Increased Demand For Paper Boosts Price To Record Levels

Look no farther than the newsstand or your grocery bag for evidence of the worldwide economic turnaround: A soaring demand for paper has pushed prices to near-record levels.

Virtually no type of paper is immune. Facial tissue, office paper, newsprint, even stock for cardboard cartons - all today are ringing in at 25 to 40 percent more than in early 1994, and further increases are expected, perhaps as soon as summer.

“The mills tell me that things are going to be like this for the next six quarters,” says Edward Rosenbloom, president of Empire Paper Co., a Boston office-paper distributor.

Supermarket shoppers now must speak up if they want paper bags instead of plastic. Office managers are trying to limit the number of photocopies being made. Printers are taking extra steps to reduce waste to keep customer prices in check. And newspapers are sometimes trimming features while raising prices to make up for higher newsprint costs.

Not surprisingly, papermakers are happy, saying that their industry has been absorbing losses through years of recession. Virgil Horton of the American Forest and Paper Association, a trade organization, says the papermaking industry has seen profits in only three of the past 14 years.

Another beneficiary is the recycling movement.

The price for baled scrap newsprint sold by Boston area dealers is about $100 per ton, up almost sevenfold in three years and a boon for communities that never expected recycling to make money.

All this comes after a five-year, recession-induced slump that industry leaders say was one of the worst ever in a business accustomed to cycles. Across the Americas, Europe and Asia, reduced advertising brought thinner newspapers and magazines, and product sales declines meant less packaging.

But papermakers, primed by the boom of the 1980s, already were building new manufacturing capacity to meet expected growth. According to the American Forest and Paper Association, five huge newsprint machines came on line in the United States in 1990 and 1991, costing nearly $2 billion and increasing production capacity by 9.5 percent. The story was much the same in Canada; between them, the two nations produce threequarters of the world’s newsprint supply.

With bills to pay on the new machines, paper companies began running them even before deciding what to do with older units. The resulting paper glut pushed prices down. That is, until the economy turned around last year.

Now, with the once-excess older machines out of service, rising demand is pushing prices to nearrecord highs. According to Pulp & Paper, a trade journal, the average price of a metric ton of newsprint - a benchmark in the industry - rose from $445 at the end of 1993 to $515 in December. A separate survey by The New York Times pegged the price in January at $552, jumping to $600 at the beginning of March and due to hit $675 on May 1.

The newsprint price see-saw was repeated in most other paper grades.

David Trader, general manager of the fine papers division of International Paper Co. in Westfield, Mass., said the mill price for white office paper was 51 cents a pound in 1989, fell to 32 cents in 1991, and was back this month to 53 cents.

He doesn’t see an end to the increases. New mills being built to reprocess waste paper are actively bidding up scrap prices - which in turn is boosting the price of the only alternative, virgin wood pulp. “They simply can’t get enough scrap paper to run their new machines,” Trader said.

Jonathan Gold, vice president and general manager for Newark Group Industries Inc., which deals in scrap paper and has mills in the Massachusetts communities of Natick, Lawrence and Haverhill, agrees, citing the impending opening of the recycling mill in Fitchburg.

“Our biggest task is to get office and building managers to put waste paper into the supply stream,” Gold said.

Suppliers of office paper say that while customers are complaining about prices, most have not yet reduced demand.

“An average person running a Xerox machine is not going to change their way,” said Rosenbloom at Empire paper.