PAPER PRICING: Pulp Nonfiction
"Coated paper prices have been sliding since the end of the recession in mid-2011 and are in a very tenuous position at the moment," says Derek Mahlburg, an economist at RISI. "The lack of profitability for producers (two are bankrupt) provides an impetus for upward movement, while the struggles of publishers and printers have made the fight to regain the lost ground a difficult task. Implementation of announced summer hikes has been slow."
Uncoated free sheet prices have stabilized. "Uncoated freesheet production is a fairly concentrated industry, but producers are walking a narrow line between trying to preserve profitability via price hikes without drawing a flood of imports to the market," Mahlburg says. Prices have held steady and may rise in the second half of 2012, he says. The uncoated free sheet market is helped by a demand for the product in short run digital printing, Miller says.
Uncoated groundwood paper prices are falling. Groundwood use is actually up among book publishers, Miller says, as many are replacing freesheet paper with the lower-price groundwood. This increase in demand is offset by a rise in production coupled with a collapse in demand for the product elsewhere.
"Groundwood is under pressure because a lot of the groundwood producers were also producing newsprint, and newsprint has tanked, so [these paper producers] are trying to convert newsprint mills to produce … groundwood book papers, which tends to flood that market," Miller says.
Groundwood as a grade is suffering from "terrible demand" in directories and newspaper inserts, once a core market, Mahlburg reports. The only thing holding the price up, he says, is a slim profit margin: If the price drops far enough, output capacity falls (because it ceases to be profitable to produce), leading to less supply.