Higher Prices, Tighter Supply
After bottoming out in the first half of the year, paper prices began inching upward as supplies and on-hand inventories tightened. As 2003 unfolds, papers used for brochures, annual reports, direct mail, and magazines will cost producers more, and take longer to get.
That's the outlook in a nutshell for commercial print buyers next year, according to Jack Miller, director of market intelligence for paper manufacturer Domtar Inc., in Montreal. His take on paper prices is reflected in the recent upward trend that brought coated free sheet (60-lb. coated No. 3) prices off 20-year lows.
While paper prices in general remain at historic lows, production budgets set months ago will need to be adjusted in 2003, or risk being squeezed as prices creep steadily up, Miller says.
Worse, papers that were readily available for just-in-time production schedules can now take weeks to get into inventory, putting pressure on production deadlines, and potentially impacting customer service levels.
There's good reason for the sudden price swings but, unfortunately, it's not magazine ad buyers or catalogue marketers on a buying spree.
Rather, industry consolidation among the top paper producers, itself motivated by weak market conditions, has driven top makers to tightly control production levels while they stabilize their financial footing.
And there's another dynamic in play, Miller says: the draw down of nearly 600,000 tons of coated free sheet inventory by end-users between 2000 and 2002. Without that bulk inventory, and with mills running at full-out capacity, a constrained paper market is almost inevitable next year.
But don't panic. Miller says print buyers should not expect dramatic price increases as demand outstrips supply.
"The near-term outlook is cautiously optimistic, with some encouraging signs in the economy, and mills continuing to reduce costs while improving operating rates," he says. "Print buyers should work closely with their printers, making them aware of their paper needs for upcoming jobs as far in advance as possible."