Weathering the Paper Storm

Printing papers continue to suffer with decreased advertising, fewer readers and letter writing, acceleration in substitutes (more economical papers and electronic communication), and a poor economy.
Despite capacity curtailment and reduced prices, demand remains weak and supply high. Newsprint is especially affected with reduced demand with the greatest cannibalism of readers to the internet and falling circulation. Book publishers may also witness additional attrition with introductions such as Kindle. With fewer purchases – containerboard and packaging is down. Fewer products being sold yields less packaging plus, consumers are satisfied with reduced layers and reduced lightweight material – still allowing for a ‘sturdy’ container – but less paper. The Tissue market has not felt the same reduction in demand, but given the poor economy, end users are now picking the more economical private brands, which typically use less paper.
Raw materials such as fiber, energy, chemicals and transportation has declined and helped, but sales prices continue to slide. PPI reported that 5.7million (5% of paper production capacity) has been taken out of market in 2008. This should assist. Big challenge is the capital-intensive paper industry attaining credit for capital projects. Limited funds are available for growth and acquisitions. Most paper producers are in a survival mode – cash management and Balance Sheet strength is key.
The Coy Paper Company monitors current events in the Pulp and Paper Industry and reports into this Blog several times each week.