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Production and Investment Forecasts in the South African Pulp and Paper Market
Frost & Sullivan, Dec 2009, Pages: 106
This production and investment analysis research service covers trends and forecast for the South African pulp and paper market for the period 2001 to 2012. The base year for this research service is 2008 and the forecast period is from 2009 to 2012. The research service provides a succinct analysis of industry fundamentals that drive growth and influence strategic planning and investment with the pulp and paper market in South Africa.
This Frost & Sullivan research service titled Production and Investment Forecasts in the South African Pulp and Paper Market provides a comprehensive analysis of the South African pulp and paper industry from 2001 to 2012. This research service provides a succinct analysis of industry fundamentals that drive growth and influence strategic planning and investment.
Market Overview
Despite the Global Economic Slump, Growth in the South African Pulp and Paper Market Continues, Spurred by the Rising Demand for Paper
The global financial crisis and completion of major expansion projects in early 2008 resulted in zero expansion projects in South Africa’s pulp and paper industry in 2009. With anticipated tightening of expenditure, the capital spends will be limited to replacements alone. Unlike consumption trends in other mature commodity sectors, paper consumption shows little sign of decoupling from economic growth. Paper consumption is projected to grow by about 50.0 per cent by 2010 compared to its demand patterns in 2000. A strong demand for pulp and paper commodities is expected from Asia Pacific and South American countries from 2010 to 2012. “South Africa has an extraordinarily low cost base in terms of fibre production compared to other pulp and paper producing nations,” says the analyst of this research. “This is due to the speedy tree growth rate and lower inherent energy costs.” A low-cost base gives South African pulp manufacturers a competitive advantage over other pulp producers globally, through competitive pricing.
However, the South African pulp and paper industry is extremely energy intensive and exposed to risks due to the fluctuating energy prices, including fuel and electricity prices. In the first half of 2009, South Africa’s power utility ESKOM increased energy prices by an estimated 33.0 per cent. “The energy price rise has contributed to higher operational costs, negatively affecting the overall profitability,” explains the analyst. “Additionally, this has been exacerbated by the weak market prices of pulp and paper commodities resulting in a few of the companies incurring losses during the financial years of 2008 and 2009.”
To overcome this setback, the pulp and paper producers in South Africa should adopt strategies that are focused on increasing self-generation capacities as well as improving energy efficiencies at all production facilities. “With an anticipated revival of the global economy in 2010 as well as better standards of living globally, certain sectors of the pulp and paper market, particularly chemical cellulose pulp, and coated graphic paper and tissue, are expected to grow steadily in the long-term,” concludes the analyst. “This growth in demand is anticipated to contribute towards greater capacity utilisation from 2010 and 2012 and a higher production output of the South African pulp and paper industry.”
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