Paper Outlook — No Woe, Status Quo
There are few signs that current, favorable conditions for paper pricing and availability will change anytime soon.
BY ERIK CAGLE
The current market prices for coated and uncoated groundwood and free sheet are progressing like a '74 Pinto spinning its wheels in the snow: going nowhere slowly and, if anything, digging itself into a deeper hole.
Don't expect "CNN" to break into its regular news coverage with a special market report on paper. Same low prices, different day. Same high availability, different quarter. And still no drastic changes in sight.
The price increases being implemented aren't taking hold, according to Karen Kelty, director of marketing for King of Prussia, PA-based XYAN, a leader in the on-demand printing market. XYAN primarily consumes uncoated stocks, but Kelty says the company will be moving toward using more coated grades.
Kelty doesn't envision a change in the domestic market during the foreseeable future and believes a concern over the consistent availability from foreign suppliers is the only reason keeping many printers from taking advantage of the superior prices.
"One interesting variable is the availability of high-quality paper from South America and Indonesia, which is priced below what is available locally," Kelty points out. "The opacity and whiteness of these foreign products is excellent. The big issue is long-term availability. You may be able to get it today, but what will be the situation in a few months? That's what is holding companies back from utilizing these sources."
Keep It Light
Coming from an on-demand, short-run printing perspective, Kelty discourages customers from becoming more aggressive in the quantities they order. XYAN's just-in-time practices, she notes, should discourage that.
"The pricing of paper shouldn't affect the quantities our customers are ordering if we are doing our job," Kelty stresses. "We try to show customers the disadvantages from an overall cost perspective of stockpiling and managing large inventories of documents. In addition, there are many issues involving waste obsolescence that companies overlook when they just consider the cost per page. We point out the advantages of printing just what's needed, when and where it's needed, then reprinting on-demand as required."
Mark Noe, purchasing manager for Broadview, IL-based Lehigh Cadillac Direct, agrees that, due to weakness in foreign economies, lower priced imports have become viable alternatives, even as domestics have seemingly bottomed out.
"It appears we have reached the lowest prices for the next 12 months," Noe remarks. "We may see some price recovery in the second half [of 1999], but in certain grades, they've reached their lowest prices in the last five years."
Going Rates
Those grades include coated free sheet, 60 lb. to 80 lb. No. 3 and No. 2 stocks. Noe does point out, however, that prices of uncoated free sheet are up 10 percent on a transactional basis since the first quarter.
Lehigh Cadillac Direct prides itself on delivering the best value to its customers by focusing on each individual project individually. Still, Noe says suppliers have mentioned that larger, more predictable business is being placed now.
Brian Kullman, paper supply chain strategist for R.R. Donnelley & Sons, in Chicago, says his company's print volume is well within forecasted levels. The uncertainty is, he notes, whether paper prices will stall at current levels as volume begins to build, or whether there will be increases for certain grades.
"The best predictor of tomorrow's price is today's price," Kullman remarks. "The pattern I've seen is that as volume builds, the first thing that happens is the mill fills. [Manufacturers] don't start thinking about a price increase until you start to have a backlog and it starts to grow beyond some comfort zone. That's when the mills will determine they need a price increase."
According to Keith Pratt, vice president of purchasing for Englewood, CO-based Mail-Well, pricing is a mixed bag. He says Mail-Well is seeing some segments becoming more aggressive on the timing and rollout of price advancements. It's not clear, he points out, whether the supply-and-demand factors are present in order to support these advances.
World Watching
"We are keeping a close eye on the offshore/global situation to assess the impact here in the United States," Pratt remarks.
If it is the weak foreign economies that are playing a pivotal role in depressed paper prices, pundits such as Andrew Paparozzi, chief economist for the National Association of Printers & Lithographers (NAPL), will be keeping an interested eye on the global economic developments.
"The question is when will the international markets and international economies start to strengthen and absorb some of the excess supply of paper, absorb the capacity currently on-line?" Paparozzi remarks. "National and international paper companies are not adding a lot more capacity. There's still a tremendous amount of weakness and uncertainty in the international economy, but it may have bottomed out. Over the next couple of years, [international economies] may start to slowly absorb that excess supply of paper we've seen over the last year or so," he concludes.
