Does Summer Bring a Better Paper Market?

Could it be true?  Could the paper market be correcting and things starting to look up?

In discussing current market affairs with many of our paper suppliers, the answer seems to be a guarded “yes.”  While the first and second quarters have seen a tremendous amount of downtime taken (both temporary and permanent), the mills feel that the moves they have made have been adequate enough to balance their supply with market demand.  We shall see.  But one thing is for sure: any more months of +/- 20% paper ship rates, and the paper mills could be in more trouble than they are now.  No one wants to see that.

What does this guarded optimism mean for prices?  Well one thing is for sure: the drastic reduction in paper prices we have seen the last two quarters cannot be sustained.  The mills have given back most, if not more than what they gained over the last 18-24 months.  And while the mills’ costs have decreased as well, they have not decreased in tandem with price decreases. 

Does this mean that increases are on the way?  I highly doubt it.  Are we going to continue to see the vast differences in pricing levels that we have seen over the past six months?  I doubt that as well.  Whatever your paper price is today, feel confident that you are not going to see any increases through the end of the year. Also feel confident that you are not “missing out” on some paper price deals by continuing to shop around. 

One thing to watch:  black liquor credits.  What is that?  Black liquor is a by-product of the paper making process that is created and then re-used elsewhere down the process chain.  Some mills have been able to apply for, and receive large amounts of government money under a loophole in a budget bill passed in 2005.  That loophole is set to expire soon, and some members of Congress are looking to close it sooner.  Those mills that are relying on this additional loophole funding now might be caught in a bind sooner rather than later if this loophole closes before it is supposed to.  If you would like more information about this, please just let me know.

• Tags:
• mill and machine shutdown
• north american paper mills
• web offset paper

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