Pulp and Paper Week reports that North American printing and writing paper demand was down 4.3 percent year-to-date through June. Demand was down for all grades, ranging from coated mechanical (-7.1 percent) to coated woodfree (-2.0 percent), with uncoated woodfree down 4.1 percent and uncoated mechanical down 4.8 percent. This, on top of a 24 percent decline in printing and writing paper demand from 2000 to 2010.
Print data tells a similar story. Inflation-adjusted
print sales year-to-date through June are down 2.4 percent, according to industry watcher Dr. Joe Webb. We would expect print sales to perform a bit better than paper because print revenue includes non-print, value-added services, which have been growing—and the data supports that assumption.
Clearly, the weak economic recovery has not done anything for paper demand, or for print.
Although paper demand is down, paper prices are up from year-ago levels. Paper demand has declined, but capacity has declined along with it, allowing mills to balance supply and demand.
- Uncoated woodfree has seen the greatest capacity rationalization and, hence, the most bullish prices, but prices may be hitting a ceiling as the most recent increases on offset grades are meeting resistance.
- Coated woodfree prices—especially for sheets—have struggled in recent years, largely because of imports. It is noteworthy that coated woodfree imports have continued to rise since the imposition of anti-dumping duties against China, as imports from Korea and Europe have more than replaced the lost imports from China.
While paper capacity has been rationalized, print capacity has not been rationalized to the same degree. Overcapacity in print has actually gotten worse and printer margins continue to be squeezed. While print capacity as measured by the Federal Reserve has declined by 15 percent over the past 10 years, print volumes have declined by 24 percent. And this does not adequately reflect the fact that many presses are not fully crewed, so potential capacity is even greater.
In a soon to be published PRIMIR study—
“Evolution of General Commercial Print”—we explore this, among many other trends, in-depth.
If there is any good news for printers, it is that paper prices may be bumping up against a ceiling. Coated paper does have continuing overcapacity, putting pressure on prices, and uncoated prices have risen to the point where coated prices are sometimes lower than uncoated. As uncoated customers switch to coated, price may well balance and level off.
