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Report About Paper Industry The surveys of the paper landscape at the 2000 mid-point have found that the commercial printing and publishing business have been healthy. This, combined with substantially higher prices for paper, plus a surge in demand by what can only be called dot-com mania, is driving paper company profits. Numerous factors have been found to influence price and demand in the paper market. Paper, which can constitute as much as half of a typical commercial printers billings, appears to be a stable and predictable commodity: both its demand and its production levels fluctuate very little over time. However, paper is one of the most-watched and dynamic supply items in American manufacture. For example, uncoated papers alone account for about 15 million tons per year in North America, for a market value approaching $ 15 billion (GAM, June 2002).
One of the major manufacturers has made the following predictions of demand and supply. At International Paper [IP], we think the market in the United States will grow between 2 % and 3 %, says IPs senior vice president of printing and communications papers, Charles H. Greiner Jr. , who is responsible for about $ 4. 2 billion in billings for the world's largest paper manufacturer. As for supply, to follow the example of uncoated papers, were looking at less than one-half of 1 % growth next year, and frankly it could be even less because some capacity is going off line this year. (web) Thus, paper company executives, guided more by market trends than by anxious bankers, are bringing prices up slowly in response to positive economic news and consumer demand trends. Coated paper, always a good gauge of high-end economic activity, tells the tale. Shipments are continuing their moderate march upward; production is up about 2. 5 % (comparable to the 1999 gain) and imports are rising 9 % (continuing the 1999 trend line).
Total shipments are up about 4 %, while exports have dropped 4. 5 % (GAM, June 2001). Speaking of prices, they are up substantially compared to last years levels, on average about 15 % in the coated paper segments (web). Uncoated freshet is up even more, between 20 % and 30 %, though the premium sectors lag as a result of soft demand and overcapacity. Moreover, there may yet be a price increase as the catalog season is approached (GAM, June 2002).
For paper makers, all of this activity means more of the same: great-quality paper applied in shorter runs on faster, more flexible presses. Paper makers do not build new machines anymore; instead, they upgrade existing machines with quality control equipment, or simply drop out of the high-quality markets. There are no plans for new paper machines in the United States for the next several years. Producers in Europe (Finland, Germany, Italy) and Asia (China, Korea) continue to build coated paper machines using, respectively, great expertise in grade development or cheap resources (GAM, June 2001). Takeovers by the large companies also often create favorable atmosphere in the paper market (web).
For instance, Stora Ensos takeover of Consolidated Papers had a positive impact on the markets through technology transfer opportunities and import balance. Consolidated Papers customers were given clear communication between the domestic and imported sheets and rolls qualifies, instead of the more informal insights sometimes utilized by sales people (GAM, June 2001). The effect of these moves on prices will be evident next year. The prevailing theory is that prices will stabilize and look like the trends of the 1960 s and 1970 s rather than the 1980 s, and especially the 1990 s. In other words, prices are more likely to move up and down in an orderly fashion and in smaller increments (GAM, June 2002). After all, the new machines in South America and Asia cannot feed all U.
S. consumers, and the Europeans usually stay at home in good economic times. Furthermore, the newly strengthened mills now have to refuse when pressured by the corporate purchasing agents for massive discounts. Paper merchants and distributors will benefit, too. They rely on the mills for price trend guidance since they take their cut off the top. Retailers in the uncoated sector will be hit hard, with the greatest concentration being in bond papers.
Large commercial printers and publishers also are likely to be hit with higher costs, but hopefully they will work out more realistic contracts rather than playing the market. References: Donald W. King and Carol Tenopir, Scholarly journal & digital database pricing: Threat or opportunity, University of Michigan, Ann arbor, March 23, 2000 Graphic Arts Monthly, Paper prices lower at beginning of year, June 2002 Graphic Arts Monthly, Paper prices fall, imports rise, Michael J. Due, June, 2001 web - Business News online journal web - Industry Resources, Price Projections US
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