PAPER PRICING: Pulp Nonfiction
Emerging and mature markets in other parts of the world have various effects on the U.S. market. In an effort to avoid shutting mills, American paper producers have sought to increase exports to emerging markets, but have been met with an increase in production capacity in other parts of the world, especially Asia. According to Mahlburg, Asia is now oversupplied with freesheet capacity and is competing with North American paper suppliers to export paper to regions such as Latin America.
"A lot of the mills that have been built in China, Indonesia and Korea—the intent was that they would supply those growing Asian markets," Miller says. "As they have built these mills they have become a surplus exporter to Europe and America until the Asian market can catch up. [When that happens] that will reduce pressure on them to export." The rate of increase in production capacity has recently slowed in Asia, he adds.
Import duties designed to cut back on surplus "dumping" in the North American market have in some cases been met by cheap imports from Europe, he says, though imports from Asia still tend to have a bigger effect on supply.
Wild cards that could affect prices here in the U.S. include the euro/dollar exchange rate (which Mahlburg says "could have a major impact on the presence of European paper in North America and the ability of North American mills to compete abroad"). American mills are in the best position to compete if international pulp prices rise. All of these factors could influence the supply of paper available (based on their effect on capacity) and the demand, both foreign and domestic.
A Volatile Market
Another factor affecting supply and demand is the ability for paper producers and consumers to quickly adjust capacity, types of papers produced and types of paper used in response to market pressure.