CHARLOTTESVILLE, VA , Jan. 17, 2013 (Viewpoint) -
At the end of 2012, we saw a very tight coated mechanical market in North America, with mills operating at 100% of capacity, mill inventories hitting an all-time low and prices on an upward slope (perhaps more accurately described as a price recovery from previous declines). A number of obstacles threaten to disrupt this balance in 2013. The key factors are (1) a sharp drop in end-use demand, (2) grade switching by end-users, (3) oversupply in Europe combined with a weaker euro and (4) rising mill costs.
Figures 1 and 2 show just how tight the market was in late 2012. Mill inventories in North America had dropped to only 100,000 tonnes, an all-time record low that represented less than 10 days of supply and was all presold. In Figure 2, the ratio of shipments to capacity (before adjusting for seasonality) was at 102% in the third quarter and 100% in the fourth quarter. It was no surprise that prices for coated paper were headed up in late 2012.
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