Duties and Rising Paper Prices
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.
Jack Miller is founder and Principal Consultant at Market-Intell LLC, offering Need to Know™ market intelligence in paper, print and packaging. Previously, he was senior consultant, North America, with Pira International.
Known as the Paper Guru, Jack is the former director of Market Intelligence with Domtar, where he also held positions as regional sales manager, territory sales manager and product manager. He has presented at On Demand, RISI’s Global Outlook, PRIMIR, SustainCom World and at various IntertechPira conferences. Jack has written for Printing Impressions, Canadian Printer, Paper 360, PaperTree Letter and Package Printing, along with publishing a monthly e-newsletter, MarketIntellibits.
He holds a Bachelor of Arts degree in Economics from The College of the Holy Cross and has done graduate studies in Statistics and Finance.