Group & Industry News

OAKLAND, CA, July 27, 2018 (PPI Pulp & Paper Week) - A customary summer lull for uncoated freesheet (UFS) paper markets that mills use to build inventory ahead of the peak season for commercial printers hasn't appeared this year, sources said, and supply is expected to remain tight for months to come.

"We are seeing very strong demand and believe supply will still be tight into next year," one mill contact said.

"Mills are all on reservation, allocation, and some are on soft moratorium," complained a merchant contact. "There are no growth opportunities and no new orders."

"There's not much room for new business," agreed a mill source. "History drives availability and we support those who have supported us."

"Relationships have to have tons behind them to matter," a buyer contact said. "Mills are kicking out lower-price business – there's less commodity and more value added."

"You have to fix your mix and clean out lower-priced business," a mill contact said. "Order books are full and we're making as much as we can."

Both buyer and seller sources said reality has finally kicked in for customers that have print orders that now have to be predicated on the availability of paper.

"For the past 15-20 years, printers could get whatever they wanted, whenever they wanted, from whoever they wanted, at whatever they wanted to pay. That's gone through 180 degrees," a merchant contact said. "The only saving grace is that our customers are busy they've got full production schedules. If they can get paper they'll have a good year."

"There's no relief from the prior month. Offset is hard to source," grumbled a commercial printer contact, who described the whole paper market as "a mess."

"Mills use the summer sowdown to reload inventories and normal service levels, and we're not seeing that yet," another buyer source said.

"We're trying to thread that needle and we're holding our own," countered a UFS mill contact. "There's incremental capacity around. You can't not maintain a mill, but we're trying to do what we can to manage that."

Price increase 'in place.' The third UFS price increase of the year that became effective in May can be considered fully implemented this month after quarterly price protections for some contract buyers expired in July, sources said.

"A few more things kicked in in July and the last price increase is fully in place," a mill contact said.

"We saw a lot come in this month," another mill source said, adding: "we are up $47/ton from April."

"I think another increase is in store – that's the talk within the industry," a buyer said. "Mills are saying 'you know there's another one coming.’”

However, a mill source pointed out that increase announcements tend to cause a run on inventory, and, right now, mill inventories are low.

Some buyer sources voiced concerns that higher prices would accelerate demand destruction, but mill contacts maintained the past three increases have in large part been cost driven.

"At the end of the day, print has to prove its value," said one.

"Mill costs are up and transportation costs are up. The first two increases covered costs and this one began to recoup price destruction over the last few years," one mill contact said.

The contact warned that some buyers with long-term contracts "at pretty good prices" have a shock in store when those contracts end.

"Some of those contracts are up to a year, so they will see the past three increases in one go, and that's huge," the contact said.

Cenveo asked a bankruptcy court judge in New York to approve an agreement with the US Dept of

Justice (DOJ) to end the $61 million contract for printing and mailing 2020 US Census materials it was awarded by the Government Publishing Office (GPO) last October. The agreement includes a $5.5 million cash payment to Cenveo as consideration for the consensual termination. According to a court filing, the DOJ was concerned about Cenveo's projected liquidity, and possible impact that might have on the production and mailing of US Census questionnaires in English and Spanish, letters, inserts, postcards and envelopes. Cenveo is expected to exit Ch 11 protection this summer.

R.R. Donnelley & Sons ordered six HP Indigo 12000HD Digital Presses in what HP said were the first purchases of this unit in the USA. The six presses are to be installed this summer. "HP Indigo technology is playing an important part in the growing transformation of the print industry from analog to digital printing," said HP Graphic Solutions Business Americas VP and general mgr Dave Prezzano, in a release.