Middle East: growth in imports and local production.

Turkey, Saudi Arabia and Israel are major markets for paper and paperboard in the Middle East. Long-term growth fundamentals are positive for most of the countries in the region and, at 5%, forecasted GDP growth is clearly above world averages. The region's population of 250 million is also growing, at 1.9 %/yr.

The pulp and paper industry is expanding in select Middle Eastern countries. The paper and board market is nearly 8 million metric tons/yr. Of this total, over 3 million metric tons is supplied locally and about 5 million metric tons is imported. Countries that are dependent on imports are, for example, Bahrain, Cyprus, Iraq, Jordan, Kuwait, and Syria. In printing and writing papers, imports have clearly outpaced regional supply growth. Domestic supply of packaging papers has, however, grown briskly--especially in Turkey and Saudi Arabia. The regional tissue industry is expanding as well.

RECOVERED FIBER IS KEY

Recovered fiber is the region's key raw material. As the consumption of paper and board has increased, the availability of recovered fiber has also improved. Virgin fiber is imported mainly for the manufacture of higher end printing papers.

Turkey has the largest paper and board industry in the region with annual capacity of 2.5 million metric tons, of which 75% is in industrial grades. Saudi Arabia is ranked next, far behind Turkey, with 0.5 million tons, followed by Israel and the United Arab Emirates.

The Middle Eastern paper and board business is primarily local. For example, the largest suppliers in Turkey have a dominant position in the country's industry. Modern Karton Sanayi Ticaret, Mopak Kagit Karton Sanayi ve Ticaret, Kartonsan, SEKA, and Kahramanmaras Kadit account for over 40% of capacity.

RAPID GROWTH IN CORRUGATED 

A good example of the growth and characteristics of the Middle East paper industry is the Turkish corrugated board business. In the past 10 years, volume growth has been tremendous, increasing from 690 million square meters to 1.5 billion square meters in 2004. The number of companies making corrugated boxes has grown from 73 to 105. Turkish corrugators are typically narrow (less than 2 meters wide), but there has been a trend towards wider corrugators. Increasingly, domestic raw materials are being used for box manufacturing. In the past, kraftliner imports were a significant portion of overall raw material usage but have gradually been displaced by domestically supplied recycled liner. Ten years ago, the share of recycled liner was 11%--today it is 22%. The share of kraftliner has dropped to 24% today from 31% in 1994.

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Paper and board production is expected to grow in Turkey and in other paper producing Middle East countries, such as the United Arab Emirates and Saudi Arabia. In the near future, new paper machines will focus on tissue products and packaging grades. Machine sizes are growing. For example, a 120,000 metric tons/yr machine started up late 2004 in Dammam, Saudi Arabia producing mainly white-top and unbleached recycled liner and medium. Another 150,000 metric tons/yr machine plan has been announced by Obeikan Industrial Investment Group in Saudi Arabia, and Modern Karton in Turkey has plans for a 400,000 metric tons/yr recycled liner and medium machine.

Note: This article is part of a series by Jaakko Poyry Consulting, Tarrytown, New York, USA, a provider of marketing and consulting services. Contact Ms. Soile Kilpi by email at [e-mail], or by phone at [phone].

JAAKKO POYRY CONSULTING