Q4 Paper Outlook — On-the-Cheap Sheets
While noting that global economic activity remains muted, Stora Enso’s CEO, Jukka Härmälä, sees some positive indications in the North American market. “There are signs that advertising spending is beginning to recover from the impact of the Iraq War,” he contends.
The data in the most recent Publishers Information Bureau (PIB) monthly report tends to back his belief, but it still shows marked disparity between magazine ad revenues and pages. Through July 2003, advertising revenue was up 9.6 percent compared to the same period in 2002, but ad pages were only up 1.6 percent.
Of the 12 major advertising categories tracked by PIB, only six had seen growth in ad pages through July. Page gains were registered in the Automotive (21.4 percent), Drugs & Remedies (15.1 percent), Home Furnishings & Supplies (10.8 percent), Toiletries & Cosmetics (8.5 percent), Apparel & Accessories (3.6 percent) and Retail (1.7 percent) categories.
Almost all of the paper makers called attention to rising energy costs, but Badger Paper Mills emphasized this business challenge. The company attributed its quarterly loss to high costs for natural gas and pulp, combined with pricing pressure, especially in printing and writing paper markets. It says expenses for natural gas during the first two quarters of 2003 ran 80 percent higher than for the same period last year.
According to Barry Polsky, spokesperson for the American Forest & Paper Association, up to 20 percent of the energy used to make paper comes from natural gas. However, the commodity represents about 50 percent of the industry’s purchased energy. “Roughly 50 percent of the energy used by mills is self-generated,” he explains. “Electricity is the major source of energy used.”
What has undercut predictions of a rebound in the paper market is, of course, the anemic nature of the economic recovery. The year looks to ring out on a positive note, though, as this time the upturn is the real thing, believes Andrew Paparozzi, vice president and chief economist of the National Association for Printing Leadership (NAPL).