On the cost side of the equation, 23.3 percent of printers responding to NAPL's March survey reported paper prices were rising, as compared to 17.2 percent in January and only 9.7 percent in November 2003. "The good news is we haven't seen any signs of shortages," Paparozzi says.
Offering a similar take on current market trends is Ronnie H. Davis, Ph.D., chief economist at Printing Industries of America in Alexandria, VA. "With the economy back on a sound footing and print markets finally getting going, we will probably see some tightening in paper markets in the second half of the year," Davis says. "I expect to see some modest price increases and tighter availability, but no major shifts. Conditions are certainly improved, but not to the point of supporting major increases."
Davis believes the efforts of printers and paper suppliers toward creating a more efficient system has reduced the potential for wild price/availability swings. Also, imports should continue to dampen price pressure even though paper companies have worked to "restructure"—via mill closings and mergers and acquisitions—the supply side to bring it in line with demand, the PIA economist adds.
The results of this effort were quantified in the annual "Survey of Paper, Paperboard and Pulp Capacity" released earlier this year by the Washington, DC-based American Forest & Paper Association (AF&PA). According to the survey, U.S. paper and paperboard capacity declined annually from 2001 to 2003, and is expected to remain unchanged during the 2004 to 2006 period. Increased foreign competition, maturing domestic markets and competition from plastics and electronic media were cited as potential factors contributing to the lack of capacity growth.
Overall, capacity for printing/writing paper declined by 0.6 percent in 2003, AF&PA reports. Among the four major grades, only coated groundwood has registered an increase in capacity since 2000, growing by 2.6 percent.