Paper Market Update
Not surprisingly, paper price increases of 2018 have adversely impacted demand for many grades, and led to grade migrations to achieve cost savings. Coated paper markets have loosened as we head into 2019, and mill lead times are shrinking. GP just announced a March mill closure that will eliminate approx. 8% of the uncoated freesheet market capacity in North America. The newsprint market has loosened and projected declines in demand will force further mill closures.
Mill order lead times have decreased for most grades of paper as we near the end of 2018. As mentioned last month, the price elasticity of supply is sensitive, so expect paper producers to either shutter capacity or convert to profitable alternatives rather than to endure significant price erosion in 2019. With fewer paper grade and basis weight options available, the risk of supply is higher and mid-stream grade, brand, and basis weight changes are increasingly difficult. The key to competitive paper pricing is lowering the total cost of the supply chain. Quad’s Paper Services group will ensure that you're with the right mill, for the right product, and for the right location.
Each paper market segment has its own set of factors that influence pricing and availability. There are absolutes, such as supply and demand forces; however, major changes within each segment can now occur at a much faster pace and these changes can have immediate impact to supply and price. Years of mill consolidation, closures, and conversions to more profitable grades have led to fewer choices and the price elasticity of supply (mills reducing supply as prices decline) is greater. As a result, the predictability of future paper supply and price is difficult.