Paper Prices Catch Up To Renewed Growth

Paper prices increased sharply during the summer following the increases in other commodity prices earlier in the year.

The Producer Price Index for publication and printing papers spiked nearly 3% in June to the highest level in two-and-a-half years. Prices for packaging paper had risen similarly earlier in the year. In fact, the strengthening economy took longer to push paper prices up from the depressed prices seen at the bottom of the cycle. That was because of the relatively larger surplus capacity at paper mills compared to other commodity suppliers, along with the slim gains in paper demand early in the business expansion compared to demand for other commodities, such as oil, metals, and lumber.

Purchasingdata.com reports that transactions prices for most paper grades continued to rise in July, with further growth expected for several more months. Since paper mills are still seeking the "market clearing" prices for various grades, there is a large gap currently between posted and actual transactions prices. In 2005, prices will be less volatile, but will still be rising periodically for most paper grades.

Because of the sluggish recovery expected in print advertising volume, prices for publication paper grades will rise the least in 2004 and 2005, but most of the price increases are still ahead.