It’s hard to believe that just a few months ago the main worry in the forest products industry was how to pass along soaring commodity costs.
Today, the greatest concern is how demand for paper and packaging will hold up as the U.S. economy sinks deeper into recession, said Standard & Poor’s in a report this week.
A fall in demand appears to have already begun, with recent shipments for many paper and packaging products declining in the 5 percent to 10 percent range year-over-year. As the recession deepens, the decline in volumes could accelerate and reduce earnings and cash flows.
Companies such as International Paper Co. (IP) have moved aggressively to shut down excess capacity to stay in line with weaker demand, but companies will likely have to take additional steps in 2009, S & P said. (Click chart to enlarge.)
S & P doesn’t expect a recovery in housing until 2010, which will weigh on wood products manufacturers such as Louisiana-Pacific Corp. (LPX) and Boise Cascade LLC, S & P said.
For details, see “U.S. Forest Products 2009 Outlook: Will the Recession Tip the Balance?”
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