An Insider's View of the Paper Market
On the coated woodfree side, demand has risen faster. PPPC figures show that North American demand rose more than 50 percent, or 3.3 percent per year on average, from 1990 to 2003. In 2004, demand will outperform the average as well by growing almost 5 percent.
Coated Mechanical Steals Market Share From Woodfree
A more recent trend has seen coated mechanical papers grow at a faster rate and take market share away from coated woodfree papers.
Part of the reason is simply a question of availability. North American production capacity for coated mechanical papers has risen by 6.2 percent or 330,000 metric tons since 2000, while capacity to produce coated woodfree actually declined 13 percent or more than 700,000 metric tons, over the same period.
The 2001 recession was particularly hard for coated woodfree producers as cautious high-end advertisers pulled out of the market in droves, forcing producers to adjust to lower demand.
Competition Washes Ashore
The effects of rapidly rising imports from overseas, another clear trend in the industry, compounded this challenge as competition stiffened proportionately. Imports into North America, which made up only 8 percent of the market in 1990, accounted for almost 17 percent in 2003. The increase was most significant in the coated woodfree sector, where market share of overseas imports rose from 7 percent to 24 percent over the same period.
This evolution owes much to all the capacity built in offshore markets in recent years, particularly in Europe. Almost all coated mechanical papers imports originate in Europe, from Finland and Germany in particular, although Germany's share has declined in recent years. Sources of coated woodfree paper imports are much more varied and include Europe, but also South Korea, China, Japan and Indonesia.
Improvements in paper-making technology and intense competition also have created shifts in consumption patterns amongst magazine publishers and catalogers. Although the bulk of coated mechanical shipments remains coated #5—a high-volume, lower-brightness grade typically produced for magazines and catalogs—the market has shown increased interest for higher-brightness coated mechanical #4 grades in recent years, partly at the expense of coated woodfree papers.