Verso Paper announced a price increase for its coated-freesheet papers yesterday, the first sign of life in the U.S. coated market after 10 dismal months.
(Update: A day after Verso's announcement, NewPage started spreading word of a similar attempt to raise prices on coated freesheet along with a $1 hike on Escanaba, its high-end coated-groundwood product.)
In a letter to customers, Verso said it was increasing prices on its Influence and Velocity grades by $2/cwt. ($40 per ton) "effective with orders entered September 15, 2009 and all orders shipping on or after October 1, 2009." The letter does not mention Verso's coated-groundwood or supercalendered products, which presumably indicates the company didn't think announcing price hikes for those products would be credible.
Not that getting higher prices for coated freesheet will be easy. Even if the economy is getting up off the mat, there's still too much overcapacity in coated paper. And the black-liquor credits, not scheduled to expire until the end of this year, give U.S. mills an added incentive to keep their CFS machines running by chasing low-priced sales rather than to be disciplined and take down time.
In Verso's favor are a weak U.S. dollar that is discouraging imports and a strengthening pulp market that provides an outlet for some of the pulp that subsidized U.S. mills are cranking out.
I will repeat what I wrote in March, when I noted (correctly) that prices for coated paper had further to fall: "Prices may indeed stabilize – even increase -- in a few months when the current inventory overhang is burned off and we enter the busier fall season, especially if the economy improves or energy costs rise. But that’s likely to be what Wall Street calls a “dead cat bounce” – a brief increase on the way to further declines."