Publishers confused by industry direction

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Michael Cohen, director of manufacturing and distribution purchasing at Reed Business Information, has been in the magazine business for almost three decades and has been responsible for paper-buying for RBI-US since the mid-1990s. Media Business: What do you foresee for the paper industry in the coming months? Cohen: Like most buyers, we're confused about the direction that the paper industry is moving. We understand the economics are poor. We understand the impact of the “black liquor” tax credits. But we don't understand the mills' latest price-increase announcements—without any significant increase in demand or decrease in capacity. Certainly, there has been no recovery in publishing, particularly in the b-to-b segment. Price increases at this point are, in our opinion, premature and will only serve to push publishers to transition to Web-based products at a quicker pace than they may have. MB: What do you think will be the effect of the paper coming from China these days? Cohen: The influx of the new freesheet tonnage from China that will be sold through Unisource will add pressure to North America-based manufacturers. I think the impact of the paper coming in from China will be determined by the strength and depth of the distribution network put together by Asia Pulp & Paper. Price is such a huge consideration now that I believe publishers will be willing to test the paper if its quality is at all near the level they have been using. If the quality is comparable to current purchases and consistent, and it offers a price advantage, I think many will try it. Publishers today don't have the luxury of overpaying for a component. MB: Can demand for paper ever return to what it once was? Cohen: I don't believe demand will ever return to the peaks of the past. The landscape has shifted to online. Print will still be an effective way to reach readers and prospects, but the emphasis has made the switch to online. MB: What effect do you see from the eventual removal of the black liquor tax credits? Cohen: I don't see how the paper industry can continue as is. The black liquor tax credit in the U.S. was an absolute life preserver for some of the mills. But it has postponed the inevitable resizing of the North American paper industry. Some mills are in a precarious financial position, and the removal of the credit will expose this weakness. I can't see mills being able to raise prices and hold on to them unless significant capacity is permanently removed from the market. I believe more shutdowns and consolidations are inevitable. It's clear, though, that the manufacturing platform has also shifted away from North America, and I can't see how this is going to change in the future. —M.J.M. MICHAEL COHEN Director of manufacturing and distribution purchasing, Reed Business Information
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