Market pulp: non-Norscan expansion.

North American and Nordic countries have traditionally dominated the market pulp industry but that domination is ending. In a few years, in fact, "non-Norscan" producers will account for the majority of market pulp shipments.

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North American and Nordic countries, also called the Norscan area, have a long history of producing market pulp. The first major "non-Norscan" producers of market pulp ("Others") were predominantly from continental Europe. The Soviet Union and Japan have also had some market pulp capacity for decades.

EMERGING MARKETS

In the late 1970s, Brazil and Chile started to emerge as major market pulp producers. They have expanded their share ever since. In the 1990s, the next wave of supply from non-traditional sources came from Indonesia and other Southeast Asian countries. Low wood costs of fast-growing plantation wood and the development of papermaking technology allowing growing shares of hardwood pulps contributed to the entry of a new breed of market pulp producers.

At the turn of the millennium, Norscan producers still represented nearly 60% of global chemical market pulp production. However, with large expansions in Latin America, continental Europe, and Asia and better use of existing capacity in Russia, the share of non-Norscan producers should grow rapidly in 2000-2015.

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Even if some market capacity growth also occurs in the Norscan group of producers, the share of non-Norscan producers will probably exceed 50% for the first time in 2006. By the end of the forecast period, Norscan market pulp production should be 1.5-2.0 million tons higher than in 2000. The Norscan producers' share will still fall to about 43% of the total by 2015.

BLEACHED SOFTWOOD KRAFT PULP TRADE

The production of bleached softwood kraft market pulp (BKSP) will remain firmly in the hands of North American and Nordic producers. They represented nearly 80% of the international BSKP trade in 2001.

The only significant producing countries outside North America and the Nordic region with intercontinental trade are Chile, Russia, and New Zealand. Continental European countries also have some bleached softwood kraft pulp (BSKP) market pulp mostly sold now within Western Europe.

In the future, North American and Nordic volumes will grow. In relative terms, their share of the total will decline marginally. Chile, Russia, and continental Europe--mainly Germany and the Baltic region--will grow most and will therefore gain market share.

The largest flows are from the Nordic region to Western Europe, from Canada to the United States, and from North America to China and other Southeast Asian countries. In the future, the flows will not change dramatically. Demand in Asia will grow faster than elsewhere, but Western Europe will probably still be the region with the clearly largest demand in 2015.

Latin America will be the fastest growing supply region. The flows that will grow most rapidly in relative terms in the future are the following:

* From Latin America to Asia

* From Eastern Europe to Asia

* Within Central Europe.

Note: This article is part of a series by Jaakko Poyry Management Consulting, Tarrytown, New York, USA, which provides marketing and consulting services to the global pulp and paper industry. For more information, contact Soile Kilpi by email at [e-mail], or by phone at [phone].

JAAKKO POYRY MANAGEMENT CONSULTING