PaperAge Magazine

Domtar and PCA Lead Uncoated Free Sheet Price Increases

Rolls of uncoated free sheet paper

Sept. 12, 2017 - The following is insight from Vertical Research Partners' packaging and forest products analyst Chip Dillon on the recent uncoated free sheet price increase announcements.

Domtar and Packaging Corp Lead Uncoated Free Sheet Price Increases

"Last Wednesday we learned from trade publication RISI that Domtar announced a $40 per short ton price increase on its main uncoated free sheet paper grades — with its remaining paper grades adjusted accordingly based on the existing standard differentials and upcharges. The increase is effective on October 6th. Two days later, last Friday, Packaging Corporation of America (PKG) followed Domtar with its own $40/ton price increase for uncoated free sheet, effective on October 9th."

Editor's Note: Packaging Corp. of America is the parent company of Boise Paper, a producer of uncoated free sheet.

International Paper Just Completed Puzzle

“Domtar is the largest producer of uncoated free sheet in North America, with an estimated capacity of slightly over 3 million tons out of a total stated market capacity of 9.3 million tons (according to RISI). PKG is the third largest white paper manufacturer in North America, with a capacity of more than 900 thousand tons, even without any contribution from its Wallula, Washingtion, paper machine. International Paper is the number 2 player in North America with a capacity of 1.8 million tons (its global capacity is 4.4 million tons). Privately-held Georgia Pacific is also a large producer of uncoated free sheet.

“Our view was that at least one of the two — and IP ideally — would have to come forward with a similar price increase for the initiative to be successful. None of the two had disclosed any price increases… until last night, when IP completed the top-three puzzle. The firm announced a similar $40/ton price increase on Monday night.

“We also note that a smaller producer of uncoated free sheet, Verso Paper, announced a price increase of $40 and $50 per ton for two white paper grades. Right now, the firms with announced price hikes control more than 70% of North American uncoated free sheet capacity.”

Vertical Research Partners is the preeminent independent equity research and consulting firm focused on the Industrials and Materials sectors. To learn more, please visit: www.verticalresearchpartners.com.

SOURCE: Vertical Research Partners