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Worst is over for NA paper and forest products industry: Fitch Ratings

A recent report issued by Fitch Ratings points to positive movement for the North American paper and forest product…

A recent report issued by Fitch Ratings points to positive movement for the North American paper and forest products industry.

While trends are pointing to modestly weakening financial metrics in 2007, the report highlights the industrys preparedness and willingness to take out excess capacities as opposed to subsidizing high cost facilities.

The report further notes that export markets will not be able to compensate for a slowdown in North American demand, which is 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 years 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 report, entitled Paper and Forest Products: Spring 2007 The Worst Is Past, can be found at www.fitchratings.com