By Wiener, Norman
Folio: the Magazine for Magazine Management , Vol. 17, No. 1
Magazine Paper A look at projected availability of the major grades of domestic and offshore publication quality paper The best way to gauge the future supply of the major grades of paper used in magazine publishing is to consider each grade separately. Each tends to have specific players, specific machines. This article will take a look at future availability of coated groundwood paper, supercalendered (S.C.) printing paper and coated free sheet. Accompanying tables profile U.S., Canadian and offshore capacity announcements. (In most cases, the data in the tables were provided by the producers.)
1. Coated groundwood papers
Of the three grades under review, the overall supply picture for coated groundwood grades still appears the most optimistic. The market is still absorbing the capacity of four major additions--
* Bowater Inc.: 197,000 tons, third quarter of 1986.
* Consolidated Paper Co.: 180,000 tons, fourth quarter of 1986.
* Repap Paper Co.: 200,000 tons, third quarter of 1986.
* International Paper Co.: 200,000 tons, fourt quarter of 1986.
New North American coated groundwood capacity is also anticipated in the late 1980s. (Blandin Paper Co., 200,000 tons, 1989.)
In the interntional arean, new capacity is also expected from some major producers in Western Europe and Scandinavia. These include close to 400,000 new tons of capacity between 1987 and 1991 from Finnpap, the marketing arm of several Finnish coated paper mills; and 200,000 tons, starting in 1988, from MD Paper in West Germany.
Only a limited amount of paper resulting from these new capacity increments from offshore suppliers is expected to end up in the U.S. market.
Based on studies done by a number of companies, a significant overcapacity of coated groundwood grades apparently still exists in Europe. Similar to the situation experienced in the United States over the past few years, European demand for coated groundwood grades has skyrocketed as many companies are now upgrading from M.F. and S.C. uncotaed groundwood grades. The degree to which the major European suppliers commit this tonnage to North America will be a function of their ability to get long-term commitments from major U.S. buyers.
In total, the outlook for coated groundwood papers must be considered as mixed. Short-term demand swings tied to some of the problems noted in part 1 of this article (December, page 110) have created market that is tighter than many had expected in light of the four new machines. Consequently, the U.S. market could remain tight for most of the next six to nine months while the major offshore suppliers plan strategies.
What about price?
Increase offshore imports could soften this condition. However, offshore suppliers are not likey to make price the overriding consideration for their acceptance in this current market. Consequently, prices for coated groundwood will rise again in 1988. If the U.S. economy remains relatively strong during 1988, and unless some of the internal problems of labor and productivity are solved, coated groundwood paper consumers should brace for up to two possible price increases, with a cumulative increase in excess of 10 percent during 1988.
Longer term, higher prices and tighter operating rates can only lead to further new announcements for the late eighties and early nineties.
2. S.C. printing papers
The outlook for the future supplies of S.C. papers seems very promising--from supply, competitive and quality standpoints. Historically, buyers of this grade have been limited to just a handful of major suppliers. This will change in the late eighties.
Major new capacity increses for S.C. papers are expected from three sources during the late eighties.
* Lake Superior Paper Industries, Duluth, ,inn.: 235,000 tons of S.C. A, beginning in late 1987. …