Paper Price Degradation?
So often, catalogers incur big hits with postage rate increases. But, seemingly lost in the fiscal shuffle are sky-rocketing paper prices and their ramifications for the industry.
The fourth quarter marks the sixth straight price rise for paper. Most of the major mills announced price increases for many paper grades — $3 per hundredweight (cwt) or $60 per ton — effective Oct. 1. And with every closure or temporary machine shutdown, paper mills hope to “limit supply and, hopefully, keep prices up,” says Dan Walsh, vice president of catalog/publication papers at distributor Bradner Smith & Co.
But Walsh says he is seeing price degradation in almost all web grades, with the possible exception of SC (supercalendered grades). “It does depend on the grade, but I would say that prices are down $1.00/cwt to $1.50/cwt,” he explains. “The last announced price increase on freesheet grades (non groundwood grades) of $3.00/cwt is not holding. Depending on the amount and the client, some are paying $3, some $1.50 and for a few others it’s been erased.”
The reason for this price degradation? “Diminishing demand as a result of catalogers cutting back, reducing weight and reducing trim size,” Walsh says. “Also, publications ad pages are being seriously reduced and corresponding editorial pages are going down. So even with all the supply curtailments, the loss of demand is forcing oversupply and forcing the mills to negotiate more than they have in the last year and a half.”
To try to stem the tide of further price erosion, AbitibiBowater – the third largest public paper and forest products company in North America, announced upcoming downtime at two of its facilities. At its Beaupre, Quebec facility, two weeks of downtime is scheduled from Dec. 10-24. Its annual capacity is 223,000 metric tons per year.
And its Catawba, S.C. mill will shut down from Dec. 23-Jan. 1. Catawba is the largest coated groundwood facility in North America. Is this a common practice? “And as far as what’s normal, no it really isn’t, especially for the Catawba mill,” Walsh says. “This downtime and similar announcements are all aimed at curtailing supply in an attempt to hold off prices from falling further.”
Montreal-based Abitibi Consolidated and Greenville, S.C.-based Bowater merged in January 2007. When the merger was announced, a release said the combined company would have annual revenue of approximately $7.9 billion.
