Moody’s downgrades outlook for paper and forestry products industry

By Martin Swant — The Birmingham News 

BIRMINGHAM, Alabama — Moody’s Investors Service changed its outlook for the paper and forestry products industry to negative from stable as price and demand of products in the industry are expected to weaken over the next 12 to 18 months, the credit rating agency announced yesterday.

“The sluggish economic conditions in Europe and North America and reduced use of printing paper as consumers in developed regions continue to shift to electronic devices are behind the weakness,” Moody’s said in a statement announcing the downgrade. “Additionally, new paper and paper-packaging supply coming on-line in China will likely exceed domestic demand, boosting inventory levels and further pressuring prices.”

Forestry is a significant industry in Alabama. According to the Alabama Development Office, the state’s forestry sector consists of more than 850 forestry-related manufacturing facilities and employs more than 170,000 people, or about 10 percent of the state’s work force. In 2005, it generated $15.39 billion in sales.

North American producers will see declined consolidated operating profit over the next 12 to 18 months, Moody’s said. The weak U.S. housing market and reduced use of printing and writing paper will contribute to demand and price pressures. The continent generates about two-thirds of the industry’s operating income. Other regions of the world, such as Europe and Latin America, will also see weakened prices and demand.

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