World Paper and Printing Markets
Pricing
Paper company managements work hard to reduce fixed and variable costs. However, the topic that paper markets watch more than any other – even cost trends – is pricing. (Whether this is a healthy allocation of management’s time is a question we will address below.)
To understand future price movements for most printing paper markets, we try to get our arms around inventory trends. Printing papers are enough of a commodity that price changes are triggered primarily by the abundance or scarcity of inventories in relation to the size of the market.
Market psychology, which also plays a role in pricing, is primarily driven by inventory trends; although it can also be affected by the expectation of future fundamental shifts in the market. For example, in late 2007, newsprint buyers in the U.S. began to accept a series of price increases in spite of the fact that inventory levels overall were at a fairly normal level.