PAPER PRICING: Pulp Nonfiction
Trying to decipher paper pricing trends is like scrutinizing snowflakes—the closer you get, the more complex they seem. Still, there are a few key factors when considering the current economics of the paper business, which has been subject to unprecedented forces during and in the wake of the recent recession.
Paper prices are affected by the market for the two types of paper used in publishing: groundwood (or mechanical) and freesheet. Both of these paper types are manufactured in coated and uncoated form, with coated papers traditionally used in glossy publications, such as coffee table books and magazines, and uncoated in most other books. Freesheet paper contains no more than 10 percent wood pulp and is whiter, brighter and longer-lasting than groundwood, which contains more wood pulp and lignin (the chemical in wood that makes paper yellow over time).
Paper pricing has been affected in the past few years by a general decrease in demand for printed products, which affects all paper types and grades. Within the market, however, complex dynamics play out as supply adjusts and demand shifts in the wake of price fluctuations. A publisher might switch from coated paper to uncoated or free sheet to ground wood to save costs, for instance; higher demand may not lead to higher prices if mills shift output to create more supply. On the other hand, prices could go up if mills close or less of a particular type of paper is imported due to foreign demand.
A few significant trends have been apparent recently.
Coated paper prices are falling. Coated freesheet paper prices are down seven percent compared to a year ago, and coated groundwood prices are down six percent in the same period, according to Jack Miller, a paper industry consultant and regular contributor to Printing Impressions magazine, quoting figures from forest products industry association RISI Inc. This is due to falling demand for coated paper (in publishing and other industries), and is also affected by mill operating rates (calculated as a percentage of what mills are actually producing compared to output capacity). Operating rates for coated free sheet, for instance, are at 90 percent, up slightly from last year, Miller says; this change is influenced both by the volume of imports (decreasing of late) and the elimination of some overall production capacity.