Newsprint Market in Confusion

As reported in our past releases, newsprint prices have fallen around $195/ton or 28% so far this year. Demand has also steadily declined, but, Kruger, Catalyst, Tembec, and White Birch announced a $50/ton increase for August shipments, despite the weak market.
Newsprint demand in North America fell nearly 29% in May – vs. 2008 and 31.7% so far this year vs at this time in 2008. Furthermore, consumption at US dailies fell 26% and paper mills only are operated at 67% of capacity (vs. 94% in May 08).
Note: we continue to report producers continue to take downtime (693, 000tons or 27% of North America quarterly capacity during 2Q2009), the reality is that more permanent closures are
inevitable.

USPS Reports Loss for May

The U.S. Postal Service reported a $677 million net loss for May which yields a year-to-date loss total of $3.4 billion. Also, reported was a 20% drop in overall volume for May and a 13% decline year-to-date. Periodicals volume dropped 13% for the period and 7% year-to-date.

Gannett Reports more Challenges

The Gannett Co. confirmed it will reduce its workforce. The company is preparing to lay off more than 1,000 employees as the largest newspaper publisher's workforce continues to shrink along with its advertising sales. Note, we reported in past that Gannett reduced its workforce 3,600 from 2007 to the end of 2008.

Vibe Magazine Folds

Vibe, a staple of music journalism since 1993 and one of the most influential publications has folded. The company was unable to secure financial backing, or to restructure its debt. Declines in the music industry and in advertising worked against the business. It had been a tough year for Vibe, which faced a steep drop in ad pages and circulation. The magazines circulation base was 600,000 from 800,000. Vibe also had reduced its frequency from monthly to 10 times a year.

Kimberly-Clark Slims Down

The maker of Kleenex tissues, Huggies diapers and many other household items plans to cut 1,600 jobs, of its global work force, as it slims down in the tough economy.
Kimberly Clark does not plan on closing any plants.
Shoppers have cut back on spending because of the recession, high unemployment and the housing downturn. Meanwhile revenue, which had been steadily rising, began to fall late in 2008.

Top Tag and Label Converters

Although the USA tag and label segments fared better than most in the Pulp and Paper industry, with 2008 growth at 2.1% - this was down from forecasted 5%. Many believe this segment will begin to witness consolidation. Top ten converters include-
RR Donnelly
Avery Denison
CCL
WS Packaging
Fort Dearborn
Multi Color
Nashua
York
Spear
MPI Labl

Erving Paper Operates under Chapter 11

The Erving Paper Company, which has a 40,000TPA operation in Massachusetts, continues to produce recycled tissue under Chapter 11. Management sited increased competition, and an underfunded pension plan as reasons for this protection.

More Downtime for Catalyst

Catalyst Paper will extend downtime at its recycled newsprint mill in Arizona by an additional 10 days. Catalyst’s Snowflake mill consumes more than 480,000 tons/yr of recycled paper that would otherwise end up in landfills

Chicago Tribune Makes Changes

The Chicago Tribune Magazine will cease as a weekly publication after July 28, as part of a series of changes to the Sunday paper to cut costs.
In a note to readers, Tribune editor Gerould W. Kern said the magazine will "appear as a series of themed magazines throughout the year—roughly once a month beginning in September."
Kern said declining advertising and high cost made weekly publication "unsustainable."

International Paper certifies most Plants with FSC

International Paper announced the expansion of its Forest Stewardship Council (FSC) Chain-of-Custody certification to include a majority of its U.S. pulp and paper mills. The company will be the largest FSC manufacturing platform across the globe..
With its expansion, International Paper's FSC Chain-of-Custody certification worldwide includes: three Coated Paperboard mills and its six converting facilities; four Pulp operations; six Industrial Packaging mills; seven Printing Papers mills and its sheeting operations; and a number of Foodservice and Shorewood manufacturing facilities.

Less Discounting for Uncoated Free Sheet

Although Coy Paper Company continues to witness price corrosion for Uncosted Free, the price declines appear to be leveling off. So far, for June, we only hear $5-10/ton discount from May. This results in 50lbs roll price $810-855, with spot pricing slightly below $800/ton,. Cutsize office paper transacts $120-1080/ton (spot below $1000). The two major producers of this grade, International Paper and Domtar, continue to take down time. May demand was down nearly 15% from May of 2008.

Containerboard Prices Remain Stable

Recent reports on market pricing for Containerboard point to staple pricing of approximately $540/ton for June shipments. The major manufacturers are closely monitoring inventory levels (actually down 96,000 tons) and lower production to keep pricing in check. Further, industry analysist Mark Wilde comments, additional permanent closures appear inevitable given the the weak domestic demand and estimate of over 4Million tons of excess capacity. He also reported box shipments declined 10.7% .
Producers continue to take extensive downtime. Coy Paper estimated 1.4Million tons in Q2
(1.7million tons in Q1). Smurfit recently announced 524,000 downtime at its Jacksonville, FL plant.

Tembec Cancels Downtime

Tembec canceled plans to take market related downtime at its Skookumchuck pulp mill in Canada. The mill was to be shutdown for a two-week period beginning June 29. Reversed decision was based on modest improvements in pulp pricing.

Crain’s New York Business Reduces Issues

Crain’s New York Business is reducing its print issues to 46 times this year from 51. They join the other publications on searching for efficient ways to cut costs.

Reader’s Digest Makes more Changes

Reader’s Digest Association will reduce the publication frequency of its magazine to 10 times a year from 12 beginning with the February 2010 issue. It will also reduce its rate base to 5.5 million from 8 million over the next 10 months.

AF&PA Reports on First Quarter

The AFPA released figures showing that the value of pulp and paper produced by its mills in the first quarter was $292.1 million versus $373.2 million in the corresponding period last year – a 22% decline.

Fraser Paper Seeks Bankruptcy Protection

Fraser Papers Inc. announced restructuring for both Canada and the United States. Fraser said weak lumber and pulp markets have led to losses and offset profits in its paper business. The company also cited a pension-funding shortfall as a reason for the Chapter 15 bankruptcy filing. The company's two paper mills in Madawaska, Maine and Gorham, N.H. will continue to operate without disruption, manufacturing specialty paper products for existing customers.

Newspapers looking at New Models

The forecast for printed newspapers continues to be doom and gloom and many publishers are exploring alternative business models. Most now offer the news in an electronic version – for free. This will change. Newspapers are reviewing applications that allow a charge to end users. The companies are also designing personalized emails that forward focused news along with banner ads and RSS feeds for additional fee based programs.

More Newspapers Join Yahoo

Five more newspapers have joined the Yahoo Newspaper Consortium, according to Reuters. The new additions bring the consortium to 814 newspaper members, which Reuters says accounts for 51 percent of all Sunday newspaper circulation.
The Yahoo alliance has been one of the few bright spots for newspapers. A recent estimate by Ad Age found that the two-and-a-half year-old consortium sold $50 million in Yahoo ad inventory, with about 'several million' dollars in sales being added each week."
FYI. 592 newspapers in the consortium rely exclusively on Yahoo's HotJobs for help-wanted ads.

Web Browser's Ranking

Since my other company is Paper.com, I thought I would share recent ranking of web browsers. In order of popularity-
Microsoft – Internet Explorer
Mozilla Firefox
Apple Safari
Google Chrome
Netscape
Opera
Other
AOL

Trends for Paper and Film Converters

PFFC recently released the results from a survey with included converters and suppliers of Flexible Packaging (30% of respondents); Unprinted Paper (24%); Labels, Tapes, Tags (24%); Paperboard Pkg, (14%).
Expectations for 2009
45% believe volume of orders will be down and 53% report order size down
46% forecast receivables will advance
49% predict selling prices will increase; while 55% thought profitability would decrease
35% will spend more on expanding product line into new markets
Only 19% stated an increase over 2007 for CAPEX allocated for new equipment
A whooping 84% believe materials will increase (forecast 8.8% increase)
62% felt plant capacity and backlogs would decline over 2008.

North American Printers Post First Quarter Loss

We reported, in this section, earlier this year on printer's financial results, PPI just released the following:
A composite of seven major commercial printing companies in North America posted a first quarter loss of $30 million, according to a PPI Pulp & Paper Week survey. It was the group’s first quarterly loss in more than five years. Combined sales for the seven firms declined 19% compared with first quarter 2008 and by 15% from the fourth quarter 2008.

Publishers Continue to Reduce Weight of Paper

In an effort to reduce the overall cost of a publication, publishers continue to reduce the size of the piece and the basis weight of the paper. Consultants fear that although these reductions could result in lower mail costs and more economic yield savings – BUT beware of the consequences. Most paper producers will price the lighter weight paper at a greater price. Although there is still a postage savings; further disadvantages include less opacity and rigidity in the lighter weight paper – yielding a ‘cheaper’ looking printed publication. This diminished appearance could tarnish the image of the company and the company’s products and overall branding.
I note, one other important attribute of lowering the weight and size generates less paper consumed, thus, better for the environment. Coy Paper Company can assist with any sourcing challenges for a lighter weight paper.

Canada to Subsidize Paper Mills

The federal government is set to announce a $1-billion package to help Canada's pulp and paper industry by countering a U.S. subsidy for using alternative energy.
The funding will be in the form of grants over a three-year period available to all 71 Canadian pulp and paper mills that make capital improvements to reduce their dependence on traditional energy sources.
The aid is in response to counter the so-called "black liquor'' subsidy to pulp mills in the U.S., which has been estimated at between $6 billion and $8 billion.

Growth in Demand for Labels

Notes from Freedonia Group survey
World demand for labels is projected to expand 4.3 percent per year through 2013 to 49 billion square meters to $105 billion. The pressure sensitive segment (which overtook the wet glue segment in importance at the global level in the late 1990s) will continue to see above-average gains, accounting for almost 55 percent of global label demand by 2013.
More trends: Wet glued products will not fare as well as PS labels, with demand even declining in many developed food and beverage markets. Other favorable outlooks include shrink sleeve, wraparound film and in-mold labels. Through 2013, plastic labels will continue to register much faster gains than paper labels, which are largely used in wet glued applications.

The Asia/Pacific region will expand its share of the world label market from 32 percent in 2008 to 36 percent in 2013. China and India will account for much of this increase, while Japan will see weak growth. The US will see below-average gains through 2013, but remain strong relative to other developed markets. Western Europe will see a noticeable deceleration in its label market growth, with some highly intensive (relative to population) users of labels in the region such as Ireland, Scandinavia and the United Kingdom expected to see outright declines. Latin America, Eastern Europe and the Africa/Mideast region, which combined accounted for less than 20 percent of global label demand in 2008, will all see above-average gains through 2013.

Among the various market segments, the smaller pharmaceutical sector will register particularly strong gains, aided by improving health care in the developing world and an aging population in the developed world. The food and beverage sectors will see weaker gains as a result of market maturity and stagnant population growth in the developed world, combined with the increasing penetration of cans, pouches and other packaging media that utilize printed product descriptions rather than labels. Label products with strong growth will include counterfeit deterrence labels, retail sector RFID tags that allow labels to assume inventory control and management as well as convey information, and tamper-evident labels.

More on Pulp Pricing

Tembec informed customers it would increase the price of northern bleached softwood kraft (NBSK) pulp by $40/ton to $700/ton effective July 1. Earlier, we reported Canfor Pulp, Northern Pulp Nova Scotia, West Fraser and Domtar announced an NBSK list price hike to $700/ton in North America.
Most buyers now feel North American NBSK prices will actually rise (first time in 11 months) Perhaps ‘real’ June increase felt will be $25/ton to $660/ton, driven by reduced supply from production downtime and closures and continued strong demand from China. Spot USA NBSK prices for big purchases might rise $15/ton to $510-530/ton. Reports suggest that most of the major producers are planning to increase prices again by $30-40/ton for July shipments.

Boston Globe For Sale!

The Boston Globe reports three are interested in acquiring the paper. Announced parties that are in discussions include Stephen Pagliuca, a private equity executive and co-owner of the NBA's Boston Celtics; Jack Connors, cofounder of a Boston advertising firm and chairman of Partners HealthCare; and Stephen Taylor, a former Globe executive whose family sold the paper to the New York Times Co. in 1993 for $1.1 billion.

Growth Still Seen in Food Packaging

If the forecast by The Freedonia Group is right, by 2013, Americans will use a staggering 300 billion food containers each year. The Group predicts that US demand for food containers will grow by 2.5 percent annually over the next five years to a total value of $25 billion versus $22 billion in 2008.
Demand for bags and pouches has grown by a robust 5.9 percent annually, from $6.9 billion a year in 2003 to $9.3 billion last year. Despite an anticipated drawnout economic recovery, the demand growth for bags and pouches is expected to be a steady 3.3 percent annually over the next five years.
He says the proliferation of convenience and single-serving food packaging has been a trend that has been gathering steam. Several factors have made such packaging popular, including smaller average household sizes, the increasing maturity of the US population and rising numbers of dual-income and single-parent households. Coy Paper Company LLC markets many products into the food and be

The Paper Market Continues its Challenges

More reports confirm May shipments on Printing & Writing papers remain weak. Uncoated free sheet down 14.7% (YTD -15.8%), Coated Free sheet decline of 30.4% (YTD - 30.4%), Light-Wt (publication) Coated off 27.5% (YTD -36.5%).

Update on Market Pulp

Notes from Deutsche Bank Conference, Brian McClay
>Spot pricing and demand for market pulp has been increasing for past 60-90 days (formal price increase announced June 1).
>Most of rally caused by increase in Chinese demand (up 60% YTD +2.3million tons - through May). Advanced price also driven by most pulp mills taking down time and mill closures (2Q2009 – 20% idled / 5.4million tons out of market last 12 months).
>Why China up? Buying lower cost imported pulp (vs. domestic); willing to inventory higher level of finished paper; pulp inventory high.
>Forecast is for additional 2million tons of pulp production curtailed by end of 2009; BUT, new capacity from Brazil (VCP) and Chili (Arauco).
>Conclusion, McClay believes pulp rally will stall out. Watch for seasonal summer depressed demand. China most likely not continue to stock pile. USA and Europe demand remains weak.

Domtar to Restart Maine Pulp Mill

Domtar Corp. said it will reopen its 398,000 ton hardwood pulp mill in Baileyville, Maine, which has been idle since March. Domtar said its decision to reopen the mill was the result of reduced pulp inventory levels and the recent increase in demand and pricing.

Quebecor Rejects New Donnelley Offer

As follow up to our past releases, Quebecor World has turned down R.R. Donnelley’s latest offer of $1.825 billion to acquire the rival printer. Quebecor said it will proceed with its restructuring plan and expects to emerge from bankruptcy by mid-July.

USA Today introduces Digital Program for News

Like other Newspapers, USA Today has witnessed aggressive competition from the web. The newspaper recently announced it is working on a digital reading devise and mobile applications to compliment its paper version. USA Today will charge for this service.

Trucker Rates may Start to Increase

Current overcapacity and aggressive pricing for both truck and inter model freight may start to witness firmer pricing. Diesel fuel continues to advance ( an important cost for truckers) and many truckers are shuttering operations. Experts forecast rate increases in early 2010 and gradually continuing throughout year. The paper industry, such as Coy Paper Company, ships the majority of its products by truck; accordingly, this is an important cost to watch.

More on Pulp Prices

FOEX’s index for northern bleached softwood kraft (NBSK) pulp jumped by $12.35/ton to $607.05/ton this week as a result of capacity cuts and closures, as well as a weak U.S. dollar and strong shipments to China. In fact, shipments of market pulp to China are up 71% in the first four months of this year.

Printing Companies Post First Quarter Loss

First quarter results for seven major North American commercial printing companies were significantly lower than the previous-year quarter due to reduced advertising and print orders. These companies combined posted a loss of $30.1 million, compared to a profit of $72.9 million in the first-quarter 2008. Quebecor World, which filed for bankruptcy protection in January 2008, reported a loss of $103 million, which greatly affected the first quarter composite. Quarterly sales for the seven firms declined 19% from the first quarter last year to $4.9 billion.

Prices Still Down for Uncoated Papers

Uncoated Freesheet pricing has continued to decrease, but at a declining rate. Recent report by Deutsche Bank reveals 50lb Roll Offset now transacting at $820-865/ton (spot price below $800); Cut size business papers $1025-$1085/ton (spot believed to be below $1000). Market leaders, International Paper and Domtar are suspending production in an effort to control supply (and pricing). Read more on Coy Paper Web Site.

Could Pulp Pricing Really be rising ?

Assisted by marketing related equipment curtailment and hence less pulp flooding the market – AND a realized reduction in inventory – the theoretical price increase for June 1 could have legs. It has been confirmed, markets like China have been experiencing increased prices. More to follow after we confirm North America buyers are actually paying more.

AbitibiBowater Awarded Additional Financing

AbitibiBowater received U.S. bankruptcy court approval for $600 million from Fairfax Financial Holdings to finance operations during its reorganization. AbitibiBowater sought protection in Quebec last month, where a court approved $100 million in debtor-in-possession financing backed by the provincial government.

RRDonnelley Increases Bid for Quebecor World

R.R. Donnelley & Sons Co. has increased its offer to acquire rival printer Quebecor World Inc. to an amount equal to $800 million and cash on the balance sheet at $335 million.

Coy Paper now on Twitter

Coy Paper Company LLC in now updating the Twitter account daily with all the current trends on the Pulp and Paper Industry. You may wish to follow Coy Papers at http://twitter.com/CoyPaper.

Newest IPhone .. .one more Challenge for Newspaper's Survival

Apple announced newest IPhone and many new applications. The new technology will allow the browser to locate the user and deliver local news, also local advertisements. The new applications will also allow the reader (IPhone viewer) to subscribe to exclusive video of local events and interviews. Real threat to the very existence and purpose for a regional newspaper.

RISI reports ''price concessions'' are in play

RISI confirms solid bleached sulfate (SBS) folding carton paperboard grades continue to witness price concessions because of weakened demand. The spot price has been stuck at $995/ton for the past seven months, but prices of SBS board for cartons for large volume is now $100-110/ton cheaper.

Tembec Continues Downtime at Newsprint Mill

The shutdown will be for a minimum of three weeks due to poor market conditions. The curtailed operations at its Pine Falls, Manitoba will mean 11,000 tons of newsprint out of market.

Domtar Achieves FSC Certification

Domtar Corporation announced it has achieved Forest Stewardship Council (FSC) Chain-of-Custody certification at four more of its paper mills. Its coated groundwood mill in Columbus, MS, and uncoated freesheet mills in Hawesville, KY, Kingsport, TN, and Marlboro (Bennettsville), SC are now FSC-certified

Another Magazine to Trim Size

The New York Times Magazine is cutting its size by 9 percent; this will save money due to less paper and less ink. Note, the size will decrease from 9 ½ x 11 ½ to 8 15/16 x 10 7/8” – making it more square. This cost saving move is a result of less advertising revenue. We have reported in past on several other publications trimming the magazine size to save money.

Pulp Prices Actually are on the Rise!

Inventories for worldwide pulp are down – mainly due to stronger than expected China demand and the devalued USA Dollar is helping exports to both Asia and Europe. All the major
producers such as Domtar, Abitibi-Bowater, Sappi, Alberta-Pacific, Sodra, Tembec, Canfor Pulp, and West Fraser have now announced NBSK price hikes for June shipments.