Jack Miller (aka “The Paper Guru from Pira International) expert on the paper industry and market.
• Still too much N.A. papermill capacity for the market, despite 11% capacity reduction since 2004.
• Consumption is flat +/-1% for uncoated free sheet.
• Papermills and companies have been essentially zero profit investments for 15+ years.
• $1 billion investment for latest technology papermills, which requires UFS pricing around $1200/ton for decent ROI. Needs $800/ton just to cover fixed and variable costs. Paper is currently running $800-850 a ton, providing minimal ROI.
• Mills run essentially “full” at around 93% of capacity. Because of minimal ROI, above 93% of capacity means a tight market and rising prices but pricing gets soft once run rates drop below 91-92%. Thus the volatility in the markets.
Additional comments from Eugene Schwartz from Foreword Magazine:
bostonprintbuyers.com/notices/newsrelease06-11-07foreword.html