Q3 Paper Outlook — Waiting for the Rebound

Still, the much talked about effects of paper mill consolidation seem to be impacting paper prices, according to Conley. "It appears that coated markets are in a state of 'flux.' They have been that way for some time, especially since the mill consolidations that have taken place. In the sheetfed market, prices remain relatively stable, although 'special' deals can be made on spot business," he says. "Imported sheets have been effective in keeping prices at the current level in the #3 market. Availability remains very good and we don't see this changing as we move into the latter half of 2002."

Conley also notes that the uncoated markets have settled down a bit. "Domestically, there aren't many more mills that can acquire each other. Pricing has seemed to bottom out, and some firming has taken place. While availability remains good, we get the feeling that uncoated mills will increase prices as soon as they feel the economy can absorb it," he states.

Still, PIA's Davis argues that, despite the mergers and acquisitions activity, prices will remain low, in part, because of the availability of imports. "Although there has been some mill restructuring, there is still plenty of worldwide capacity coupled with generally soft worldwide demand. Based on current global paper supply and demand, stable paper prices should remain throughout the year."

However, Davis expects that paper prices will rise as the economy begins to strengthen in 2003. "Paper markets may start to tighten in 2003 as economies in other parts of the world recover. We may see an alignment of growing economies throughout the world in 2003, which may result in rising paper prices," he reveals.

And while the U.S. economy may not rebound until 2003, there is one indicator that it is beginning to recover: Advertising is slowly returning.