Saturday, December 27, 2008

Prices dropping for all grades of paper

Deflation has now officially hit the market for publication papers: Prices for everything from newsprint to coated freesheet have declined this month, several sources indicated in the past week.

December prices were down even in the formerly rock-steady market for high-grade supercalendered paper (SCA) paper, according to both Pulp & Paper Week and Deutsche Bank. Mark Wilde of Deutsche Bank put the December drop at $10 to $20 per ton and said SCA prices could continue declining if demand for lightweight coated (LWC) remains weak. Until recently, analysts were predicting that SCA prices would remain steady or even rise during 2009.

“Newsprint prices are slipping,” Wilde wrote, with declining costs and the Canadian dollar making mills more willing to accept lower prices rather than shutting down. The Deutsche Bank analyst agreed with Pulp & Paper Week that newsprint dropped about $10 to $15 per metric ton in December, breaking a string of consecutive monthly price increases that had pushed newsprint prices up more than $200, or about 35%, since the summer of 2007.

FOEX reported a slight drop in U.S. newsprint prices last week, while Forestweb reported that newsprint prices are flat. But Forestweb’s North American Publishing Papers Index decreased in December because of declining prices for coated papers.

Prices for LWC and other coated-groundwood products dropped $35 to $70 per ton in December and are “coming under increased pressure, wrote Wilde. “With consumption likely to remain weak and the US$ rising (increasing threat from imports), producers will remain at battle stations through 2009,” he added. High customer inventories, decreasing catalog circulation, and a weak advertising market for magazines are all dragging down coated groundwood.

The CEO of Abitibi Bowater (aka AbitibiUnderwater) admitted to the Globe and Mail this week that his biggest fear was a collapse of demand in the first half of next year. Despite the bearish news on pricing, shares of the newsprint giant doubled in price during the week (to 52 cents, down from $20.47 at the beginning of the year). AbitibiBowater stock was boosted by news of an apparent sale of some hydroelectric assets, production cuts by competitors, and the company's statement that the current quarter will be more profitable than the previous quarter. All of that boosted hopes that the company will remain solvent despite having $1 billion in debt payments due during the coming year.

Stocks of such other publicly traded paper companies as Verso, Domtar, and Catalyst were generally flat for the week. Wall Street had already accepted that demand and prices will decline. The big question is whether producers will idle enough capacity to prevent paper markets from collapsing.

2 comments:

The Scribe said...

Print costs dropping and yet a Russian oligarch can purchase my beloved London 'Evening Standard' for a £1, with the cover price now at that very same price. Hhhhmmm, books are not exempt either:
http://musingsforamodernworld.blogspot.com/2009/01/digital-books-no-thank-you.html

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