Grade Profile

Uncoated free-sheet: A tenuous balance with demand growth still outpacing capacity

Grade structure. Chemical pulps (sulfate, sulfite, soda, cotton linters, or vegetable fiber) are used to make uncoated free-sheet (or woodfree) papers, with occasional additions of up to 10% mechanical fiber or bleached chemi-thermomechanical (BCTMP) pulps and recycled fibers. BCTMP furnishes lower the cost of manufacture while providing a better grade of paper than stone groundwood or other mechanical pulps. Many of the major producers have converted some or all of their machines to alkaline-based paper, and most new installations are alkaline.

Uncoated free-sheet papers are used for office and business printing (copiers, computer printers, etc.), business forms and envelopes, publishing (mostly text and adult trade books), commercial printing, and writing (stationery). There has been somewhat of an upheaval in the segment as cut-size demand is expected to grow two to three times faster than overall uncoated free-sheet demand, thanks to the rise of digital on-demand printing and sales of ink jet and laser printers. Office reprographics grew more than 10% in 1997 in the U.S. While shipments of offset printing paper and business forms increased in 1997, their share of the overall market has remained flat— 25% for offset printing and 17% for forms bond. U.S. shipments ended 1997 5.3% higher than the previous year at 13.86 million tons.

Capacity. According to the American Forest & Paper Assn.’ latest survey, capacity to make uncoated free-sheet is forecast to rise by a 1.3% average annual rate in the 1998-2000 period, for a three-year gain of 584,000 tons. The expansion reflects the addition of two new machines— 330,000 tpd Boise Cascade Corp. machine that started up in Jackson, Ala., in 1997, and the 300,000 tpy Willamette Industries Inc. machine slated for startup this month in Hawesville, Ky.,— well as mill closures and grade shifts.

Current market conditions. The uncoated free-sheet market ended 1997 in a better position than at the start of the year, and manufacturers were able to raise prices in April and in August. (But prices for 1997 in the popular 20-lb cut-size grade were 11% lower than 1996.) In somewhat of a departure from what traditionally occurs in the fourth quarter, prices remained firm through December, normally a weaker month. Building on that strength, most producers set a price increase for mid-January, also not usually a strong month. However, slipping backlogs, combined with fears that new sheeters could tip the balance of the market, made it difficult to put the increase in place.

Outlook. Demand is expected to grow faster than capacity for the next two years, which producers say should allay concerns about the market’ ability to absorb new production. However, the impact of the Asian currency crisis on the white paper market is still unknown.

Pricing. The average transaction price for 20-lb reprographic bond (cut-size) was $768/ton in 1997, vs $864 in 1996. For 50-lb offset rolls, the 1996 average transaction price was $934, compared with $842 in 1997. Prices are forecast to rise 8% to 10% this year.

BY JOYCE ROUTSON

News Editor