Thursday, October 2, 2014

The Postal Service Giveth, and the Paper Market Taketh Away

October began with both good news and bad news on the cost front for publishers of magazines and catalogs.

Because of announcements made on Wednesday, publishers can scratch the usual January postage rate increase from their 2015 budgets but should probably count on price increases for coated paper.

The U.S. Postal Service Board of Governors announced it would not raises prices on "market-dominant" mail classes early next year, contrary to its usual practice of implementing inflation-based price hikes in January. They have the authority to raise rates 1.58%, which could have led to a 1-cent increase for Forever Stamps as well as higher postage for direct mail, catalogs, newspapers, and retail flyers.

"The governors decided not to seek a change for mailing and shipping products and services in January in part because of the uncertainty regarding the exigent price increase.The Postal Service will continue to evaluate pricing strategies and will communicate about any potential price change filings in early 2015, including advance notice to customers of any price changes."

As noted in Postal Rates in 2015 Could Rise or Fall -- or Do Both, USPS is currently slated to reduce market-dominant rates by 4.3% in the second half of next year when the exigent surcharge expires. But postal officials have gone to court in hopes of increasing or extending the surcharge. And they hope to avoid a price cut when the surcharge expires by implementing an inflation-based price hike at the same time.

The bad news came from Verso Paper, which is closing its Bucksport, Maine coated paper mill. That, coupled with the recent closure of the FutureMark mill in Illinois, could mean an end to rock-bottom prices for magazine-quality paper in 2015.

Verso revealed that Bucksport has been unprofitable for years. Paper industry insiders say the same is true of FutureMark. As the old saying goes, the best way to make a small fortune in the paper business is to start with a large fortune.

Verso, teetering on the edge of bankruptcy, says the Bucksport closure will not affect its proposed merger with NewPage, which is under extended antitrust review by the U.S. Department of Justice. By the time Justice gets done, there may not be anything left of Verso to merge.

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Anonymous said...

Don't forget Resolute's Laurentide Mill in Quebec pulled the plug recently, too. I think a big factor in all of these is the switch from LWC to SC.

Anonymous said...

Jay will be next. What a dump. pot holed wood yard, no investments in years antiquated technology. So that leaves one mill left for Verso aka. IP's former coated paper division -Quinnesec. A mill much better suited to making dissolved pulp or rayon rather than coated paper.