Paper Industry Perspective
1st Quarter 2012
Prices Flat to Down; Hikes Proposed
By Jesse Marzouk
Prices for most types of printing and writing (P&W) paper declined slightly in the first quarter of
2012 as overall demand for P&W
paper continues to decline. Year
over year through February 2012,
coated mechanical, uncoated
mechanical, and coated freesheet
all experienced demand declines in North America; the smallest was
in coated mechanical (3.7%), and
the largest was in uncoated mechanical (17.6%). Somewhat surprisingly, uncoated freesheet experienced an increase of 1.5%;
however, this gain is not expected continue throughout the remainder
of 2012.
In the first quarter, coated
paper prices decreased $10 to
$25 per ton as demand remained
soft. Uncoated freesheet roll prices
decreased approximately $10 per
ton, even with the year-over-year
demand increase.
Newsprint prices remained
steady throughout the quarter as
capacity closures supported a
weak demand environment. Overall demand for newsprint in North
America has declined 3.0% year
over year through February. Newsprint manufacturers are taking market downtime on certain
machines and shutting other machines permanently to offset the
decline in demand.
To potentially stem price
declines, major North American
P&W producers have announced
price hikes for the second quarter. Major coated
paper manufacturers have announced
price increases of
$30 to $60, depending on the grade.
Major uncoated
freesheet manufacturer, Domtar, announce a price increase of $60 on roll
products.
It is difficult at this
point to gauge the success of the
proposed price hikes, but amid a
weak demand environment, it
will be very difficult for producers
to gain the full amount of the
announced price increase without additional capacity cuts.
Jesse Marzouk is a vice president and forestry products specialist. He has
appraised numerous U.S. and Canadian pulp, paper, and lumber-related companies
involved in manufacturing and distribution. Jesse received his MBA in finance from
Kellogg School of Management at Northwestern University, and has a degree in
finance and accounting from Indiana University.