Sunday, December 4, 2011

Why Coated Paper Prices Look Ready for a Fall

North American prices for coated paper will decline and more paper machines will be idled next year, according to a leading industry analyst.

Even supercalendered paper, currently in short supply, could see declining prices by the middle of 2012, Reel Time Report editor Verle Sutton said in a webinar recorded a few days ago. The webinar, "Price & demand outlook 2012 for newsprint, publication papers", is still available for download from Industry Intelligence.

Sutton’s forecast runs counter to the brave talk coming out of the mills and the more bullish analysis from rival forecaster RISI. He noted that his and RISI’s 2012 price forecasts are as much as $120-per-ton apart. Sutton, always the iconoclast and often spot-on with his predictions, pooh-poohed claims that rising costs for pulp and other items will prevent prices from declining.

“Coated pricing will decline until capacity is removed. By the end of 2012, it is estimated that about 400,000 to 600,000 tons must be shut down [in North America] in order to balance supply and demand,” Sutton said.

Sutton based his prediction partly on the recent surprising weakening in demand during what should be the busiest buying season.

"Since 2000, even those of us who have been relatively pessimistic on the impact of electronic communications on demand have generally underestimated the true impact of the electronic revolution on paper demand. That occurred again in 2011 in a big way."

Sutton also provided insightful commentary on the newsprint market, why prospects for the idled Port Hawkesbury mill are suddenly looking up, the outlook for European exports to North America, and whether North American mills will use coated machines to make supercalendered paper next year. But as someone who respects copyrights (especially since my day job is in publishing), I won’t reveal any more details about the Sutton webinar.

Among the many previous Dead Tree Edition articles that cited Sutton or his Reel Time Edition newsletter are:


Anonymous said...

After reading the most recent operating report from Newpage I noticed that they made reference to the Wisconsin mills being profitable and the east coast mill loosing money.I would suspect that capacity closure is coming?Whats your take on this?Is verso coming to the rescue of these mills? With the recent capacity closures from verso can they afford to adopt some struggling mills?

Anonymous said...

Rumford is on the edge with or without a Verso rescue. Luke and Wickliffe must still be appealing to Verso if they desire sheetfed and cover capacity, since they are slowly getting away from some of their low end products. IF they want to be a real CFS player. New Page can be a long term pub. player with the likes of Escanaba, Rapids, Duluth, and Biron (not sure if Stevens Point is viable). Verso MUST be ecstatic with Sappi decision to go dissolving pulp in Cloquet - could also help Wickliffe or Luke if they could figure out how to sell quality pulp. And yes, pricing will come down this year, but not drastically - some stablizing assuming New Page gets away from bankruptcy mode and starts acting like a long term player and not a cash hungry player. And what about their execs wanting BONUSES for cash flow - give me a break!!

Anonymous said...

What is most of interest to me, is the possibility of gwd coated producers running SC grades on their machines. That would have a huge impact on pricing, as demand has NOT increased lately, but closure to mechanical gwd and sc (blue heron, katahadin, port hawkesbury, manistique ) has msde things tight. Although a few of these have restarted, they have small capacity and are not long for the industry anyways.

Anonymous said...

After a 74 million loss in just two months a bonus for the execs seem deserving! Can all these cfs machines produce sc grades? I am not privy on the technicals of producing the sheet but I would assume some capital needs to be put in the machines?Interested to see how this plays out