Domestic Coated Grade Markets Still Soft

Estimated prices on No. 5, 40-lb offset rolls in the U.S. were down $25/ton to $835 - $875/ton in July, Mark Wilde of Deutsche Bank reports. Domestic demand remains soft (June shipments were -2.2% y/y). However, recent capacity reductions (Verso's 18,000 tpy Sartell PM 3 and Resolute's 150,000 SC machine No.1 at Catawba) will reduce North American coated groundwood capacity by ˜12% and tighten the demand/supply balance. These supply reductions have created some optimism on the $40 - $60/ton price hike announced by most producers for May/June, Wilde notes.

In June, No. 3 60-lb coated free sheet (CFS) prices were flat m/m, for the fifth straight month, at $965 -$985/ton, Wilde says, pointing out that producers failed to implement a $30/ton May price increase. Demand also remains weak, he reports, noting that, according to PPPC, June shipments were down 13.6% y/y. Operating rates were 86%, down from 99% in June 2011. "Globally, one of the biggest issues is the tremendous increase in Asian CFS capacity over the past two to three years," he advises.

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