From the manufacturers' perspective, the paper market is hurting. Catalog publishers are pushing more of their customers to the Internet. Some magazine publishers are cutting print in favor of electronic editions. And postal increases of the past few years have hampered the direct mail market.
One veteran paper broker said some paper companies see that magazine revenues are up and think that publishing companies should have more money to spend on paper. "But, really, they should be frightened because those revenues are all from conferences and webinars and e-newsletters," said the broker, who asked not to be identified. "The business doesn't revolve around print anymore. Print revolves around the business."
That said, here are four trends to watch in the paper industry:
Historically, the paper market has tended to be fairly volatile, going up and down in cycles of 18 to 24 months. "I don't think that will happen any longer. The increases and decreases will be much smaller now than they have been," said Keith Hammerbeck, director of manufacturing services at Advanstar Communications.
Many paper sales have been lost in the past few years, whether from cataloguers shifting to the Web or magazines moving to smaller formats. Because of these trends, mills are currently hard-pressed to charge more for paper. And it doesn't look like that will change anytime soon.
"If the mills' costs weren't going up, I'd think there would be tremendous pressure for the prices to go down," said Mike Bennett, a sales executive at Bulkley Dunton Publishing Group, which specializes in paper for magazines.
But given their current economic condition, there's not much room for mills to cut prices.
"The two price increases in the coated market this year were more need-based than demand-based. The mills needed those increases to survive," said the veteran paper broker who asked not be identified. "Publishers are in the driver's seat for the next year or so, if not longer."
Another paper broker, Gerry Chisholm, VP at Gould Paper, said now is a good time to try to lock in a price as far as possible into 2007, with a caveat in the contract that says if paper prices go down further in that time period, the price in the contract drops as well. "It's incredibly doubtful that prices will go up at all in that time period," he said, "but you might as well protect yourself."
Asian and European mills have been in the sheet-fed paper market for a long time and are starting to make inroads on the web-grade front as well. And while North American mills have been shutting down in recent years?a trend that's expected to continune?cheaper and more efficient ones are springing up in other parts of the world, particularly in China.
"The [Asian mills] haven't been equal in quality just yet," Bennett said, but the expectation is that it will only take a few more years before Asian web-grade paper is equal in quality to North American.
Asian producers are moving forward quickly with lightweight groundwood coated No. 3 paper. "If their quality is as good in web as it is in sheet-fed, you'll see a lot of change," the paper buyer said. "That's a 15% or 20% price reduction."
Hammerbeck said some paper from Asia now is of a higher standard than North American stock. "It used to be that you'd get cover stock with an 80 brightness, and now for the same price you're getting an 87 brightness," he said. "That's really changing things out there."
Ron Brockman, production director at Vance Publishing Corp., said the rise of Asian and European paper is a plus for another reason. "It limits paper exports," he said, "and that helps keep prices low here."
The rise of supercalendar
Lightweight coated groundwoods have been the norm in the magazine industry for years, but now supercalendar, which costs 8% to 12% less, is gaining in popularity. Supercalendar sheets (SC) used to pull apart on the press, but that's no longer an issue, Hammerbeck said.
"We did a test with SC and No. 5, and gave them both to my boss," Hammerbeck said. "He called me up and said, `You need to give me one of the SC.' So if he's not telling the difference at first glance, that's good."
Marie Myers, senior VP-manufacturing at CMP Technology, has had tests run at various printers with supercalendar and is considering switching one of the company's books from groundwood. She said the move could save the company a couple hundred thousand dollars annually.
"The quality isn't as good," Myers said. "But I don't think the end consumer is affected. We're not running makeup ads here."
Chisolm warned that the shift could have negative effects. He said one of his catalog clients moved from groundwood to supercalendar earlier this year and sales plummeted about 20%. "They're going back to coated," he said.
Keep on trimming
While many magazines have already cut their size from top to bottom and side to side, it is definitely worth looking at this option again, industry executives say.
"When you do the math, a quarter-inch here and a half-inch there equals a huge amount of savings," Chisholm said.
Advanstar trimmed its books last year, and Hammerbeck encouraged other publishers to follow suit. "There are a lot of publishers out there at larger sizes, so there's still plenty of room for trimming," he said. "If your printer has a short cutoff press, you can save 4.5% on paper right there."
Myers pointed out that trimming isn't the only way to realize more savings. She suggested moving some books to saddle stitching. Many publishers stick with 40- and 50-pound stock in order to remain perfect bound but could go to lower weights and smaller paper sizes if the books were saddle stitched, she said.
"We have a lot of monthlies that have been saddle for some time, and we've had no complaints," Myers said. "A lot of it is the market you're in and what your competitors are doing. They're all doing pretty much the same thing: anything to save money."