In my last blog
, I said that paper prices are up because, “Consolidation and mill closures have brought supply and demand more into balance.”
That statement elicited a Comment: “And it doesn't have anything to do with the administration’s new duties on imported paper, eh? Nothing like curtailing competition then raising prices to whatever you like.”
The duties only apply to coated paper. Prices are up for a number of paper grades, not just the coated papers that are the subject of the import duties. It’s economics 101: prices are determined by supply and demand. Yes, duties are part of the story, but they are not the whole story.
Coated paper is more expensive to make than uncoated, and coated prices have historically been higher than uncoated prices. Based on the 25 year trend from 1980 to 2005, the differential between 50 lb. uncoated offset rolls and 60 lb. coated #3 rolls has been close to $200. Sheet prices have followed a similar pattern.
After 2005, coated paper prices were hammered by competition from imports, and the differential is now down to about $60 per ton, even with the duties in place, with uncoated offset prices slated to rise in April.
Duties are sometimes imposed when it is determined that foreign companies are engaged in unfair practice such as dumping, or are benefiting from illegal government subsidies. This is a controversial subject. In simple terms, the argument goes like this:
Cheap imports give us cheap products. If foreign governments want to subsidize this, why not let them? But these imports cost us jobs. Yes we want free trade, but it must be fair trade. We have to stop losing good manufacturing jobs overseas. But some economists say that imposing protectionist duties on imports leads to higher prices, and that can mean more jobs lost downstream than are saved. In this case, that would be lost printer jobs.
Actually, in this case, the duties have had little impact on coated paper prices in North America. Aggressive pricing from European mills has kept coated paper prices depressed. Many of the paper companies are publicly traded and you can see their returns. Newpage lost $674 million in 2010. The uncoated mills, Domtar and IP, are doing much better than coated mills. Consolidation and supply and demand are driving prices far more than are duties.
A complex picture indeed, and beyond the scope of this blog. But I did explore the subject of coated paper duties more fully in the May 2010 issue of Printing Impressions