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Q3 PAPER OUTLOOK -- Paper Thin Market

June 2003

Stopping the Presses

A lack of solid information and price stability led Perry Judd's Inc. to suspend publication of its "The Paper Mill" quarterly customer newsletter, reports Bill Orndorff, vice president of materials management for the Waterloo, WI-based printing organization. The company hasn't issued a new edition since the fall of 2002.

"It's a matter of having information of good value to disseminate in the newsletter," Orndorff says. Given the sometimes crazy things going on with pricing, he doesn't see any point in making statements about the outlook in a quarterly publication. "We're dealing with market realities as they happen and now disseminating information to customers through other, more immediate, means," the printing exec says.

Perry Judd's customer base and capabilities dictate that he focus on web paper grades. In that segment, Orndorff says a recently announced bid to raise prices by $3 a ton resulted in about 30 percent of the paper companies actually instituting the full increase and being able to hold it. Others backed down and instead tried to institute a $1 or $2 price increase, he notes.

"The day after the price increases were announced, you could still source spot work just as aggressively as you could three weeks before it was announced," the materials manager reveals.

Orndorff is hesitant to make any predictions about the outlook for paper, other than to say that he believes prices will remain stable throughout the summer and it will continue to mostly be a buyer's market. That's assuming buyers behave sensibly.

"Some people like to order paper early (re: hoard)," notes the printing exec. "We discourage that practice because there is a cost to doing business that way. I believe people who buy and use paper as they need it come out ahead of the game in the long run."

The opposite behavior is the only cause for availability concerns, Orndorff adds. "Some people have fallen into bad habits in the last two years. This includes waiting until the last minute to buy paper and expecting to turn it really quick. If people would follow the rule of allowing six to eight weeks for delivery of good paper, there is not going to be any problem with availability," he asserts.

The Perry Judd's exec has also noticed a broader change in print buyer behavior during the current downturn in the market and general economy. "In the past, when there was good paper availability at declining prices, buyers upgraded the stocks they used," he says. "Today, they continue to look for the best deal and frequently downgrade their choice of stocks. Publishers and catalogers used to try to come in on budget for the year, but now they want to come in under budget. They're banking any paper savings rather than investing it in a stock upgrade."

Paper buyers looking for a bargain, or those just interested in adding a new source to their list, can find a growing volume of paper offered online. One of the more unique sources is Go2Paper, which enables printers (as well as traditional paper suppliers) to market their excess paper inventories to other printers and print buyers.

Sellers can utilize the Website's ( general "Paper Marketplace" or establish a "Private Web" with password-controlled access. Mail-Well Inc. recently signed up for the latter option, joining such recognized names as RR Donnelley and Quebecor World.

"Go2Paper offers a great solution for us to maximize revenues from our excess paper," asserts Larry Catani, vice president of purchasing at Mail-Well. "We are looking forward to expanding this service to all of our printing plants, allowing them to free up working capital and provide faster inventory turns."

Earlier this year, the service was expanded to handle sheet grades in addition to web rolls. The stocks offered cover the standard grades, ranging from coated freesheet to uncoated groundwoods, reports Mike Conran, CEO of Go2Paper. "It's mostly prime paper and in great condition (i.e., still mill wrapped), but offered at a discount," he says.

Conran contends such resources will actually become more valuable to printers as the paper market tightens up.

Paper Goes Digital

In another development on the digital front, papiNet—the global electronic standards initiative of the paper and forest products industry—has released six additional business documents within the XML-based standard. The messages added include Product Quality, Product Performance, Complaint, Complaint Response, Planning and Availability. Additionally, the Information Request message has been updated to include the ability to request Availability information.

These messages join the existing 16-message suite that is designed to enable the paper industry and its customers to electronically communicate business transactions involved in the procurement, order fulfillment and inventory management processes. As an organization, papiNet reportedly will now focus its efforts on increasing implementation of the standard beyond the 80 companies currently using it. Complete documentation, along with the schemas for the published messages, is available on the papiNet Website,


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