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Q4 Paper Outlook--Caution in a Moderate Market

September 1998
On the foreseeable horizon, paper prices should remain moderate—but don't let the stable situation make for stingy expenditure budgets for 1999. The word is caution, not complacency, for the market.


BY MARIE RANOIA ALONSO


Welcome to September. For many, it's a time to establish budgets for purchasing expenditures for the following year. Little doubt, in most commercial printing operations, paper is the most paramount consumable purchase for which to anticipate, sparking many a meeting or hallway conference on what to expect from the paper mills and distributors regarding pricing and availability.

How to prepare?

Two words: Remain conservative.

Bruce Janis, president of MSPGA: Management Science for the Publishing and Graphics Arts, concurs, noting that, after the much anticipated increase of roughly 6.5 percent on a typical 40/45 lb. No. 4 or No. 5 sheet hit the market at the start of this year, the market has been in a state of cautious rest.

"We have a moderate market at present and, on the horizon, there are no strong indications of rising paper prices for the remainder of this year," he reports. "That's encouraging news for those commercial printers budgeting paper for 1999."

Just Above Inflation
Janis recommends that budgets be conservative when it comes to forecasting paper expenditures for the coming year. Allow for an anticipated increase of roughly 4 percent going into 1999, he advises, which will be just a touch above inflation. "At this point, we are deep into the business cycle, so, looking at inventories for the remainder of the year and into 1999, it's wise to budget for reasonable purchases—and there is no reason to take on anything past 30 days."

How is 1998 going?

Bob Allen, manager of purchasing and scheduling at Banta/Kansas City, reports that, although the operation received a significant increase on gloss coated groundwood in the 5 percent range early this year, followed by a surprising downward shift around July, the market at present seems to be resting steady, with subtle drops in the free-sheet market.

"Typically, with the cyclical nature of the paper business, prices usually get softer, go down or stay stable during the year, especially in the fourth quarter," he reveals. "I would surmise further erosion of pricing as this year comes to a close. In fact, I wouldn't be surprised to see some lower prices yet again in the fourth quarter."

Barbara Dohman, vice president of production at Colortone, a midsized commercial printer servicing the Washington and Baltimore metropolitan areas, agrees that maintaining a conservative inventory is smart business.


 

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