Tuesday, March 24, 2009

Coated Paper Prices: What's Your Vote?

Publication paper prices in the U.S. will not go much lower, a panel of paper-industry experts said today.

"Given the tight economic environment, we expect prices to remain essentially flat," read the four-person panel's statement to a session at the Publishing Business Conference & Expo in New York, my spies tell me. That's in contrast to my speculation last week that permanent overcapacity would cause further significant drops in the prices for coated paper. (See "Coated Paper Prices: Headed for a Crash?")

So what do you think? On the upper right of this page, you'll see a chance to cast your vote. RISI's Paper Trader pegged the February price of 40# coated #5 as $900 per ton ($45/cwt.) Where do you think it will be in July?

The panelists indicated that uncoated freesheet prices have already hit bottom, while coated prices will drift a bit lower before stabilizing. Coated prices cannot go much lower because some mills are barely recouping their cash costs now, according to paper broker Scott Clifford. He is vice president of Clifford Paper Inc. and knows far more about the paper market than I.

I'm told that Janet Grimm, VP of Book Publishing Papers at another big broker, Lindenmeyr, warned the audience that recent capacity shutdowns mean that the paper market will tighten "in the blink of an eye" once the economy starts improving.

Some buyers in the audience were not convinced, and neither am I, at least not for coated paper. Too much demand has shifted to other grades or simply disappeared permanently for there to be such a violent "snapback". Maybe a couple of machines will be shuttered if prices drift lower, but beyond that I think it will take significant price declines before another 1.3 million tons of annual capacity is removed, as RISI's John Maine says is needed to keep the market in balance.

A lot of folks (buyers, mills, banks, bond-rating agencies, etc.) are trying to make decisions now based partly on where paper prices are headed. So let's help them out with some "crowdsourcing" -- cast your vote! (If the poll doesn't work in your browser, please email me your vote at dead.tree.edition@gmail.com.)

1 comment:

r. bach said...

I was there... the quote that "paper pricing could go up in a minute" was laughable. In her dreams...