TALKING POINT/ PAPER STOCKS
The attempt by International Paper Co
<IP> and Stone Container Co <STO> to raise linerboard prices
could stick, industry analysts said, citing strong demand and
tight capacity. But they said rising inventories hurt the odds.
    "It remains to be seen whether the increases will be
accepted, but I think the odds are better than 50-50 they
will," Mark Rogers, paper analyst for Prudential Bache said.
    Mead Corp <ME> and Union Camp Corp <UCC> said they are also
considering price increases.
    Rogers, who has been aggressively recommending Stone and
International Paper for several months, said the increases
could stick because plants are running full tilt and little new
capacity is coming on stream.
    "The operating rates in linerboard are running at about 97
to 98 pct of capacity, but demand continues to climb," Gene
Cartledge, chairman and chief executive officer of Union Camp
said "The industry is essentially sold out."
    Cartledge said domestic linerboard shipments in January hit
about 1.6 mln tons, six pct higher than January 1986, while
exports hit 170,000 tons, three to four pct higher.
    Nevertheless, rising inventories could nip the increase in
the bud, Lawrence Ross, forest products analyst for Paine
Webber, said.
    "Containerboard inventories have been growing for the past
three months," Ross said. "Over that time inventories rose from
4.8 weeks worth of supplies to 5.9 weeks most recently."
    Also, Ross said that the Jacksonville, Fla., paper mill, 49
pct owned by Stone, is planning to come on stream again soon,
which may help alleviate some of the supply constraints. "The
plant's capacity, by itself, is about two pct of the industry
total," Ross said.
    But, Rogers said the Jacksonville mill "won't be enough" to
significantly ease tight capacity this year. The price increase
is necessary, he said, to attract more investment.
    Rates of return in the industry have been too low in recent
years to merit inventment in new capocity, Rogers said, adding
that he sees prices climbing to the 400 dlrs-a-ton range this
year.
    "The consensus on the Street is changing," he said, "from
whether there will be increases to when is the next increase
and how much."
 Reuter
