It’s been a crazy couple of years in the world of paper pricing. After six straight quarters of increases, paper prices fell during the first half of 2009. And now at the start of the third quarter, it appears that prices have leveled off.
Prices for coated groundwood and coated freesheet are now running from $44 to $46/hundredweight (cwt), says Blake Hutchison, director of purchasing for catalog printer Arandell Corp. Inventories have been worked down during the past two quarters, he notes. “I believe they are now at a point where they can only go up.”
Printers and mills will begin to start building inventories again in the near future. As printers and mills start to get busier, lead times will slowly begin to grow, Hutchison says. “But I don’t see anything that would cause a major shift in the next quarter or two.”
Dan Walsh, vice president of catalog/publication papers at distributor Bradner Smith & Co., agrees that pricing has stabilized. “Pricing seems to have leveled off somewhat, which I would attribute to the catalog season coming on and the mills getting busier as they do every catalog season,” he says.
Like Hutchison, Walsh thinks that lead times will lengthen again going into the heart of fall/holiday catalog mailing season. “Customers have gotten very accustomed to having paper ship in just a week or two, so planning ahead would be prudent right now,” says Walsh.
Catalogers must keep in mind the effects of the collective downtime the mills have taken, Walsh notes.
“Many of the mills have redundant manufacturing capabilities enabling them to shut down capacity on one machine at one mill site and still be able to make the product elsewhere,” he explains. “But this can lead to more lengthy lead times, so again, customers should not sit on orders.”
Taming the wild market
During the past two quarters, the paper market “has been a mess,” Hutchison says. “Mills have been falling all over each other in a race to the bottom on pricing.”
But the “Wild West” mentality of the past few months is coming to a close, Hutchison says. “Mills are slowly seeing their order books fill up, and supply has come more in line with demand after all the downtime the mills have taken.”
The manufacturers continue to try to balance supply and demand by taking downtime and tons out of the market, Walsh says. “The permanent manufacturing closures are not now being felt, but when demand comes back, that paper capacity that was taken out will be realized by many that can’t get paper when they want it, or at all.”
By spring of 2010, he predicts, “we could be seeing a very firm paper market with rising prices.”