MINNEAPOLIS – March. 22, 2006 – The recent Gulf Coast Hurricanes, Katrina and Rita have left no industry unaffected, including the paper and printing industries. Pair the economic consequences left in the Hurricanes’ wake with North America’s largest paper mill restructuring in 25 years. The result? Printers and print buyers are forced to find new methods, both creative and timely, to deal with rising paper costs and slightly longer paper lead times.

Uncoated paper pricing has been the most negatively affected by adverse economic conditions, but has also seen marked optical improvements in recent months. Commodity brands have upgraded brightness from 84 to 92. Additionally, most leading opaque brands have seen brightness increase from 92 to 96. As a result, print buyers and their customers are enjoying cleaner, crisper end products.

Unfortunately, the enhancements in paper brightness have become somewhat of a catch-22 for printers and their buyers. High demand for uncoated papers with brighter optics has put a strain on the paper industry worldwide. That strain is perhaps greatest felt in North America.

As printers and their buyers clamor for the new, brighter uncoated paper, the United States and Canadian paper industry is undergoing its deepest restructuring in 25 years. Full and partial mill shutdowns and the retirement of high cost older paper machines has North America’s paper industry struggling to meet increased uncoated paper demands. In Canada alone, a stronger Canadian dollar, and high wood and energy costs have already closed many Canadian paper mills reducing paper production capacity by 9%. Since a fair amount of paper purchased by American business comes from Canada, capacity closures have reduced the amount of inventory readily available to print buyers.

Paper mill shutdowns, decreased paper capacity and increased costs for uncoated papers is a trend that will continue throughout 2006. Paper mills will reportedly operate under allocations for the first half of the year. These market conditions have forced some suppliers to increase, even double, delivery time from mill to printer. Industry analysts predict that from 2005 through 2007, over 1,500,000 tons of uncoated paper capacity shutdowns will have taken place throughout the United States and Canada! Uncoated paper producers have already instituted a 10% markup on January 2006 paper orders. Experts predict 1 to 2 additional markups in 2006.

Finished coated papers have not escaped the wrath of Hurricanes Katrina and Rita either. Although domestic paper suppliers have reported good inventory levels and seen shipments continue at a fairly normal pace, these natural disasters have increased suppliers’ energy, chemical and transportation costs. Since coated paper mills are financially unprofitable, these added costs have negatively impacted mills and machines with products in weakest demand, namely freesheet and groundwood coated paper. To date, 6% of North America’s freesheet and groundwood coated paper mills have closed.

Industry analysts predict that like the uncoated paper market, the coated paper market will remain tight throughout 2006 and print buyers can expect 1 to 2 markups on coated paper orders.

What does this mean for our customers? Our account executives will work closely with our paper suppliers to ensure lead times meet customer expectations, regardless of the market’s current paper order backlogs.

We plan for economic conditions such as these. However, print buyers should talk to their GLS representative about paper choice alternatives, creative printing methods and lead times well before scheduling press time. Because, regardless of what happens within the industry and economy, proper planning will help print buyers stay within budget and meet even tight deadlines. That’s GLS’ goal.