Search

Excess global capacity and sluggish demand have created earnings pressure for the paper and forest products industry in mid-1998, and the stronger dollar has allowed cheaper paper to be imported into the US. Lower paper and lumber prices are among the reasons the industry needs to consolidate, but newsprint prices are firm as of Sep 1998. These stocks are expected to lag the market in 1998 and 1999.

Prices for newsprint posted gains for most of 1997, but prices for other paper grades were depressed by the economic turmoil in Asia, and the prices for export logs and lumber have been hit hard as well. Work stoppages and consolidation are two factors which will have impacts on the paper and forest products industries, as well. Investors need to consider risks before committing funds as these stocks are susceptible to downturns.

Prices for most grades of paper remain depressed in 1998 due to increased capacity in most markets, but the price for newsprint gained for most of 1997. Increased wood supplies in 1997 also offset the strong demand for the product. Expiring labor contracts in the Canadian newsprint industry and paper industry consolidation will also have effects. These stocks are not timely for 1998 and investors should look to other industries.

Strong gains were made for newsprint prices in 1997 after hitting $500-a-ton in 1997, but capacity increases in foreign and domestic markets have made it likely for prices of other grades to remain low. Supplies of wood products have remained high, not offsetting the demand from construction, and several paper companies are consolidating. Risks inherent in the industry must be considered by investors before making commitments.

Paper and forest products industries earning and economic performance have been on a steady decline for seven quarters since they reached their high point in the summer of 1995 and are expected to drop even further in the immediate future despite the tradition of cyclical changes. Paper prices are dropping and the construction industry demand for lumber will be impeded by increased interest rates. Investors who require good year-ahead performance should avoid involvement with paper and forest products companies whose equity prices are already near all-time highs.

Production of paper and paperboard fell 4% and 5% respectively in May 1996, due to high customer inventories and eroding prices in the spring of 1996. Even though markets for some individual products remain chaotic, prices in other market sectors may stabilize in the second half of 1996. Lumber prices were also volatile in the 2nd qtr of 1996, ending with an 11% gain. Most investors should not seek stocks in this industry in 1996.

Prices are declining in the paper, pulp, paper and paperboard industries as manufacturers attempt to maintain market share. Capacity for both paper and paperboard is expected to increase by 2.5% per year through 1998, with paperboard rising the greatest. Earnings will increase for lumber companies with fewer Canadian imports. Investors must be cautious when selecting these stocks, although the industry is timely in 1996.

Stocks in the paper industry have outperformed the market since June 1995. The balance between demand and supply of most paper grades is favorable and prices are expected to rise 5% in Oct 1995. Kraft board, boxboard and linerboard prices rose 30%-50% over 1994 prices, and lumber and other wood product prices also increased in June 1995. Stocks with favorable pricing forecasts are recommended for investment.

Jefferson Smurfit Corp. and Stone Container Corp. have backed away from a loan syndication, reportedly due to disappointing pricing. Plans called for the $4.8 billion syndication to be launched during the week of Sep 14, 1998. According to sources, The paper packaging firms are considering high-yield bonds as an alternative to the bank loan. Jefferson Smurfit and Stone Container plan to merge., Due to disappointing pricing, Jefferson Smurfit Corp. and Stone Container Corp. have shelved a $4.8 billion loan syndication that was expected to launch this week, sources said. The paper packaging [...]

In a move that will return its attention to containerboard and packaging, Stone Container Corp. said the company will exit the pulp business and almost fully withdraw from newsprint, using [...]