Even with a slightly improved demand at the end of 2009, coated publishing paper prices are almost $150 below their mid-2009 peak. Despite the combined rising costs of raw materials and the loss of black liquor credits, pressure continues on margins for the producers of coated groundwood publication papers. The forecast is for coated paper prices to continue to trend upward and producers to look for more improvement throughout the second half of 2010, assuming the economy does not enter another dip.
While it was true that during 2009, coated paper prices declined, but, in the first half, so did production costs. Unfortunately, the price slide continued despite the return of increased costs toward the end of the year. Pulp costs increased such as softwood pulp, up $200 per ton since their 2009 low, while coated publication prices fell $130 over the same time frame. Producers are also facing further pressure from the rising costs of energy, chemicals, transportation, and other cost components.
The challenge remains for mills due to rising fiber costs and the elimination of the black liquor credits (which will not be renewed). These credits reached as much as $100 per ton of paper. Combined with the other cost concerns noted above, producers will face tremendous margin pressure in 2010 if prices remain at their current levels. Accordingly, look for producers to introduce increased pricing thorough 2010.
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Economics 101 - supply becomes less than demand = prices are bound to increase. Paper industry needs to be careful not to kill the golden goose. Too aggressive a pricing policy - our end users will substitude another media. Once we loose them, wonder if they will come back?
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