I am keeping a close watch on my "paper" crystal ball and am pleased to have a short report for you. There is a lot of activity in the paper industry; the most notable being the ongoing UPM strike and the announcement that MeadWestvaco is selling off its paper business.

Supply and pricing of coated papers is still a hot issue and one that is particularly pertinent for magazine publishers.  I see a temporary reduction in the supply of coated freesheet grades with a potential for this to reverse in the late spring as planned mill maintenance and rebuilding occurs. According to a source at xpedx, there has been some open machine time that was not there a month ago, yet there is no indication that prices will be lowered.  As far as groundwood goes, particularly the #5 papers, the tight market will continue with no end in sight.

Some positive results are being reported from paper manufacturing with increases in revenue due to higher selling prices for coated stock. The paper division of MeadWestvaco ended ’04 with a 10% increase in sales. Sappi, the worlds leading producer of coated fine paper, announced that while earnings suffered for the quarter ended December ’04, prices averaged 9% higher than the same period in ’03. Sappi also reported that coated fine paper shipments from US mills grew 10% over the previous year.

What will this mean for your paper requirements in the coming months? I see a continued tight market for coated paper, further price realization for the mills, and a steady demand for these products. Be sure to protect yourself and your business with:

• Careful planning, longer than usual lead times for ordering paper
• Realistic budgeting for your annual paper usage
• Ongoing discussions with your CSR to ensure your paper choices are working for you.