PREDICTION FOR PAPER FAILS TO LIFT PUBLISHERS

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A leading paper industry expert surprised publishers at the American Magazine Conference last week by predicting no paper price hikes in 1996.

But after a year of brutal increases, some publishers viewed the prediction with skepticism.

"I don't think we will see any further price hikes in 1996," said John Maine, VP-printing and writing papers at consultancy Resource Information Systems, Bedford, Mass. "The bad news is I don't think you should hold your breath waiting for a huge decrease. Even though demand is weak, I'm not projecting an actual drop in demand, just a slowdown in demand growth."

All of this should have been welcome news to publishers who have been hit by paper mills with five price increases in the past five quarters-boosting the list price of coated groundwood paper nearly 60% above its mid-1994 price.

But neither Conde Nast Publications President Steve Florio nor Hearst Magazines President D. Claeys Bahrenburg was swayed, at least when it came to the lightweight coated groundwood grades most heavily used by magazines.

"We're expecting two [price hikes] next year," said Mr. Bahrenburg. "The free sheet market is soft but groundwood is pretty strong. If we see any falloff [in the price of coated groundwood], it won't be before the end of 1996."

Mr. Florio also said he was expecting two price hikes next year for coated groundwood. "Mr. Maine made a similar speech about paper prices in 1995 and we had more than a 40% increase this year alone," he said.

But the forecaster did find one key supporter in Don Logan, president-CEO of Time Inc. "I think we are nearing the peak of the market," Mr. Logan said. "From what I hear there is no rationale for any more price increases for some period of time. Demand and supply have kind of caught up."

Others agreed with that assessment. Harry Quadracci, chairman-CEO of printing press giant Quad/Graphics, Pewaukee, Wis., said his inventory levels were 40% higher than a year ago.

Mr. Maine also said that historically, rapid increases are followed by sharp downturns. Today, the list price of $1,400 a ton for No. 5 34-lb. coated groundwood is $100 to $150 higher than it's ever been before, factoring in inflation. "The only time period in which we've seen paper prices even approach the kind of escalation we saw in the past 18 months was 1973 when President Nixon released [price] controls," he said. "Then paper prices went up 30% in a very short period of time. Within 12 months after that happened, paper demand dropped more severely than it ever dropped before.'

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