Paper Department

Is the Bull Emerging

he decline of the NASDAQ and NYSE indexes was eerily similar to what has been transpiring in the paper stock market over the past year. Through practically all of this year most paper stock grades slumped. Slow demand, soft prices, and significant downtime brought the bears out in force.

However, moving into the late summer and early fall there are some positive indicators. After a wrenching drop in prices, many pulp substitute grades have seen prices moving up firmly. Supply has dropped, which is one reason for the improved environment.

Low grades, especially the bellwether old corrugated container grade, while not showing an upward surge, appear to be stabilizing. There have been some reports of modest $5 per ton increases popping up in some regions. However, most vendors quickly report that the modest increase follows several quarters of declining prices.

Why the more positive signs? The biggest factor is the general state of the forest products industry. Over the first half of this year producers slashed production levels for practically all grades of fiber. Hundreds of thousands of tons of paperboard was taken off the market. Meanwhile, pulp producers, hoping to stem the sharp drop in prices, have removed ample amounts of production from the market.