Paper Mills close and Paper Demand decreases

We often report on the paper industry’s recent initiative of asset rationalization whereby mills are shuttering capacity or consolidating with other manufacturers. This trend is forecasted to continue into the foreseeable future. Recently, we outlined NewPage, Domtar and Fraser papers curtailing production equipment. StoraEnso consolidated its North American facilities with NewPage, as did Bowater with Abitibi. Internet is certainly taking a piece of printing demand and the higher cost of postage makes mailing
printed material more expensive. Even FSI (Free Standing Inserts – those promotions you get in the newspaper) have declined 5% from 2006. One expert commented that even Television advertising is no longer a leading influencer and loosing its effectiveness.
Most paper prices have increased; this certainly has not assisted with demand. One comment on all the sudden paper price increases is these advances have not kept up with the cost increases for such expenses as fiber, energy, shipping and chemicals. Look for more paper price increases and less paper consumed in 2008.
One industry expert stated that although demand for paper is decreasing approximately 2% a year, the producers are shuttering 6% of capacity each year.