Paper Industry Begins to Stabilize

It’s no secret that the paper industry has suffered through volatility as digital mediums wrest readers from print. The aggregate effects of publishers slashing pages and mills shutting down swung prices wildly over the past several years on yet another front of the battle between digital and print.

The market may be stabilizing though as paper mills adjust and page counts slow their decline.

For Terry Choate, president of Making Magazines, static pricing has been a function of the paper mill industry’s ability to manage their own supply.

“The paper mills have done a better job downsizing recently,” he says. “[They’re at] the point where their capacity is pretty much in line with demand.”

The other side of the pricing equation—demand for paper—has stayed relatively flat or declined slightly as of late, Choate says.

Ad pages, a generally reliable indicator of overall page counts, declined 8.3 percent for the industry as a whole in 2012, according to PIB. The numbers stabilized through the fourth quarter however, ending with a 7.3-percent reduction year-over-year.

The gradual stabilization of the paper mill industry, page counts, and therefore pricing, played out in last year’s fall increases. The 2012 catalog season saw a roughly $3/CWT bump across the board—a standard hike Choate says—but those prices have yet to come back down.

“It stuck,” he says. “Prices haven’t decreased since that [fall] increase. And that has to do with that consolidation of paper mills and bringing capacity in line with demand.”

Marie Myers, senior vice president of manufacturing at UBM, agrees. She’s seen the same prices holding in the market, as well.

“They haven’t really shifted one way or the other,” she says. “They’re holding.”
The future is a little less certain though.

New players in paper manufacturing—especially those in emerging markets like China and India—could have a significant impact. It’s too soon to tell what role they’ll play, but right now it’s clear they’re investing. Even traditional indicators like import levels have been largely negated by federal trade regulations, so things are murky at the moment. As a result, Choate is leaning heavily on page counts to determine where paper pricing will go.

“I don’t think the paper industry is going to be much different than it’s been the past couple years,” he says.

Ways to Save
Price stabilization is welcome news for suppliers who have suffered through swings recently, but it keeps overhead locked in for publishers. They’re forced to cut grades, weights or trim sizes if they want to save on paper costs.

While Myers says publishers should consider their competitive set before lowering their stock, there are ways to mask quality reductions with layout and printing solutions. Editors and page designers should be aware of heavy, solid-color backgrounds and full ad pages that can bleed through when switching to a lower grade or weight.

Rick Frank, a pressroom operations manager for Quad/Graphics, says that communication between printer and publisher can usually solve any issues that arise though.

“Day-to-day, specs are very close, but some [publishers] might like purple colors, some might be more concerned about flesh tones,” he says. “If that conversation is had up front, we can make adjustments specific to their title to account for that lower grade of paper so we don’t lose that contrast or that flesh tone.”

Most glossy papers can handle what the average publisher is going to ask for, but there is a limit, Frank adds.

“The one thing I think publishers need to be aware of is total area coverage,” he says. “If they’re printing close to a 300 percent total area coverage on a page, and now you’re downgrading your paper, that should be a consideration. Obviously, a nicer stock is going to be able to take 300 percent coverage, but when you start into the lower grades, you’re going to have a problem. It’s going to be very prone to plugging and looking very grainy and wet on the sheet.”

Reducing paper quality is often painless though—at least dropping one or two weights or grades. Most publishers tend to over-spec their paper anyway, Choate says.

“There is no reaction at all, no one even notices it,” he says. “[Publishers] have to be realistic about the people that they’re reaching. Most think that their magazine has to be on this beautiful, heavy paper, but they never test it. You’ve got to test it to see if your market will bear a lower quality or a lower weight paper.”

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