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Worst is Over for North American Paper & Forest Products Industry

Published in: Business Wire
Date: 6/11/2007

Trends are pointing to modestly weakening financial metrics in 2007 for the North American paper and forest products industry, according to Fitch Ratings. Fitch notes, however, the industry seems better prepared and willing to take out excess capacities rather than subsidize high cost quadrant mills.

Export markets will not be able to compensate for a slowdown in North American demand, widely predicted for the second half of 2007. Second-quarter paper and packaging earnings should look good and relatively better for lumber and panel producers. Beyond that, probabilities are that third- and fourth-quarter earnings will at best match those of last year. Lumber and panel producers should do better than last year's second half, having adjusted more quickly to a soft housing market. As the year unfolds, additional capacity adjustments are expected, which will support prices and auger a better 2008.

The first quarter of 2007 was not completely negative for the North American paper and forest products industry, and earnings in succeeding quarters will likely be better. The depressed value of the U.S. dollar is stimulating exports (pulp, linerboard, paperboard and newsprint) but injuring Canadian based manufacturers.

The full 'Paper and Forest Products: Spring 2007 - The Worst Is Past' can be found at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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