Lackluster predictions at Paper Week

Mar 11, 2002 10:30 PM  By

New York–At the 125th Annual Paper Week, hosted by the American Forest & Paper Association, paper predictions ranged from no growth to modest growth of around 2%. John Weaver, president/CEO of Abitibi-Consolidated, set the tone by saying that growth and therefore demand and capacity would be dictated by the advertising marketplaces, most notably in newspapers, magazines, and direct mail. “We expect an upturn in the second half of 2002…but predictions are mixed from various sources,” he said. Consultant Martin Glass of EMGE & Co. reinforced that the trend of end-users downgrading paper has left suppliers of the higher grades—namely coated freesheet—harder hit.

Direct Marketing Association president/CEO Bob Wientzen echoed the general sentiments. “Direct marketers, especially catalogers, are paper manufacturers biggest clients…consumer confidence will be the key indicators to the recovery of both industries,” he said. Wientzen predicts 6.5% growth in the catalog industry between 2001 and 2006, while Web-driven sales will continue to rise from 2% in 1997 to 32% in 2005.

Chip Dillion, managing director for Salomon Smith Barney, made predictions on various paper grades. Despite falling demand for uncoated freesheet, Dillion said the grade continues to do well because of consolidations keeping capacity in check. On the other hand, coated freesheet has been more unstable and dependent on the advertising market. Consolidations rampant in North America have left the top four producers of uncoated freesheet (IP, Weyhaueser, Domtar, Boise-Cascade) with 70% of the market capacity. Dillion concluded that prices and margins would depend on the value of the Euro vs. the U.S. dollar, as well as the paper industry’s continued focus on controlling supply since it has little control over demand.