Paper Forecast — Consolidation Cuts Through

"Larger forest products companies may be more willing to take downtime rather than cut price to secure orders, but it is easier to say that than do it in the face of unsold capacity," he says. "The paper industry is still relatively unconcentrated compared to markets for other commodities—oil, steel and chemicals—and it faces global competition."

Trudie Gustafson, vice president of contract and inventory administration for the Taylor Corporation, North Mankato, MN, also believes true market conditions will dictate prices paid by commercial printers. "It really boils down to pricing, and it is driven by capacity, supply and demand, and competition," she says. "There will always be competitors. The difference now is that they are changing in size and scope, as are their customer bases."

Englewood, CO-based Mail-Well, one of the commercial printing industry's leading consolidators in its own right, views the shrinking of the paper manufacturing side as a natural evolution. Keith Pratt, vice president of purchasing, believes consolidation can bring a more stabilizing influence to the marketplace.

"With Champion uniting with UPM and Stora Enso going with Consolidated, you're bringing in two powerhouses that haven't been in the U.S. before in a big way," he says. "We're now able to benefit from the merger of these companies. The combined companies bring a lot more to the table for Mail-Well in terms of product offerings."

Pratt also notes that the earlier International Paper/Union Camp merger fits into Mail-Well's structure of building relationships. "Already, I'm looking at areas where we can seize the moment and use these consolidations to Mail-Well's benefit," he says. "We have to look at it from a strategic basis and look at the opportunities it brings to Mail-Well."

While paper availability may not be reduced drastically due to industry consolidation, some printers see a reduction in mill choices. David A. Crone, general manager for Phoenix-based Woods Lithographics, points out that a year ago, his company's options for C1S included Frankote, Union, Temple-Inland, Springhill and Beveridge. Today, each company has been acquired by a larger company (in the case of Beveridge, it is closing its mill this June).