Commodity Report

It appears there is clear sailing for the next several months for paper stock markets. Demand for most grades remains strong, with mixed paper markets continuing to reflect healthy demand.

Domestically, finished paper pricing power is appearing to remain subdued. With an oversupply of production capacity, paper companies are continuing to announce plans to cut capacity through shutdowns of either machines or mills.

Among the companies that have announced significant reductions in paperboard production are Caraustar Industries, Austell, Ga.; Smurfit-Stone Container Corp., Chicago; Shorewood Packaging Corp., New York; and Domtar Inc., Montreal. The moves should ultimately help bring supply and demand back into balance. Any improvement in the supply demand model, many of these paperboard producers hope, will allow them to boost prices.

Abitibi-Consolidated Inc., Montreal, one of the largest newsprint producers in the world, also recently announced that it would be closing two of its paper mills until markets improved. The company also said that two of its mills that were previously idled have been permanently closed.

Despite the less-than-rosy short-term outlook for paper companies, many paper stock dealers are enjoying the continued robust export market, which has allowed prices for many post-consumer grades to stay at fairly high levels.