Despite all the talk of "green shoots" in the economy at large, prices for coated paper have recently dropped even more than expected.
Less than two months ago, we polled readers about where they expected prices for 40# #5, then at $900/ton, to be in July. Most thought the RISI index for the grade would decrease, but only 29% voted for the index to be below $820 ($41/cwt.)
Most of the voters (including me) have already turned out to be wrong: Though it hasn't released its full report yet, RISI has revealed that its 40# index for May was $810. It is also projecting that the bottom of the market for all types of coated paper will be much lower than it previously predicted.
Demand may perk up a bit as inventories are burned off and we enter the busier half of the year. But the problem is supply: There are simply too many North American mills churning out coated paper.
Market leader NewPage has indicated it has no more high-cost machines to shut down, and the black-liquor credit has given many U.S. mills a huge subsidy to keep their pulp and paper machines running. It seems likely that paper prices will keep dropping until the least efficient machines or mills can't even cover their variable costs.