N.A. Uncoated Groundwood Producers Pushing for Increases

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Directory paper producers are pushing for a 7.5% increase in 2011 annual contract prices on the back of a $50-80/ton increase in spot prices since July, reports Mark Wilde, senior analyst with Deutsche Bank. Typically, Wilde explains, contract sales account for ˜85% of total North American directory sales and the level of spot prices determine next year's contract price. In September 2010, 22.1-lb directory paper prices were flat at $670/ton (+$70/ton y/y).

However, compared with September 2008, prices are still $45/ton lower. List prices for other grades were up in September: 35-lb offset was up $45/ton and SC grades (both A & B) rose $30/ton. All of the major producers announced $60/ton price increase on uncoated mechanical grades, effective mid-September/early-October. The increase is driven by improving fundamentals and a pick-up in advertising demand and catalog business (3Q magazine ads were +3.6% y/y), according to Wilde.