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Offshore Paper Usage--Mixed Emotions on the Rise

September 1998

Welcome to this special (fictional) edition of the game show "Jeopardy," where the contestants are printers, paper manufacturers, paper merchants and industry experts.

The category is "Global Competition and World Markets." The question: "Is offshore paper usage affecting domestic demand?"

But wait. This is a special bonus round. There's an economic crisis in Asia. The high hopes of European paper suppliers to sell their grades in Asian markets have backfired. Tons of paper, including coated free sheet, are headed for American shores.

So contestants, get ready. Here's your chance to score big with a special bonus-round question: "What are we to do with all this paper?"

"We'll take it!" says one printing contestant, grinning from ear to ear.

BUZZZZ. Game ends. Please stay tuned tomorrow to find out what the world paper market turns.

But buyer beware! Don't burn your bridges with domestic mills and merchants. What happens if tomorrow's paper supply is low and demand is high? Allocation policies could take hold, and severing ties with existing suppliers could prove costly.

And such is the nature of the game.

As brothers in business, paper suppliers and buyers are intricately interdependent. Both need each other to survive. Both are also trying to make a profit in their respective businesses. And those profits generally come from the other's pocket.

However, rules of the supply-and-demand game are apt to change when an economic situation arises, like the one taking place in Asia. No wonder our "Jeopardy" contestants have such mixed opinions.

Expert Opinions
Industry experts argue about the effects of the crisis. Some argue there's no crisis at all.

Some printers are buying offshore paper because of the lower prices. Some have never bought offshore stocks at all. Others are waiting for a significant fall.

The following is a brief, but telling, survey of what some of the nation's largest printers are experiencing during this highly interesting fiscal third quarter.

"Yes, tons of paper are coming in from offshore. And, yes, paper prices are dropping," says the purchasing manager of one of the nation's leading printing conglomerates, who wishes to remain unnamed (to maintain strong relationships with domestic paper suppliers). "There's a high volume of paper. Same quality, lower price. That's great value, a great enticement to buy."

Which is exactly what this major purchaser of paper (approximately 450,000 tons per year) was doing at the time this interview was conducted—buying paper from European suppliers at below-U.S. prices.



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