S&P recently generated a report that outlined a slow recovery for companies involved with USA forest products.
The document reviews a slight improvement in outlooks for 60% of forest sector companies. This report is titled “The US Forest Products Sector is Entering a Slow Recovery” and says that the positive trend reflects significant debt reduction that these companies achieved, despite poor economic conditions. They believe that the economy and housing markets have hit bottom and that the sector’s credit profile will improve over the next few quarters.
I, on the other hand, am not as bullish, especially if one is focused on the pulp and paper segment of the forest products industry. There will be some improvement, assuming the economy picks up, but debt reduction will be a challenge.
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Unless the economy takes on a fast turn around, the North American Forest Products Industry is in trouble - building has slowed - less wood; no one purchasing durable goods - no packaging (less corrugated papers); limited advertising - smaller magazines & newspapers (less paper) ; ecomm is becoming more popular - less catalogues (again, less paper).
Above NOT good for forest products sector.
Slow is better than no recovery. We are all relying on the US gov to get ourselves out of this mess. But, will this recovery provide sustainability to the improvement for the forest industry? Fundamentally, the industry needs to change. Electronic devices are cannibalizing the paper industry. This has little to do with an improved economy.
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