Paper Outlook — Cutting the Bottom Line

PRICE INCREASES, or attempts to implement them, are what’s on tap in the paper sector. Along with raising quoted prices per ton, paper companies could feel renewed pressure to pass along higher energy costs through surcharges if oil prices do climb toward the $100/barrel mark predicted in the most bearish outlook.

The Lane Press, in Burlington, VT, put an interesting spin on that latter market development. Under the “Did you know?” heading in its last two “Paper Prophet” newsletters, the printer pointed out to customers that “Lane Press’ close proximity to Northeast paper mills slashes transportation costs and reduces fuel surcharges.”

There hasn’t been any one big development in the paper sector this year, but a number of smaller forces are combining to move the marketplace. What’s having the greatest impact, though, is the longer term trend of globalization of the supply chain.

Volatile Markets

Globalization has the dual impact of making the paper market potentially more volatile, since it can be buffeted by a greater number of factors, but also dampens the ability of suppliers in any given region to drive pricing. Strikes, plant shutdowns and changes in demand that occur in one region can have a ripple effect on others. Broader economic issues, such as oil prices and exchange rates, also come into play.

Business trends in the North American printing industry, of course, still matter, but paper pricing in this region is now dependent on a large sphere of market drivers.

The outlook for printing volumes is turning more guarded, according to the latest “Printing Business Index” (PBI) report from the National Association for Printing Leadership in Paramus, NJ. This broad measure of print activity in the United States fell to 52.8 in June, its lowest level in three years. That compares to a PBI of 55.6 in May and 59.9 in March of this year.