Analyst says market for coated-paper rebounding

Posted Nov. 05, 2010, at 11:21 p.m.
Last modified Jan. 29, 2011, at 11:28 a.m.

Maine papermakers shouldn’t expect any significant gains next year from an Oct. 22 federal trade regulation decision to impose tariffs upon Chinese and Indonesian coated paper imports, an industry analyst said Thursday.

“Most of the impact that is going to occur has already filtered into the market,” said John Maine, vice president of world graphic papers of RISI, the former Resource Information Systems Inc. “The direct impacts are not that great for Maine, but there is still an indirect impact in that the mills in the Midwest are running more fully, and it [the ruling] will tighten up the coated paper market overall.”

A preliminary federal ruling, issued months before the U.S. International Trade Commission mandated the tariffs in October, caused two leading exporters of coated sheets of paper — Asia Pulp & Paper and Sun Paper — to pull their coated paper sheets from the market, Maine said.

Due partially to the ruling, the U.S. “mill operating rates in the industry are already at 100 percent and have been pretty much for the past six months,” Maine said.

The coated paper sheets cited are used in catalogs, books, magazines, labels and wraps, greeting cards and other items requiring high-quality print graphics.

Yet coated paper manufacturers Sappi Fine and NewPage, which have mills in Maine and were petitioners against the Asians in the case, sell their products in rolls, not sheets so didn’t directly benefit from the ruling, Maine said.

“The coated sheets tend to be made in the Midwest, but in some cases they [the papermakers] have sister mills in Sappi and NewPage,” he said.

Distributors affected by the ruling then offset the impact of the ruling somewhat by buying coated paper sheets from mills in Germany and South Korea and in some cases from NewPage mills in the U.S., Maine said.

So there was some benefit to domestic mills but also some benefit to some offshore suppliers, Maine said.

Tariffs, he said, “are very effective at supporting producers here in the domestic market, but on a global basis they really just shift tonnage from one region of the world to another.”

It will be difficult to measure the impact of the new tariffs, Maine said. Some of the coated paper price and production increases have occurred because the market continues to recover from the disastrous lows of 2007 and 2008.

Production in the coated paper market rose by about 20 percent in 2010, although the market fell by about 40 percent over the previous two years. Thanks to a weak dollar, which makes U.S. exports less expensive, and the continued recovery, that market increase should continue into at least the first half of 2011 with the overall, long-term downward market trend reasserting itself in 2012, Maine said.

“The economic recovery is continuing, so demand will continue to do reasonably well,” he said.

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