Paper Industry remains Strong

Pulp & paper prices have rebounded very strongly in past several months. The biggest surprises have been in market pulp and uncoated white paper. Supply issues have driven market pulp prices up. The result has been stronger-than-expected
prices. Uncoated free sheet paper has been the real winner this year. After a miserable 2005, uncoated white paper
volumes have strengthened. Add in nearly 1.5MM tons of North American capacity reductions and the market has tightened sharply.

Coated Free Papers will Increase in Price

The major producers of coated free sheets have announced a price increase for the #3 level grades. The price will increase by $50.00 per ton ($2.50/cwt). The manufactures of these papers have enjoyed strong operating rates and industry experts believe this increase will go through.
Paper.com has several coated grades and dozens of items in stock and available for immediate shipment.

Choosing the Right Paper for Digital Printers

Paper manufacturers have allocated a lot of recent R&D to developing the very best papers for digital printers because of the growing demand. The right paper is critical for optimum performance. Growth in digital printing since 2003 is over 20% compounded annually. Almost every mill now offers several grades specifically designed with digital and laser printing in mind.
Xerox has always insisted that choosing the right paper for a digital job is not only directly related to the quality of the printed piece, but also to the productivity of the overall printing system.
Paper.com has hundreds of digital papers available from uncoated to cast coated, from lightweight to card stock, and from smooth to texture. The products are available for immediate shipment from a ream package to multitruck loads.

Smart Paper closes Wisconsin Mill

SMART Papers announced that it is permanently closing its Park Falls, Wisconsin, pulp and papermaking facilities, citing the high costs of energy, wood fiber, transportation and logistics together with market pricing for its commercial "opaque" printing papers. This mill was included when they purchased the printing and writing mills of Fraser.
Paper.com has all the Smart Paper products, in stock and ready for immediate shipment.

Meriturn and Dunn Purchase Valentine Mill

Meriturn Partners and Dunn Paper acquired the assets of the Valentine Paper Company in Louisiana. Valentine specializes in Machine Finished (MF) Papers and latex saturated papers. The two machines produce wallpaper base, diazo, masking and thermal base sheets. The acquisition compliments Dunn’s current manufacturing base of Machine Glazed (MG) papers such as flexible packaging, wet strength, grease resistant, and metalize base. Together Valentine and Dunn will produce over 140,000 of paper

White Birch to buy Masson Paper

White Birch Paper Company agreed to buy the 235,000tpy Masson Paper producer of newsprint in Canada. The acquisition will make White Birch the third largest newsprint producer in North America with 1.135 million tons of capacity. Other White Birch mills include Stadacona Mill, Soucy Mill, and Bear Island Mill.

North American Paper Market

The deepest restructuring in 25 years has been occurring in the North American Paper market. In 2005 an estimated 9% of capacity was permanently shut down. Paper companies announced permanent closure of 6.7million tons of pulp and paper out of a capacity of nearly 90million. Primary reasons cited included high energy and chemical cost as well as increase shipping fees.

Paperloop now called RISI

Paperloop has officially changed its name to RISI. The rebranding is part of their effort to become an information data base. RISI stands for Resource Information Systems, Inc. and will serve as a source for independent economic analysis.

Quebecor World sells last asset

Quebecor World - once one of the largest North American printers - has completed the sale of its non core assets. Quebecor World has divested of all non publication printing plants.

Ennis Acquires TBF Operation

Ennis announced its plans to acquire the assets of Tennessee Business Forms based in Tullahoma, TN. This purchase allows Ennis to enter the short run print business and market labels.

Nekoosa Coated Products Purchases Nashua Carbonless

The specialty paper producer, Nekoosa Coated Products, purchased Nashua's carbonless sheet business. This news follows the recent announcement of NewPage selling their carbonless business to Glatfelter.

Southworth Company Strengthens Manufacturing Capabilities and Acquirers Esleeck Paper Company

Southworth Company, producer of Southworth® brand premium business papers and related products, announced that it has purchased the assets of Esleeck Manufacturing Company a manufacturer of high quality uncoated writing, technical and specialty papers.

The acquisition of the Esleeck paper mill in Turners Falls, MA will provide a strong operational extension for the Southworth brand of paper products. As part of the integration, the Southworth paper making operation in West Springfield, MA will be shut down. The Turners Falls mill capabilities include a broad range of paper weights, card stocks, colors, cotton fiber and rag content, extending the Southworth product range.

Cutsize Copy Papers to increase in Price .... Again

At least two major North American producers, International Paper and Domtar, have announced price increase on cut-size copy paper effective with shipments in early April. The balance of the manufactures are expected to follow.

North American printers report flat 2005 earnings and lower 4Q income

Printers in North America increased their sales but earnings dropped in the fourth quarter compared with the same period in 2005 due to high energy costs and a challenging pricing environment, replicating results from the third quarter.

AF&PA Releases Annual Survey of U.S Capacity

The American Forest & Paper Association released its Annual Survey of Paper, Paperboard and Pulp Capacity today. Results of the survey showed that U.S. paper and paperboard capacity continued to decline in 2005, decreasing 0.8% to 99.3 million tons. The decline extends a downward trend that began in 2001. U.S. paper and paperboard capacity contracted at an average annual rate of 0.9% between 2000 and 2005. Looking ahead, the survey indicates that capacity will decline 2.0% in 2006, and then edge higher in the subsequent tow years, rising 0.2% in 2007 and 0.4% in 2008.

Bowne & Co. Sells Boston Facility

The Artcraft Co. has acquired The Vose Swain Engraving Co. of Boston from Bowne & Co. based in New York City. Terms of the deal were not disclosed.

Uncoated Papers Still Strong

Uncoated Papers - copy paper, book paper, cover, writing, and offset - continue to be tight in supply. All producers have announced increasing the cut size prices $60-80 in April. Many paper machines have been shut down and demand has risen - driving improved markets for the manufactures. The industry will continue to consolidate. Who knows - Weyerhaeuser and International Paper??? or maybe Domtar and Boise with Weyerhaeuser?????
Look for increased prices to continue.
Paper.com offers over 15,000 paper items at competitive prices.

Fraser to Close Berlin Pulp Mill

Fraser Paper announced it will permanently close the pulp mill in Berlin, New Hampshire. The facility produced 230,000 tons of pulp. Management sited increased costs such as wood, energy and chemicals created a poor financial condition. The company will continue to operate the Gorham , NH paper mill.

Smart Papers Expands the Synergy Line

The Synergy uncoated line produced by Smart Papers has expanded its already comprehensive offerings of text, cover and writing grades. They have introduced two 100% post consumer recycled sheet and added 5 new colors for a total of 19 shades. Smart has also introduced new lightweight and double thick covers; five new finishes; and two new watermarks.
Paper.com offers the complete line in stock and available for immediate order.

Many QuebecorWorld Printing Plants Sold

The new parent of several of the Quebecor Printing Plants, MATLET, has decided to rename the 5 purchased plants to the name used before Quebecor/ World acquired them. The new leader, Gary Stiffler, paid $70million and has maintained management and renamed plants from QuebecorWorld to Acme, Central Florida, Nova, and Premedia, Packaging Services.
MATLET has confirmed two primary ingredients for success - capital investment in the latest technology and highly skilled individuals.

Paper Industry Contiunes to Consolidate

The paper industry continues to undergo a quiet restructuring. In the past, the producers were engaged with widely publicized mega mergers and hostile corporate takeovers; today, mills and assets are silently falling into the hands of money managers and banks. Senior managers at the paper headquarters of these companies appear to remain in tact after the acquisition and given authority to make decisions. Private equity investments for 2005 totaled approximately $400billion.

North American Printing and Writing Grades Strong

Printing and writing shipments in North America got off to a promising start in 2006 with a 3.2% increase in overall volumes compare to this time last year.

Canadian Paper Industry Margins Decline in 2005

The Canadian paper industry’s earnings declined sharply in 2005, a reflection of their unfavorable exchange rates, high energy, transportation and chemical costs, and limited pricing power. A Pulp and Paper Week survey revealed that nine publicly-traded Canadian companies combined generated a total loss of C$505.9 million, compared with earnings of C$160.8 million in 2004, despite a 2.9% increase in sales. Margins for full year 2005 worsened to negative 1.8% from 0.6% in 2004. The Canadian dollar was 7.4% stronger overall for 2005 compared with the previous year.

Label Papers to Increase in Price

MacTac (Morgan Adhesive Company) - one of the largest pressure sensitive converters in the world - has announced a general price increase of 5-6% . Reasons cited include rising costs of raw materials.

More Uncoated Price Increases

The producers of uncoated papers are proposing yet another price increase for April of $60.00/ton or $3.00/cwt. If successful, this would include the offset and converting (roll) grades. I anticipate that cutsize (copy papers) will follow. Operating rates continue to improve.

Glatfelter Buys NewPage Mill

Glatfelter announced the purchase for all the assets of the Chillicothe, Ohio paper mill and the Fremont, Ohio converting plant of NewPage for $80million. The paper mill produces 440,000 tons of specialty and carbonless paper a year.

Paper Industry Pricing

The market has continued to tighten as merchants are starting to scramble for offset rolls. Prices on 50-lb offset rolls rose
$45/ton in January and another $5 in February. Most producers announced price hikes for February on cut-size (copy paper) grades, with the trade papers reflecting $20/ton of improvement. Glatfelter announced a $50/ton hike on trade book paper recently. Operating rates are in the low 90's and further supply withdrawals are probable and might drive operating rates higher.Demand has improved in recent months; January shipments rose 6.1% vs January 2005.

The pulp market rally is continuing. Arauco recently announced plans to boost pulp prices by $20/mton in March. Other
pulp producers are expected to follow. Softwood pulp markets continue to be tighter than hardwood. NBSK inventories
stands near 31 days/supply compared to 37 day/supply for NBHK. World shipments were up 6.5% y/y in January.

Paper Market at a Glance

Conditions continue to improve gradually across most segments of the paper industry. The gains remain a function of modest demand improvement as well as continued supply reductions. Pricing is improving in key commodity paper grades like
containerboard, market pulp, and uncoated free sheet. In most cases prices are being influenced by a combination of capacity reductions combined with improving demand. Producers are trying to negotiate higher prices to offset higher energy, chemical, and freight costs that hurt margins in 2005.