Dropping demand forces paper cuts

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Gerry Chisholm joined the paper industry in 1966 when he took a sales job with Diamond International. Since 1990, he's been with Gould Paper Corp., where he now serves as senior VP-sales. “Needless to say, things have really changed in my time,” he said. Media Business: What's happening with paper prices? Chisholm: They're going to go up in July. Some went up April 1 unless you had a six-month guaranteed price. Most astute paper buyers realize that the days of paper mills just making paper and losing money have got to end. MB: What's causing prices to rise? Chisholm: The only thing that ever makes paper prices go up is when customers fear that they're not going to get the product and the demand exceeds the supply. Increased expenses for mills may cause mills to close down more equipment, but [they don't] cause price increases. These increases are because people are afraid the five mills will become three, especially with continued rumblings of a NewPage-Verso joint venture or merger. MB: Are you expecting more closures? Chisholm: More machine shutdowns will certainly come with time. Paper demand is going to go down consistently. The state of Texas wants every schoolbook to be electronic in the next five years. On my vacation, every other person had some kind of electronic book, or tablet or something. MB: You're watching your industry crumble right there? Chisholm: It's a change in the way we do things in this country. We don't make automobiles the way that we used to. We don't make steel the way we used to. It's just the way it is. MB: What's your advice for paper buyers? Chisholm: Lock in for as long as you can, and then lock in price caps going forward for as long as you can so that any increases that you do get you can budget for. And be sure to get it all in writing. —M.J.M.
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