The year, 2009, certainly created several challenges for the paper industry. Paper producers did a remarkable job of limiting price erosion despite sharply lower shipment volumes and variable (usually up) raw material costs. The industry responded with massive amounts of market downtime, as well as a significant amount of closures, in many cases even driving down inventories despite weak demand.
Although the last few months of 2009 illustrated some improvement; sustained improvement will only arrive once the economy improves. Keep in mind, 2009 paper demand continued to be lower than 2007 and the beginning of 2008.
The paper manufacturers continue to operate along a slippery rope – recently most grades experienced an announced price increase; meanwhile, demand continues to be below expectations, supply was controlled by down time (this is not sustainable ), input costs such as chemical, energy, and transportation are forecast to increase, and the infamous black liquor credit (worth billions of dollars) is gone.
I think we all agree that for the industry to be healthy, long term, a price increase is needed; however, most buyers are aggressively pushing back due to the inability to pass it on to their customers.
Of particular note is the containerboard price increase – without consumers buying 'stuff' – nothing to go into the box – therefore demand is forecast to be depressed. The other two markets sharing concern are the price increase for publication and newspaper papers. Both are hurting from lack of subscribers and depressed advertising.
Anyone of our Coy Paper Company News on the Pulp and Paper readers care to comment on forecasting 2010 prices, demand, and supply; also, venture an opinion on next mills to close?
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7 comments:
My company finds your releases very informative and I am most interested to hear comments on what your readers forecast for 2010. We are a commercial printer, with lots of pressure and limited price leverage - both on the supply side and with our end users. We forecast a difficult 2010 - low demand, concern over our clients paying our invoices, and constant cost / resale pressures.
If the economy does not improve, difficult to think printing segment will see much light.
I am a direct mail broker and we forecast lower demand for 2010 and a trend for lower volume into the future as well - mainly due to digital competition. Our price per 1000 continues to increase and end users retaliate with fewer mailings, less pieces, and demand a more economical program (which means inferior paper). Several of our end users think the web is equally as effective as print and costs less, we of course fight this and present the many advantages print advertisements offer.
I think direct mail, and our post office, will have to figure out how to compete or work with the web! We think 2010 will be worse than 2009.
We, in the merchant world, saw much of 2009 with many printers needing paper ASAP and they seemed to call several other merchants for very best pricing before placing order. Everyone was squeezed, our margins, the mills profits, our printers were caught between increasing paper prices and inability to pass the increase along to end user. We saw repeat business - but with less paper ordered. The worst part is historical customers shopping our price for best landed cost. Unless the economy improves - I see no reason why this trend would not continue. Best I hope for is that 2010 is not worse that 2009. What an awful thought.
On another note - I really DO like this blog - I try to look at it every week.
Lots and lots and lots of challenges still in front of us. I see a difficult several years and we only hope the paper industry comes back this decade. Could paper become a dinosaur ? With the advent of digital devices - will people learn to read and write / type on non paper screens? Reusable bags now are used at stores, less packaging is used for products, no one writes letters, businesses now correspondence via email and forward invoices, statements, acknowledgements, etc on the web, Google and wikipedia have taken over reference books, and no one hits the 'print button'. Not good signs for paper.
I will not agree on it. I over polite post. Especially the designation attracted me to read the intact story.
Hold on to your hats. Inventory down, no more $8,000,000,000 CREDIT, pulp prices up, capacity down. Mills MUST MUST get more money for their product - economy is awful - I think this is called 'the perfect storm'. I think prices will increase and all of us will be squeezed.
I appreciate all the comments. Keep them coming. It is very interesting to learn from all the different end users what 2010 might look like.
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