D. Eadward Tree's 2015 Postal & Paper Price Forecast
"The big risk to mailers in the remand outcome would be a possible determination by the PRC that the exigent rates would need to raise more than the $3.2 billion in their original order," Kearney wrote. That could mean an increase to the surcharge, most likely in early 2015, or a delay of the surcharge's expiration.
As for magazine-quality paper, the big drama during most of 2014 has involved whether the Department of Justice would allow the two biggest North American manufacturers—NewPage and Verso—to merge. The outcome was uncertain at press time, but there's no question that paper prices will be rising in 2015.
Federal regulators have delayed the proposed merger, apparently concerned that the combined company would have enough market share (about 50 percent) to drive up prices unilaterally. But their effort may have backfired. Verso announced in October that it would close down its Bucksport, Maine mill and essentially exit the market for the kind of paper most often used by magazines, #5 coated groundwood. The proposed NewPage deal provides incentives to keep the mill open at least until the merger is consummated, but cash-strapped Verso apparently decided it could no longer wait.
Following the Bucksport news, competitors wasted little time in announcing price increases of $20 to $60 per ton (about 2% to 7%) for coated-groundwood and supercalendered papers. Prices for the more expensive coated-freesheet papers had already risen early this year from their cyclical bottom and seem likely to remain at least level going into early next year.
"I haven't heard of anybody being left high and dry" by the Bucksport news and two other recent mill shutdowns, says Bill Lufkin, owner of Lufkin Strategic Procurement. But paper makers have two months of order backlogs for coated groundwood, which underscores how tight the market has become—tight enough that the price-hike announcements are no bluff.
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