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Contrary to bullish forecasts on the growth of tissue in the Middle East/North Africa (MENA) region published in earlier reports, new evidence is emerging that the oil boom has led to accelerated investment far beyond projected demand growth.
This is according to a recent study by the Nuqul Group examining the forces affecting the industry, which will be presented for the first time at Tissue World 2007 in Nice on 26-29 March 2007. The report suggests the big rise in tissue capacity that will lead to serious overcapacity in 2008, and through 2009-2011.
The increase from recent start-ups (Nuqul, Tonic, Pyramids, Indevco), projects under construction (ADNP, Crown, Orient, Gulf, Nuqul), and announced projects (Emirates, Zeina and GHI, Saudi Paper, Indevco) will double the region's capacity even before adding the rumored projects in Iran, Kuwait, Saudi and Jordan or increases in efficiencies of existing mills.
Numerous factors such as political conflicts in Lebanon, Palestine, Iraq and Sudan, trade boycott threats against Iran and Syria, as well as poor wealth distribution between rich and poor countries (and within the richer countries themselves), combine to limit consumption growth to levels that in no way can absorb this increase in supply.
Further challenges to the industry come from surplus capacity in Europe and China, an increased demand for non-available waste paper coupled with a similar boom in adding de-inking plants, and the expected tightening of environmental constraints imposed by the WTO and lending institutions such as the IFC arm of the World Bank.
With price being the only competitive tool employed, converters that do not make their own paper may be at an advantage in the coming five years, according to the report.
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