The steady shift in consumer preferences toward electronic information sources has gone beyond print media and is now taking its toll on demand for paper to produce books. As a result of this waning demand in North America, combined with ongoing turmoil in the world economy, Canada’s paper products industry faces a weak outlook in the next few years, according to The Conference Board of Canada‘s Spring 2012 outlook for the industry.
“The transition of information and media from print to electronic format has been going on for years, but until recently the effects were most pronounced for directories and newspapers,” said Michael Burt, Director, Industrial Economic Trends. “With the current batch of e-readers and tablet computers, it appears that a critical mass has now been reached and books are likely to follow the same path as newspapers.”
Industry production and revenues fell in 2011, and that trend is expected to accelerate in 2012. Declining North American demand for paper products continues to be a fundamental weakness for the industry. Moreover, prices have fallen three consecutive years. New markets in Asia provide some opportunities for growth, but pulp and paper demand in China is slipping due to global economic uncertainty.
As a result of weak prices and production, revenues will fall by almost five per cent this year. In response, the industry will continue to find ways to make more with fewer people – it is forecast to shed 5,000 jobs this year and overall employment is expected to decline from 2013 through 2016.
Despite challenging economic conditions, the outlook calls for the industry to remain in the black in the medium term, albeit with paper-thin profit margins. Market growth beyond North America, increased production efficiency and introduction of new products (such as bio-chemicals and bio-energy) will contribute to profitability increases from a forecast $229 million in 2012 to more than $600 million annually by 2016.
Note: Registration and login required to access the full report on The Conference Board of Canada’s web site.