World paper markets up to 2015: what drives the global demand? Cyclicality, economy, discontinuities, advertising spending, and a 7 billion people worldwide.

World demand for paper and paperboard will exceed 453 million metric tons in 2015. The average growth rate should be 2.2 % per year with absolute volume change over 200 million tons. The new Jaakko Poyry Consulting long-term forecast is conditioned on these key assumptions:

* The current slowdown in the world paper market is cyclical. No hard evidence exists for a permanent drop in demand due to substitution from competing media, packaging materials, or systems.

* The demand for paper should bounce back to previous levels once the economic recovery allows an increase in advertising expenditure and demand for consumer goods.

* Some discontinuities in overall demand growth may occur in certain end uses and paper grades in the long term as new generations adopt new ways to communicate and distribute goods. Competition from alternative media will eventually lead to modest growth rates or even declining demand in some publication paper end uses near the end of this decade.

* Generally speaking, print on paper will remain a powerful advertising medium. Internet advertising should grow strongly, but its share of global advertising spending will remain marginal at 1% in 2000, growing to 4%-5% by 2005.

* The global economy should grow by 2.9% per year long term. Economic growth will be fastest in China, Asia-Pacific, and Eastern Europe at 4%-7% per year. Developed economies should grow 1.5%-2.6% per year through 2015.

* The world population should increase by 1.2% per year from 6.0 billion in 2000 to 7.2 billion in 2015. Most growth will occur in China, India, and Africa.

* The world population is aging. This has many implications for the paper industry including packaging design for the elderly, demand for educational materials, and changes in the tissue paper markets.

* The number of households continues to grow faster than total population. In North America, Western Europe, and Japan, where population growth averages 0.3% per year, the number of households is growing 1.0% per year.

The level of paper consumption per capita correlates strongly with national income per capita. This relationship is valid between countries and with respect to time as Fig. 1 shows. Low-to-medium income regions with vast populations such as Asia-Pacific and Latin America represent the largest potential for growth of the paper industry's in the long term.

[FIGURE 1 OMITTED]

By 2015, the largest increase in paper and paperboard consumption--66 million metric tons or more than 50% of the global demand growth during 2000-2015--will occur in Asia where paper consumption may reach 171 million metric tons. Asia will account for 38% of global paper consumption by 2015. Paper demand should increase by 12 million metric tons in North America and by 22 million metric tons in Western Europe as Fig. 2 shows.

[FIGURE 2 OMITTED]

North America, Western Europe, and Japan are stagnating newsprint markets, but demand is growing in other regions. The demand for printing and writing papers should grow at a healthy rate of 2.6% per year.

The world demand for will be slower than previously partly due to the general volume reduction and light-weighting tendencies in global packaging markets. Cartonboard and associated industries will face strong competition from alternatives such as flexible packaging and corrugated board.

Note: This article is part of a series by Jaakko Poyry Management Consulting, Tarrytown, New York, USA, which pro rides 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].