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Q3 PAPER OUTLOOK -- Waiting for the Rebound

June 2002
BY CAROLINE MILLER


The price of paper continues to remain at an all-time low thanks in part to industry consolidation, a stagnant economy and weak demand. However, in the long term, market watchers are predicting that prices will begin to increase as the economy continues its slow climb out of the recession.

The National Association of Printing Leadership's (NAPL's) March survey of printers found that just 9.8 percent of those responding to the survey reported that paper prices were rising. "That is just half of the 18.4 percent who reported that paper prices were rising last November," reveals NAPL Chief Economist Andrew Paparozzi. "In the same token, 37.6 percent of the printers surveyed reported that paper prices are continuing to drop," he adds.

And it appears that, for now, paper prices will remain favorable for printers, agrees Ron Davis, chief economist at the Printing Industries of America (PIA).

"Most indicators point to continued stability or softness—at least for the short run. Printers' paper costs were down about 1 percent for 2001. As of January, printing and writing paper prices were down by 1.8 percent from January of 2001 based on government data," he claims.

Production Is Lagging

Overall, U.S. paper production declined by 5.8 percent in 2001 after already falling 2.5 percent in 2000, and printing and writing paper prices continued to decline in 2001.

While many agree that paper prices have finally hit rock bottom, Roy Grossman, president of Sandy Alexander in Clifton, NJ, isn't so sure. "Last year at this time, we thought we had certainly hit bottom. Here we are a year later with a new floor, so who knows."

But Tom Conley, vice president, general manager and co-owner of Professional Printers in Columbia, SC, believes that prices have indeed stabilized. "I am not sure how much lower they can go. The consolidation (among manufacturers) has helped to keep prices at today's levels. Can you imagine what the pricing would be if we still had the number of mills that we did five to six years ago?"

Still, the much talked about effects of paper mill consolidation seem to be impacting paper prices, according to Conley. "It appears that coated markets are in a state of 'flux.' They have been that way for some time, especially since the mill consolidations that have taken place. In the sheetfed market, prices remain relatively stable, although 'special' deals can be made on spot business," he says. "Imported sheets have been effective in keeping prices at the current level in the #3 market. Availability remains very good and we don't see this changing as we move into the latter half of 2002."
 

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