Print Version

December 2006 - The year 2006 was very active for the office/business papers industry. This month’s feature counts down a few of the major happenings in 2006 and mixes in a little speculation about 2007.

	Five is the number of major domestic paper mills producing commodity white office paper in 2006. They are, in descending order of applicable size/tonnage: International Paper, Weyerhaeuser, Domtar, Boise and Koch (formally Georgia Pacific). But how quickly things change! There were some very significant announcements in 2006. Domtar and Weyerhaeuser announced a merger where the new company will retain the name Domtar. The combination of these mills will make them the largest domestic producer of business papers. So while International Paper may be bumped down to the second slot from a tonnage perspective domestically they still retain the #1 position globally, further strengthened by their announcement to purchase certain mill assets of Brazil’s Votorantim Celulose e Papel S.A. So the mill landscape going into 2007 will be somewhat different than this year. We’ll watch the emerging “New Domtar” with interest and also see what International Paper does with their new Brazilian assets. For more info, reference the “Change Is Coming” feature in our PaperRap.com archive.
	Four is the number of basic paper grades for white office papers. They are: Laser, Ink-Jet, Copy and Multi-Purpose. While other grades of cut-sheet office paper exist, such as green-bar continuous feed computer paper or business stationery, most of the volume flows through the four grades above. A good way to think about these grades is to associate them with the office equipment they are designed for. Laser paper has attributes engineered into the sheet to best work with laser printers. Same thing with Ink-Jet paper and ink-jet printers. Ditto for Copy paper and copiers. And as the name suggests, Multi-Purpose papers are designed to work very well in all basic office printing/copying machines. There are up-sell opportunities to move your customers into higher margin products. One way is through matching their equipment to a specific sheet as described above. The other component is to match application to a sheet to get the best results. For example, a financial statement or marketing piece should be printed on a higher grade of paper to look their best. For more info, reference the “Making the Grade” and “Tips for High Margin Paper Sales” features in our PaperRap.com archive.
	Three is the number of price increases the industry saw in 2006. They happened in March, April and June for a cumulative inflationary impact of 20-25%. Key factors driving the cost increases were mostly supply side. Probably most importantly the paper mills took out about 10% of total manufacturing capacity so available supply was restricted. The industry was under enforced allocations for most of 2006, though conditions have recently started to loosen a little. But they haven’t loosened enough to de-stabilize current prices which hopefully will hold constant through Q1. For more info, reference the “Foreseeing a Paper Price Increase” feature in our PaperRap.com archive (note our prediction of a Q4 2006 increase turned out to be off the mark).
	Two is the number of very major foreign mills who significantly reduced their exports to North America in 2006. They are: Mondi and Votorantim. The 2005 domestic industry shift to standardize office paper brightness at 92 (GE/TAPPI scale) at then current 84 bright prices greatly closed the brightness gap with foreign producers. That combined with late 2005 deflationary domestic prices put pressure on the foreign mills who began to withdraw their North American tonnage for greener pastures elsewhere. Ongoing supply allocations by domestic mills together with stable and higher prices have left the door open for foreign mills to once again have a profitable opportunity here. As stated in #1 above, International Paper will own the Voto machines, so that will be something to watch. Also, the premier Portuguese mill Soporcel is building a new giant machine scheduled to come on line in 2008 with some of its capacity dedicated to the US market (they currently export 100,000 tons a year here into 5 distribution centers mostly under the Navigator brand).
	One is reserved for you, the faithful PaperRap.com visitor and United Stationers customer. Thank you for making 2006 a great year for office paper. As of this writing total customer unit purchases were up double digits over 2005, which was itself a solid growth year. With consumer demand only growing 1% (at best) in 2006 that means United Stationers and our customers were enjoying increased share by out-pacing the market. We appreciate your business and will work hard to continue to earn it in 2007 and beyond. Happy New Year and Good Fortunes! - United Stationers Paper Specialists