Coated-Paper Price Hikes Will Stick This Time

Thanks to declining domestic mill capacity and a continuing decrease in paper from Europe, paper demand is rising. That means price increases for coated papers are sticking for the first time in seven or eight years, says Rick Dethloff, director of purchasing for Menomonee Falls, WI-based printer Arandell Corp.

The price increase of $3 per hundredweight (cwt) announced on June 1 for coated freesheet and coated groundwood is expected to hold through the summer. If demand continues to increase, adds Dave Goldschmidt, vice president of sales and marketing for the catalog division of New York-based paper brokerage Strategic Paper Group, catalogers should brace themselves for a similar increase in the cost of coated freesheet and coated groundwood come Oct. 1.

A recent report published by Bedford, MA-based forest industry research group RISI says that freesheet European imports are down by 18%, while freesheet exports to Europe are up 25%. “The increase in business in the European market is restricting some of the imports” coming into North America, says Dethloff, “and I think you’re also seeing some downtime on paper machines domestically at some of the major mills.”

Boston-based paper manufacturer Sappi Fine Paper North America, for one, started seeing a recovery in demand this spring, says director of marketing and market research Steve Anderson. The price increases this year are “just a modest recovery or stabilization of prices,” he says. Since 2000, paper prices have plummeted $150/ton below historic averages.

Milwaukee-based business-to-business packaging supplier Associated Bag Co., just missed being hit by the most recent increases. In May it bought enough paper to last through November, says marketing production supervisor Matthew Lusk. “We were still making some decisions on circulation, so we had not purchased paper at that point,” Lusk says. “Then we got a call from our broker saying that we might want to buy sooner rather than later to avoid the price increase.” Associated Bag prints the body of its catalog on 32-lb. Fraser Fracote, a #5 coated groundwood, and the covers on 67.6-lb. UPM Finesse, a #3 coated freesheet.

Paper shortages likely

Rising prices aren’t the only reason catalogers should consider buying paper in advance, says John Maine, vice president of RISI. For the first time in years, there could be scattered shortages.

U.S. coated paper shipments to buyers were up 12% in April, Maine says, while European coated woodfree shipments to buyers were up 13%. Demand is outpacing capacity, he says, and many catalogers are finding limited supplies of their preferred papers. “Coated papers have no sources of new supply on the horizon,” Maine says, “and are thus expected to remain tight through 2005.”

According to Goldschmidt, catalogers that use uncoated freesheet, coated freesheet, and coated groundwood #5 will face paper shortages during the third and fourth quarters. A lot of capacity has been taken out of the system, he notes. Already, “we’re having to scramble to find alternative stock.”

And as the supply tightens, catalogers will have to increase lead times and place their orders four to six weeks in advance of the press date, says Russ Beegan, a paper buyer for Georgetown, MA-based printer B&W Press. “The way things are now, you can’t place your order and expect it in three weeks, as you could do for the past three years,” he says.

Partner Content

Hincapie Sportswear Finds Omnichannel Success in the Cloud - Netsuite
For more and more companies, a cloud-based unified data solution is the way to make this happen. Custom cycling apparel maker Hincapie Sportswear has leveraged this capability to gain greater visibility into revenue streams, turning opportunities into sales more quickly while gaining overall operating efficiency. Download this ecommerce special report from Multichannel Merchant to more.
The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.