Paper prices to rise

Prices for coated groundwood, freesheet, and supercalendered (SC) paper grades are expected to rise on July 1 and possibly again on Oct. 1. Paper mills are hinting at an increase of $40-$60 per ton, or 5%-7%, following a January increase. But given the booming economy, low pulp prices, and the financial crisis in Asia, catalogers are wondering why the mills feel the need to boost prices again.

“I’m having no problem getting paper or guaranteed delivery through the end of the year,” says Jim Paauwe, vice president of advertising at Michigan Bulb Group, a division of multititle mailer Foster & Gallagher. “This tells me it’s not a tight enough market to warrant a price increase.”

Industry observers say that the mills are still trying to bounce back from the 36% drop in prices in 1996. What’s more, mills that upgraded their machinery this year are eager to see a return on their investments.

In June, the price of pulp-the raw material for paper-was expected to rise $50, to $600 per metric ton. But even with the increase, pulp prices remain relatively low. In fact, in response to excess stock and the Asian financial crisis, “pulp prices were reduced up to $40 per ton in the last six months,” says Rex Ciavola, director of print/production for the Viking Office Products catalog.

Since the paper price increase this January, prices for coated groundwood #4 and #5 grades have remained stable at $1,000-$1,050 a short ton, according to industry publication Pulp & Paper Week. That’s an increase from the previous year of roughly 21% for #4 prices and 8% for #5 prices.

But some mills may raise the price of lightweight coated groundwood in hopes of making as much profit as possible before new SC mills, such as Stora North America’s mill in Nova Scotia, begin selling their paper this summer. Improved grades of SC, such as the SCA+ produced at the Nova Scotia mill, are being promoted as a cheaper alternative to coated groundwood-though as demand for these SC grades rises, so will the prices.

Freesheet, however, has become almost a bargain. A 50-lb. offset roll of uncoated freesheet cost roughly $780 per short ton in January, $20 less than in October 1997. And in March ’98, #3 coated freesheet cost $1,060-$1,130 per short ton; in April ’98, it cost $1,040-$1,080 per short ton.

The attractive price convinced Michigan Bulb Group to use #3 freesheet on its “higher-end books,” Paauwe says. “There’s a higher gloss and better brightness on the #3 sheet. It’s a very soft market, and prices will continue to be stable, and may even go down.”-SO