What’s the read on the paper market? Despite a few recent blips upward, pricing is down almost 20% from a year ago.
“Pricing has about bottomed-out,” says Daniel Walsh, vice president for catalog/publication papers at Bradner Smith & Co., Chicago. “The mills launched a coated paper increase in early September that took most everyone by surprise, since demand hasn’t yet shown any rebound.”
In the past, Walsh explains, mills have tried launching a “trial balloon” increase to see if it will stick.
“In my experience, price increases that are not backed by demand are not usually successful in being sustained,” he says. “It’s like when the airlines raise prices — if one doesn’t [follow suit], the price hike usually falls apart. It is true that the mills ‘need the increase,’ because of their rising costs, but needing and getting an increase without being busy are too different things.”
What happens as we turn the page into the new year? Depends on who you ask.
Rodney Fisher, president of consulting firm Fisher International, doesn’t expect paper availability to be a concern for marketers. “There is quite a lot of inventory in the system,” he says. “And while ultimately that will get burned out, it won’t be for a long time. We won’t see a serious shortage like in 2006-2007.”
Walsh, however, advises caution. “Prices have been down 20% and demand has been off 30% in the last year, so paper mills have shut down machines, and in some cases shut down entire mills,” he says. “This means that when demand comes back, we could potentially be in a tight market almost immediately. And when that happens, the mills really start raising prices every quarter.”
Of course, thanks to the magazine industry being hit so hard by ad-page declines and marketers shifting dollars online, demand likely won’t ever return to past levels. “But,” says Walsh, “because so much capacity has been taken out of the paper market, I do see the potential for trouble.”
Network
