Stormy Forecast for Paper Buyers

So that’s how we got here: reduced supply, falling dollar, private equity ownership. These conditions justified price increases, and mills have demanded them. Are they happy yet? Not really. Despite the 2007 round of price hikes, increases in the direct costs of paper making have munched up much of the revenue. Fuel oil, which affects both papermaking and shipping, is the main villain, but raw materials have also been increasing. In short, if the market can support further price increases, they’re on the way. Increases of $50 to $60 per ton have been announced for July. It will be tough for mills to get the full amount with demand weakening, but some of the price hikes may stick. Expect about a $30/ton uptick when the dust settles.