Industry Braces for Rising Paper Prices

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Experts predict paper prices will increase because of rising raw materials costs.

International Paper has announced a price increase of $60 per ton for coated papers starting June 1, and other paper producers are following suit. One factor driving the increase is price compression in the market for pulp, the raw material from which paper is made, said Verle Sutton, editor of The Reel Time Report.

The Reel Time Report is a monthly newsletter on the publication-grade paper industry produced in conjunction with Forestweb, a forest-products market intelligence firm. Rising pulp and energy costs are forcing paper producers to raise prices to avoid shutting down equipment, Sutton said. According to the report, pulp prices in the United States have increased from $580 per ton in December 2003 to $650 per ton in April.

Paper prices generally have been increasing as well, but less quickly. From December to April, prices for SC-A increased $15 to $655 per ton, and prices for SC-B paper rose $30 to $620 per ton. Both are used in catalog and insert production. Coated groundwood paper prices have stayed at $700 per ton in the period, while coated free sheet fell from $755 to $745 per ton.

Other factors have played into the price increases, Sutton said. Import supplies have declined, and demand is increasing modestly.

Some paper users have price guarantees from their suppliers that may delay increases through July, Sutton said. However, most likely will feel the increases next month.

Some catalogers said the industry can expect to hold the line on prices for a few months more. Rex Ciavola, senior vice president, global creative services and production at Office Depot, Delray Beach, FL, told attendees at last week's Annual Catalog Conference that paper prices should remain steady, but not for long.

"I don't see paper prices going up right now," Ciavola said. "I see demand going up, but if I negotiate hard enough and I have a great relationship with my suppliers, we're going to keep our paper prices flat."

The fourth quarter, however, is another story.

"I do see that paper prices are going to go up at least 5 percent," he said. "If you're getting increases right now, don't take 'em. Push back. It's not reasonable. Why? 'Cause the demand's not there yet. However, in Q4 it will be."

Looking ahead to 2005 and 2006, Ciavola said demand will go up and supply will fall slightly.


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