Future fortunes vary in four key segments for specialty papers

Smithers Pira, shares its latest market analysis on the impact of current and emerging trends on key specialty paper markets.

Data in the new Smithers Pira market report The Future of Specialty Papers to 2020, estimates a global market volume for specialty papers of 26.5 million tonnes in 2014. This is projected to reach 26.9 million tonnes in 2015 and 29.3 million tonnes by 2020, growing at an annual rate of 1.8% over the period 2015–20.

The period 2007-12 were exceptional in the impact of the economic downturn. Some regions have been more badly affected than others. The US, Western Europe and Japan in particular faced a spiral of reduced real incomes leading to reduced consumer demand and plant closures.

There have been winners too. Some economies that have been developing gradually, and had less exposure to the financial markets of the US and Western Europe, experienced something of a boom. The list of examples is quite large and significant in its impact: Mexico, Brazil, Argentina, Venezuela, Poland, Russia, Turkey, India, China, Vietnam, Malaysia, Philippines are just some of the economies that have gained commercial trading volume continuously and consistently over recent years.

A variety of specialty paper markets have been affected in different ways by the overall changes in the paper industry – and will continue to be affected to 2020, as forecast in Smithers Pira’s The Future of Specialty Papers to 2020 report.

Asia is set to extend its market lead over traditionally lucrative markets like Western Europe and North America – Source: Smithers Pira (Figures ‘000 of tonnes)

Book papers

Perhaps some of the most significant developments that have played out in recent years are those in book papers. While a gradual trend away from hardback books towards paperback books has been going on for several decades, the book market in general is under pressure from the twin impact of reduced real incomes and the advent of electronic ‘e-readers’. In Western Europe, e-readers captured only 1% of the book market for a few years after their launch but this has now grown to 5% of the market. In the US, the figure was close to 15% on introduction and is now about 25%.

In most other markets, the book format continues to be seen as traditional and the impact is more a financial one: if real incomes are squeezed, there will be reduced expenditure on books. In some markets such as Latin America or India, books are not traditionally purchased. These are newspaper or magazine markets with books only purchased as reference works. The global implication for the paper industry is that as book readership declines in the richer markets of the US and Western Europe, there are nevertheless opportunities for expansion of book sales in developing markets where education is strongly emphasised.

The book publishing landscape has changed and although there is a loss of volume as consumers real incomes have fallen in the US and Western Europe, there has been a parallel transfer of book printing to China and India in particular. Other markets – such as North Africa, Poland, Turkey, and Vietnam – have also become prominent in recent years. In each case, availability of local printing resources encourages local demand.

Essential segments

Some paper segments are essential to business and commerce and thus sensitive to changes in economic activity: inkjet paper and thermal paper are good examples. Other segments are affected by advertising spend, which in theory should reinforce business activity, but if budgets are constrained, demand for poster board and poster paper is reduced.

Types of specialty paper that are dependent on traditional commercial patterns have been affected as well: aerogramme paper now only has marginal impact but the equivalent paper used in pharmaceutical and household product packaging inserts has seen growth. Business card stock and envelopes have gained in all markets as promotional activity is emphasised in order to gain business.

Security papers

Security papers have experienced varied performance: currency papers are being challenged by laminate and full-plastic currency; cheque papers are losing volume to electronic fund transfers; postage stamps similarly have had volume eroded by the massive popularity of email globally.

Ticket and receipt papers have lost volume mainly in the developed markets where real incomes shrank, but are growing in volume in the developing markets.

Regional growth: Asia

There is a growing market for all flexible packaging, printing and writing papers across Asia. Notable has been the high rate of investment in new pulp and paper mill plants in China. Another key feature is the static consumer demand in Japan. Consequently most printing and paper segments record stagnant sales volumes in Japan.

The pulp and paper mills and converters in Asian markets operate on very narrow margins but are increasingly able to survive through regional exports and will thus be less dependent on the US and Western European sales in the coming years.

Full data and analysis on how these and other developments will transform the global specialty papers market across the next five years are available in the Smithers Pira report