Sector Snap: Paper and pulp producers raise prices

Prices for paper and pulp jump as producers respond to tight supplies and increased demand

• On 1:37 pm EDT, Friday August 28, 2009

NEW YORK (AP) -- Paper and pulp producers raised prices this week as the once-beleaguered industry takes advantage of several years of capacity cuts amid scattered signs of a post-recession rise in demand.

RISI Inc.'s Pulp and Paper News Service reported Friday on numerous price increases, including some for a material known as pulp, which is used to make absorbent tissue products, as well as various types of paper, including grades used by newspapers, glossy magazines and office supply companies.

Wall Street analysts said some of the price hikes reflect foreign buying, while others reflect tighter domestic supplies.

"The pulp market has been on a tear since China resumed buying aggressively earlier this year," D.A. Davidson analyst Steve Chercover said Friday in an email to The Associated Press.

"The big question is whether the Chinese are building significant inventories or consuming the commodity in their growing domestic paper industry. Bears believe the former, bulls believe the latter."

Paper prices, which have endured numerous cuts during the recession, are pushing higher after several years of plant closures.

"Producers are trying to raise prices in the second half of the year after focusing on capacity management during crisis of early 2009," Chercover said.

"Producers have had varying degrees of success depending on the grade they produce, with newsprint producers having seen their prices drop to cash costs amid cratering demand, while uncoated freesheet and packaging producers have maintained significantly better margins and have better demand prospects going forwards."

In afternoon trading, International Paper Co. rose 17 cents to $22.47, Louisiana-Pacific Corp. gained 1 cent to $7.54 and Domtar Corp. added 54 cents to $35.56.

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