Paper Industry Perspective 1st Quarter 2016
Paper market sees heightened pricing activity
By Jesse Marzouk
Prices of printing and writing paper fluctuated in the first quarter of 2016, depending on the grade. Prices of coated paper declined between $15 and $20 per ton, while news-print prices increased approximately $40 per tonne. Although uncoated freesheet prices held steady in the quarter, most producers have announced price increases of $60 per ton for both cut-size and non-cutsize grades in April. If successful, prices for uncoated freesheet offset rolls will be at their highest level since the end of 2011.
Prices for coated paper declined as supply continued to out-strip demand. Demand remains weak amid declining use in magazines and catalogs. Producers are attempting to balance supply and demand, but the task remains difficult. Verso Corp., which is North America’s largest coated paper producer and is currently operating in bankruptcy protection, recently announced the permanent closure of its Wickliffe, Kentucky, mill, which was idled towards the end of 2015. The Wickliffe mill primarily produced coated paper, but before its shutdown was increasing its percentage of uncoated paper because of weak demand for coated grades.
Newsprint prices increased $40 per tonne in the first quarter as North American demand declined only 3.3% in the first two months of the year. This is much improved compared with approximate 10% declines for full year 2015 and 2014. Further, producers are hopeful that a recently weaker U.S. dollar will buoy prices internationally and help maintain or allow for more price increases domestically.
Demand has been unexpectedly stronger than anticipated for uncoated freesheet. Since the beginning of 2015, demand has declined by less than 1%. It is on the back of relatively steady demand and reduced supply from both exporters because of duties, and North American mills because of shutdowns, that producers are attempting to raise prices for the first time in two years.
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.