By John Maine, Vice President, World Graphic Papers, RISI
CHARLOTTESVILLE, VA,
Feb. 19, 2010 (RISI) -
Despite the improved year-over-year demand at the end of 2009, coated publishing paper prices are almost $150 below their mid-2009 peak and spot market reports suggest a further drop in February. Combined with the rising costs and the loss of black liquor credits, this will put tremendous pressure on producer margins. Furthermore, a gap with the European price provides further persuasion that a recovery in coated paper prices will occur in the second half of 2010.
In early 2009, coated paper prices fell along with production costs, but the price slide has continued despite the return of costs to an upward track. Softwood pulp prices have risen $200 per ton since their 2009 trough, while coated mechanical prices fell $130 over the same time frame. Most coated mechanical mills in the US purchase or transfer the kraft pulp portion of their furnish at market prices, so this gap between paper and pulp prices represents a major hurdle for any mill that is not fully integrated, including those receiving pulp from off-site sources within the same company. Producers are also facing further pressure from the rising costs of energy, chemicals and other inputs.
Even fully integrated mills will not be safe from rising fiber costs, as pulpwood costs are rising while the black liquor credits of 2009 have expired and will not be renewed. These credits reached as much as $100 per ton of paper, so their absence represents a significant hit on the profitability of recipient mills. Combined with the other cost concerns noted above, producers will face tremendous margin pressure in 2010 if prices remain at their current levels.
John Maine, RISI Vice President for World Graphic Papers and Derek Mahlburg, Graphic Paper Economist, authors of the monthly Paper Trader, work out of RISI's Charlottesville, VA, office.
Tel: 434 978 2927 Email: jmaine@risi.com and dmahlburg@risi.com
Stay updated on graphic paper markets with RISI's industry news, prices, forecasts, analysis and mill intelligence. Visit www.risiinfo.com and click on "Pulp & Paper."
