Paper Update: Expect More Price Hikes

After January’s modest increase in paper prices, most mills in February proposed increasing the prices of lightweight coated (LWC) and supercalendered-A (SC-A) papers $3/hundredweight (cwt). And what with a general increase in magazine ad pages, a mill bankruptcy, and a paper upgrade by venerable marketer Sears, Roebuck & Co., those proposals are likely to become reality as early as this month.

“The first quarter was a good quarter for LWC in terms of sales,” says a buyer for a major paper merchant who spoke on condition of anonymity. At the same time, Great Northern, a manufacturer that specialized in SC papers, filed bankruptcy and shut its mill in Millinocket, ME.

While the shutdown of the Great Northern mill reduced SC capacity, the decision of catalog/retail giant Sears to upgrade all of its catalogs from SC-B to SC-A will further tighten the market for SC-A. According to Stanislas Brossollet, president of NS-USA, a North American division of Oslo-based paper company Norske Skog, Sears uses a whopping 175,000 tons of paper a year.

No panic yet

Quill Corp., a Lincolnshire, IL-based cataloger of office supplies, prints on SC papers, but print buyer Walter Pyles isn’t overly concerned about the likely price increase in April. Still, the cataloger, which uses both SC-A and SC-B, is waiting to see if Sears stays with SC-A.

Another factor that could lead to additional increases in SC pricing, Pyles says, is that more users are migrating down from LWC to SC-A and from SC-A to SC-B as the mills continue to refine the supercalendering process. “Now that people are seeing quality of SC papers improving each year, the demand isn’t waning,” he explains.

Richmond, VA-based Children’s Wear Digest, which uses LWC #5, last year locked in its paper prices through June 2003. Nonetheless, president Jim Klaus is keeping an eye on paper pricing trends. “Coming from such low [paper prices last year], we are not panicking, and we will certainly not base any decreases in circulation on a few price hikes,” says Klaus, whose plan calls to increase circulation this year.

But according to Bill Traub, director of marketing for Waseca, WI-based Brown Printing, Klaus is in the minority. Traub says that because most mailers are scaling back on prospecting and mailing deeper into their house files, their circulation is flat or down slightly. Others are trying to cut costs by decreasing their paper weight.

“Most of the customers that are trying to combat postal hikes continue to go with lower basis weights,” Traub says. Brown had one catalog customer go from a 40-lb. sheet two years ago to a 38 lb. and, most recently, to a 36-lb. sheet. Cover stock for some catalogers that used to be 50 lb. is now 45 lb., Traub adds.

Traub doesn’t think that flat catalog circulations or a trend toward lower basis weights will prevent paper prices from rising, though. “Lead times [for paper orders] are back to four to six weeks, from as little as one to two weeks, which indicates that the market is tightening,” Traub says. “And if the April hikes stick, another hike in the summer for the holiday catalog paper orders would not be surprising.”

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