Paper-market outlook

Paper-market outlook – Industry Overview

Mayu Mishina

Byline: MAYU MISHINA Managing editor |

The past few years have been grim for the paper industry. Already suffering from overcapacity and soft demand, the paper market took another hit last year with the slow economy. But it seems the troubled market is at last showing signs of recovery: According to the Pulp and Paper Products Council (Montreal), an international alliance of product associations, North American demand for printing and writing papers increased 2.6 percent year over year this past July, and production increased 4.4 percent.

“After the problems of last year, this year is looking pretty good [so far],” says Rick Mullen, director of product management at Domtar (Montreal). “We’re cautiously optimistic.”

It’s a good sign for both paper vendors and printers, whose industries are closely intertwined. Says Rob Melton, marketing manager, printing and publishing papers, at Weyerhaeuser (Federal Way, WA): “We expect to see moderate improvements in the economy, and that will lead to improving fundamentals for the printing industry and for our customers.”


That indication of “moderate” improvement is key. “I don’t think anyone thinks the economy will turn around overnight,” says Kelly Ferguson, vice president of editorial for paper-industry resource Paperloop (Marietta, GA). “The expectation is that the economy is going to slowly recover, barring any unforeseen circumstances.”

Notes Mike Houghton, vice president, paper business segment, at Georgia-Pacific (Atlanta), “It’s been a tough couple of years.” He points out that shipments of uncoated freesheet to commercial printers have been down eight percent year to date, and almost twice that level over the past few years.

In the catalog- and magazine-paper category, year-over-year advertising pages remain significantly down, according to Jim Sheibley, Stora-Enso’s (Stamford, CT) commercial director, magazine papers. Sheibley says catalog mailings are down, both in terms of volume and individual catalog weights, as well as the total weight of shipments from the U.S. Postal Service. He adds that paper prices for major markets for the catalog, retail and magazine sectors have fallen close to 20 percent in the past year and a half.

“The good news,” remarks Georgia-Pacific’s Houghton, “is we’re emerging from the trough levels that we reached the first half of the year. From the demand perspective, there’s strong anticipation of much more favorable economic growth and GDP as we move into 2003.”


Paperloop’s Ferguson, too, predicts that things will pick up in the fall and Christmas season, with “a little more advertising on the retail end. That’s usually a harbinger of things to come,” he says.

Ultimately, a recovering paper market may fuel a rise in paper prices, though any increases in the near term will be slight. Some paper companies have already instituted incremental increases on their commercial-paper products; those that haven’t indicate plans to eventually follow suit. “Going forward, it is expected that prices will rise,” acknowledges Mel Zangwill, president of Tembec Paperboard Group (Toronto).

But Ferguson says printers needn’t fear a dramatic price hike, a strategy that has previously backfired on paper vendors.

Nor should availability be a problem. “Our backlogs have been extended but all of our grades are still available, and we expect them to remain so for the next several months,” says Melton of Weyerhaeuser. “During the past year or two, our company has taken out inefficient paper machines and capacity to better match our supply with our customer demands.”

Indeed, Domtar’s Mullen notes that the paper industry as a whole is managing its assets better now. “The paper industry has consolidated, the old high-cost capacity has been taken out and we’re seeing the impact of that on the supply side of the equation,” he says.

Mullen adds that the industry has successfully found capacity, through “speed-ups” and efficiency programs, when demand has required it. He notes Domtar has carefully chosen the paper sizes, colors and basis weights that make up its SKUs, and has also invested in warehouses in various markets to ensure overnight delivery if needed.

“I think we’re all trying to work toward reducing the cost and complexity in the supply chain,” observes Weyerhaeuser’s Melton. “Printers today don’t have the luxury of carrying a lot of inventory, so we have evolved to serve the amount they [can] carry. We’re working with distributors to make sure paper is available within hours rather than days. We can no longer say, ‘We can get it to you next week.'”


As always, forging long-term relationships with paper vendors is the surest way to ensure paper availability when you most need it. Houghton of Georgia-Pacific says this is preferable to the transactional job bidding that paper vendors are sometimes forced into: “We’re interested in an alliance-type relationship with commercial printers, which will provide more consistent demand. In the long run, if you can forge meaningful alliances, our focus on productivity improvement and supply-chain cost improvement is a substantially greater win [for printers] than trying to play price roller-coaster on a high-volume, commodity-oriented product.”

Domtar’s Mullen is quick to agree. “Everyone is looking for value [but] your suppliers need to be stable. Low prices may mean low quality as well,” he explains. “It’s important to have a good, stable source of supply and people you trust, who can bring you new ideas instead of you having to go find them.”

Houghton suggests that smaller printers consider both their order volume and product mix, and try to align more of their total mix to a given supplier. He points out that using one main paper manufacturer minimizes product variability and thereby increases press productivity.


Despite the slow economy, paper mills remain committed to evolving with the new print technology. More than one manufacturer has noted the growth potential of digital printing, for example.

“We’re watching the evolving technologies – digital printing is a big one,” reports Melton of Weyerhaeuser. Mullen says Domtar is also looking into opportunities in digital print.

Finally, says Weyerhaeuser’s Melton, “we’re on a continued drive to find papers that perform better on press so printers can reduce waste and get better print results. There’s tremendous pressure on margins at all levels of the supply chain, and we’re all trying to do what we can to reduce costs. I believe that’s true for paper mills, distributors and printers.”

Dealing with postal increases

With rising postal prices again an issue for the printing industry, some printers are turning to paper to help balance out production costs.

“Technological and equipment drivers – such as increased brightness and smoothness on paper, and color capabilities and quick makeready on printing equipment – are in many ways increasing the flexibility that printers have in selecting papers. Printers are in a position where their cost and throughput can benefit from many of those changes,” explains Mike Houghton, vice president, paper business segment, for Georgia-Pacific (Atlanta).

Here are some areas to examine:


Jim Sheibley, commercial director, magazine papers, at Stora-Enso (Stamford, CT), advises printers to look for lower basis weights both within and across different paper-product categories.

“With improvements in pulping as well as special coating pigments, the quality of some of the grades below fine papers are [good enough that] we see customers moving happily to less-expensive product,” Sheibley observes.


Houghton says printers need to work with customers and balance tradeoffs, such as possibly using a lower grade of paper, to partially or totally offset the rising postage costs.


“On a per-pound basis, opaque papers may cost more, but they also will save money on the total job,” notes Rob Melton, marketing manager, printing and publishing papers, for Weyerhaeuser (Federal Way, WA).


Mel Zangwill, president of Tembec Paperboard Group (Toronto), says coated two-side (C2S) papers can weigh up to 20 percent more than a single-coated sheet. “A single-coated backside [sheet] gives printers an economical alternative to conventional C2S grades,” he says.


“Printers have to innovate with their customers with respect to the particular grade of paper to specify, the basis weight and potentially reformatting of the finished product to a different finish size where less overall paper is used,” says Houghton of Georgia-Pacific.

Paper directory

Often referred to as the bible of the paper, printing and publishing industries, “The Paper Buyers’ Encyclopedia” is a comprehensive directory of more than 6,000 paper grades and classifications. It contains contact information for more than 5,500 mills, merchants and converters. The 626-page directory costs $135 (an Internet edition is also $135, or users can purchase both for $175). To order, call Grade Finders, Inc. (Exton, PA) at (610) 524-7070 or e-mail

PIA paper-price tracking system

PIA (Alexandria, VA) is offering members a system that will track paper prices. Accessible through, the system provides printers with month-to-month data on price changes for a selection of the most commonly purchased paper types. It also offers a direct interface with the Bureau of Labor Statistics (BLS) Producer Price Index (PPI). PIA members will reportedly have the benefit of explanation, interpretation and advice on how to use the BLS PPI data.

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