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Q1 PAPER OUTLOOK -- The Price Is Right

January 2002
BY CAROLINE MILLER


It's a good news/bad news situation. The good news: Printing paper prices are very favorable and popular grades are readily available. The bad news: When prices are low and paper is readily available it generally means that the demand for printing is soft, as well.

And that is exactly what the trend in the paper market has been for the past year. In late October and early November, just 2.5 percent of those who responded to the National Association for Printing Leadership's (NAPL's) national monthly paper survey indicated that paper prices were rising in that period. "It's the lowest we've ever seen that number. That is down from 42.5 percent a year earlier," states NAPL Chief Economist and Vice President Andrew Paparozzi.

The majority of the respondents, or 80 percent, agreed that prices were stable, while 17.5 percent felt paper prices were falling. While 80 percent of NAPL's survey responded that prices were stable, most in the industry contend that prices are continuing to fall, especially in the coated paper markets.

"The coated paper market is in the doldrums. It's about as soft as it's ever been," contends Roy Grossman, president of Sandy Alexander. "Pricing is extremely low and availability is high. As soft as last year was, this is significantly more so."

And the trend towards lower prices and high availability is only going to continue as the economy continues to flag. "In 2001, the paper industry was expecting a rebound later in the year, But, for 2002, there is a general feeling that paper suppliers are headed for a tough year with little relief in sight," explains Addis T. Hilliker, vice president of supply chain management at Banta Corp.

However, coated stocks aren't the only category of the market that is reporting weak demand. The paperboard market also experienced a difficult year, according to Marc Tannenbaum, vice president of marketing for Westvaco Packaging Resources Group.

Soft Market Continues

"In terms of general market conditions, they are pretty soft. Demand is slack, at best. It has been a pretty tough couple of months since September 11. We are really anticipating a market that is going to continue to be challenging with soft demand and readily available supply," he adds.

The third and fourth quarters of 2001 saw a continued drop in paper prices, across the board, in response to an economy clearly in recession and as a result of the September 11 tragedies.

"Pre-September 11, there were lots of layoffs, the economy wasn't doing well and consumer confidence was low," continues Tannenbaum. "September 11 was a seismic event that made all those conditions all that much worse. All the uncertainty that people already had was highlighted by the terrorist attacks."
 

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