RIS adds, "The industry is already bogged down by a sharp drop in advertising in 2001, and the new forecast of a mild economic recession in the fourth quarter (combined with a slow recovery in 2002) will make it all but impossible for advertising to come shooting back." In addition, the proposed 10 percent postal rate hike will most likely go into affect in Q4 2002, says the MPA.
"Catalogs will be similarly affected by both the weak consumer spending and by the higher postal rates," reports RIS. "We expect catalog circulation to drop slightly again in 2002, and we will continue to see trends towards lighter basis weight, cheaper papers, fewer page counts and smaller trim sizes."
True consumption of coated paper will be showing minimal, if any, increase in 2002 because of these factors. The only reason reports show any increase at all in consumption is due to the belief that buyers will rebuild inventory in 2002 after a dramatic period of reduction in 2001. RIS estimates, "We are projecting a recovery of about 100,000 tons in 2002. This will allow purchases of coated paper to rise about two percent for coated groundwood and five percent for coated freesheet in 2002, but these gains are minimal compared to the respective drops of five percent and 11 percent in 2001."
"Our more cyclical businesses of containerboard and coated paper continue to be affected by the slowing economy, resulting in price declines from the prior quarter and prior year levels," admits Jerry Tatar, MeadWestvaco's (www.meadwestvaco.com) chairman. "We are faced with a challenging economic environment. To reduce the impact, we are intensifying our efforts to improve productivity and customer satisfaction, and we are taking prudent measures in capital spending, working capital management, purchasing and cost control."
-Natalie Hope McDonald