Re: ONP Market Situation -Reply

Chaz Miller (
Fri, 22 Jan 1999 16:53:10 -0500


Your analysis of the paper industry response on newsprint prices is
slightly inaccurate. Newsprint prices spiked in response to a doubling of
virgin pulp prices. The newsprint companies were simply responding to
a dramatic increase in their raw material prices. The newspaper
companies responded in a classic market manner: they source reduced
their use of newsprint: this included tighter inventory control at news
delaer outlets, smaller sized sheets and withdrawal of circulation from
some geographic areas. The two Denver papers offer a good example
of this: the Denver Post is now printed on a smaller sheet size and the
Rocky Mountain News is no longer distributed out side of the Denver
metro area.
Other paper users also found ways to cut back on their paper
purchases (in fact, some of the most dramatic examples of paperless
offices, such as Owens-Cornings new headquarters office in Toledo
were insipred in part by high paper prices).
We are now faced with a 300,000 to 600,000 excess inventory of pulp
in the NORSCAN markets and perhaps as much in other markets. No
wonder virgin pulp prices have collapsed and taken wastepaper prices
with them.
Afternoon papers were pretty much gone well before the pulp prices
increases that lead to the source reduction reaction.

>>> "William P. McGowan" <> May 1, 1997
8:43 am >>>

My read on the ONP situtaion is tied to three phenominon:
1) Paper industry price gauging of three years ago
2) Consumer/advertiser preferences
3) Relatively high contamination

1) Price gauging of the past--as we all know, eveything in the paper
industry hit all time highs three years ago. For those firms that could
pass on the costs to their customers, fine, but for those marginal
papers, usually the "afternoon daily in major cities, the price spike in
news was the final nail in their coffin. their production costs doubled
at a time when their readers were increasingly less willling to abosrb a
price increase. Now that many of these afternoon dailies are gone,
there is nowhere near the previous level of demand for newsprint, and
the market has not had long enough to create new sources of demand. I
call this the too much newspaper chasing too fews newspaper
companies scenario.