After several years of predominantly healthy conditions, the global economy “has deteriorated considerably over the last several weeks” economist David Clapp told attendees of the 2008 European Paper Recycling Conference.
Clapp, an economist with RISI, Bedford, Mass., provided his observations on how the global credit crisis might soon affect the paper industry in a session entitled “The Paper Economy.”
Although characterizing himself as an optimist, Clapp nonetheless said the United States was entering its “deepest recession” in a generation and that it “could be looking at its worst economy since World War II.”
In addition to the turmoil in the financial and credit markets and a stagnant housing market, Clapp remarked that “China has begun to slow,” which is an extra dose of bad news for packers and shippers of recovered fiber both in North America and Europe.
Forecasts cited by Clapp had China’s GDP growth falling from 10.5 percent in 2008 to a more modest 8.5 percent in 2009. In the United States, he foresees 2008 ending with 1.4 percent GDP growth, but sees GDP falling 0.4 percent in 2009. Likewise in the EU, he sees 2008 showing 1.2 percent growth but GDP falling 0.2 percent in 2009.
For recovered fiber in particular, Clapp said demand globally “has lost momentum and prices are responding.” He cited fears of mill overcapacity in China, particularly if that nation’s export markets cool off in 2009. Many planned mill expansion projects have been put on hold, said Clapp.
For recyclers in North America and the EU, this means pricing “will merge from [its] weakness slowly,” Clapp predicted.
And finally, if credit markets do not improve, paper makers and other recovered fiber consumers around the world may also have to contend with difficulty obtaining credit for expensive maintenance and upgrading projects at mills in their capital-intensive industry. For companies that Clapp characterized as “marginal players,” this could be especially problematic.
The 2008 European Paper Recycling Conference, hosted by the Recycling Today Media Group, took place at the Marriott Amsterdam Oct. 6-7.