"In the face of strong ad pages and catalog sales, it's amazing that paper producers aren't able to institute price increases," Janis notes. "It's clearly an oversupply problem, and that's definitely beneficial to publishers."
Pricing levels aren't being buoyed from the strong demand due to the excess capacity. A drop in advertising pages, which would add even more to oversupply, would help bring down prices further this year, Janis believes. He sees publishers getting some further reductions by the fourth quarter of this year.
"If you're a magazine or cataloger, you can probably go to the printer in the fourth quarter, say that you want relief on paper, and your printer will probably find it for you," Janis says. "If they get aggressive, their printers can make them happy. There's ample opportunity to go out and buy cheap paper."
C. Stephenson Gillispie Jr., chairman, president and CEO of Cadmus Communications, concurs that prices will remain flat—or even decline—given the influx of paper from Europe and Asia. His company is following key indicators to evaluate the long-term market impact.
"We'll watch for a decline in imports from Europe, since Europe is sending supplies to Asia that, in turn, are being sent to the United States," Gillispie points out. "And, we'll closely follow the strategies of domestic mills to see if they shut down machines to reduce inventory."
What's bad news for the Asian economy, says William K. Traub, vice president of marketing for Brown Printing, is a sigh of relief for paper purchasers.
"Part of it is that the Asian economy is in terrible shape. Ad pages are up overall, but off slightly from the original forecast, and some catalog mailings are down," Traub remarks. "You know the paper market is soft when there are price reductions in the fall.
"On the bright side," he adds, "lower paper costs are going to help offset the postal increases."