 | Financial Services / Exchanges |
| Media | Dec 01 - 4, 2008 | Media/Tech/Telco |
| India Investment | Nov 24 - 26, 2008 | Country Summits |
| Health | Nov 17 - 20, 2008 | Health |
