Domtar seeks to boost copier paper prices

Increase would boost prices by 36% since start of 2006

By Tom Stundza -- Purchasing, 1/23/2008 11:06:00 AM

J.P. Morgan analysts have confirmed that Domtar is notifying its customers of a $60/ton price increase on cut-size uncoated free sheet, effective February 15, which would boost the market price to $1,090/ton. If this increase sticks, buyers will; be paying 36% more for basic office white paper than they did in January 2006.

 “The magnitude of the price increase is larger and, importantly, the timing of the announcement comes earlier than we had been expecting,” says analyst Claudia Shank Hueston at J.P. Morgan Securities in New York. She writes clients that Domtar’s announcement reflects the current tightness in the uncoated free sheet market, “particularly the cut-size segment.”

The analyst expects such other producers as International Paper, Boise Cascade and Georgia-Pacific “to raise prices by a similar magnitude.” She believes this is likely, given low white paper inventories and healthy operating rates. J.P. Morgan estimates that industrywide operating rates will reach 96% in 2008, “a level that has historically supported pricing.”