Corrugated board In the various industries hit by the economic recession in Western Europe, corrugated paperboard has suffered the most, and the decline in output caused by the economic downturn has caused inventory to decline. In the second half of 2001, due to lack of demand, the prices dropped significantly. At the same time, because most customers estimate that there is room for price reduction in the price of cardboard, they have been reluctant to open positions. We estimate that customers' inventories will continue to decline in 2002. As a result, shipments of corrugated cardboard will not increase during 2001-2002. This is the worst performance of this sector in the past 10 years. Corrugated cardboard encounters triggered a chain reaction of boxboard. In 2001, the consumption of boxboard may have decreased by 4% year-on-year. In 2002, driven by the economic recovery and the establishment of customer positions, the demand for boxboard may increase. By 2003, we forecast that the Western European Economic Association will start a strong rebound, which will drive demand for the entire paper board industry to rise, with an increase of around 4%.
Manufacturers in Western Europe tried to deal with too low demand by stopping production. Although the downward trend in prices has been temporarily controlled, we believe that in 2002, due to lack of demand and higher costs, the price of paperboard will continue to fall. Since the end of 2000, the operating rate of the paperboard industry has been low. We believe that the operating rate will remain at about 88% before 2003 and the average operating rate in 2000 will be 93%.
The deteriorating economic environment of boxboard has also had a severe impact on the Western boxboard market. We estimate that the consumption of recycled cardboard in 2001 decreased by 4%, while the consumption of folding cardboard decreased by 2.5%. Both manufacturers also took a stoppage action in the summer of 2001, which helped to stabilize prices. In fact, in the case of insufficient demand, the price of cardboard is still very flexible. Obviously, if the suspension of work continues, the price of the boxboard market will continue to climb until 2002. We believe that such high prices will lead to further reduction in the consumption of boxboard. Consumption in 2002 may decline by 0.5%-1% year-on-year. The pressure on the boxboard market now comes from the split of similar products to the market. At the high price of cardboard, some cheap alternatives, such as plastics, may come in. We predict that the recovery time of the container board industry may be when the economy of Western Europe as a whole recovers in 2003, when its consumption may increase by 2.5% to 3%.
In terms of production, the production of boxboard in Western Europe has remained stable. Compared with recycled boxboard, the high profitability of boxboard does not prompt manufacturers to rush to increase production capacity. In the next two years, the production of boxboard will maintain an average growth rate of 2.6% per year. So far, only Sarda has announced that it will put into use the new machine in 2002: a Carton Machine with an annual output of 70,000 tons. In this way, the ratio of shipments to production will not be too wide. We predict that the operating rate of the boxboard industry will remain at 90%-92% between 2001 and 2003.
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