Printers Winning on Paper

"We need to see stronger growth in the printing industry, and stronger demand from printers. Right now, paper is available and there's no reason for printers to be stockpiling it," Paparozzi points out. "There's no indication that prices are going to rise, so there's no reason for printers to be hedging and building inventories as protection against possible future price increases.

"What we've seen," he adds, "is that the industry is still growing, but the rate of growth has slowed, largely because corporate profits, which are such an important measure of business demand for print, have weakened."

He notes the correlation between the slowing in the industry's economy and the softening in paper prices—the beginnings of both which can be traced back to a year ago.

"Prices today are actually lower," Paparozzi says, "reflecting the noticeable moderation in the paper industry's commercial customers. Unless we see some kind of significant increase in printing activity, which would translate into stronger, greater demand for paper, I don't see anything lighting a fire under the demand for paper. Certainly not in 1999."

Mark Noe, purchasing manager for Lehigh Press Cadillac, Broadview, IL, feels the most noteworthy development in the past three months is the weak demand for coated grades. Some mills, he says, have moved tonnage at lower prices through non-traditional distribution outlets.

Like many paper purchasers, Noe says the current softness can be attributed to an excess in foreign capacity, which is washing up on U.S. shores.

"A second factor relates to reduced costs at North American mills through reductions in labor and administrative expenses," Noe says. He believes coated free sheet could climb by as much as 5 percent in the second quarter, and believes uncoated free sheet will see a slight reduction from the announced increase.

In spite of significant mill downtime being taken by the industry, paper demand remains low and any grade of paper is readily available with soft pricing being the norm, according to Addis Hilliker, the vice president of supply chain at Banta Corp.