Paper Industry Perspective
4th Quarter 2012
NewPage emerges from bankruptcy
By Jesse Marzouk
Some prices of printing and
writing (P&W) paper moved
around in the fourth quarter of
2012. Prices of uncoated freesheet rolls declined approximately
$20 during the quarter, while coated mechanical paper prices increased approximately $20 to $25
per ton. Prices for other
grades, including coated
freesheet and uncoated
mechanical held steady
throughout the quarter.
Prices for coated mechanical paper increased
as producers reduced
capacity from the system,
resulting in an operating
rate at or above 100% of
stated capacity during the final few
months of 2012. The capacity
cuts came from Resolute Forest
Products, which shut down one of
its three lines at its Catawba,
South Carolina mill, and Verso
Paper, which decided not to reopen its Sarttell, Minnesota mill
after a fire caused significant damage.
Going forward, prices in the
coated paper market, for both
coated mechanical and coated
freesheet will depend on the rate
of demand decline from catalog
and magazine publishers, the rate
at which supercalendered (SC)
paper steals market share from lightweight coated (LWC) mechanical paper, as well as any future
capacity cuts from coated producers.
Regarding magazine and
catalog demand, 2012 was a surprise on both fronts, although in
different directions. Demand from
magazines surprised to the downside, while demand from catalogs did the opposite. The better than
expected demand from catalogs
helped drive the price increase on
coated mechanical grades in the
fourth quarter. With regards to SC
paper, it will be interesting to see if
the speculation surrounding a
switch from LWC to SC paper actually occurs now that Port
Hawkesbury Paper has restarted
and is producing high quality SC
paper. Lastly, as has been the
case for the better part of the last
five years, further capacity cuts in
the industry will also be important
if producers hope to maintain and/
or raise prices in the future.
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.