Q1 Paper Outlook — Market Taking Stock

As one mill goes on allocation, people who buy on the spot market then turn to the other mills to try and get paper, which can force them to go on allocation, he points out. This leads to a domino effect in the market, at least in part driven by "what ifs" and emotion.

In this case, there are hard numbers to back up the concern. For example, the most recent report from the Montreal-based Pulp and Paper Products Council (PPPC) showed that demand for all printing and writing papers in North America rose 1.9 percent in October 2002, compared to the same period last year. The post-9/11 business fallout undoubtedly accounts for some of the difference, but the year-to-date data all show an increase in paper demand, albeit a more modest +0.5 percent. The more telling finding is that paper production for the first 10 months of 2002 was running 1.1 percent lower than the previous year.