Shipments of uncoated offset are down due to loss of market share to coated grades and value-added, high bright uncoated groundwood grades, the industry consultant continues. "Declines in shipments overstate the drop in real demand, however, because there was some inventory building in 2004. That inflated the shipment and apparent consumption numbers for 2004, and reduced 2005 shipments as this inventory was worked off."
Pickets Make Their Point
Miller says there are indications of tightening in the coated free sheet and groundwood (coated and uncoated) sectors as a result of the strikes in Finland and Miramichi. "For lightweight coated (LWC), price increases announced for July will likely take effect due to the strikes, he says. "For coated free sheet, the market remains a bit sloppy. The AF&PA (American Forest and Paper Association) reports weak shipments through May, but that does not reflect the impact of the lockout in Finland."
Overall, prices for 2005 should more or less average what they did in the fourth quarter of 2004—a level not far off the long-term industry trend, Miller believes.
Rick Dethloff, director of purchasing at Arandell Corp. in Menomonee Falls, WI, says the strike at UPM's Miramichi mill has created some apprehension in the market as to whether the supply of coated groundwood will meet the projected demand. "This apprehension caused major buyers to place bulk orders in an effort to build inventory of coated groundwood," he observes.
In general, the market showed some support for higher prices on coated groundwood grades, but much less, if any, support for the increase on coated free sheet papers, Dethloff says. His experience is that of a leading printer of high-quality catalogs via web offset.
Paper distributors expected there to be an overflow from LWC paper demand into lighter weight free sheets, but this market dynamic never materialized, adds the director of purchasing. "Therefore, the January increase on coated free sheet was quickly extinguished for lack of demand."