Sappi Completes Acquisition of M-Real’s Coated Papers

Sappi Ltd. has successfully completed the acquisition of M-real’s coated graphic papers business for US $1.1 billion. M-real’s four coated graphic paper mills, the Kirkniemi and Kangas mills in Finland, the Stockstadt mill in Germany and the Biberist mill in Switzerland will now be part of the Sappi Fine Paper Europe operations.
The deal makes the Johannesburg, South Africa-based company the world's largest producer of coated fine paper with 23% of the world’s market share (15% for publication coated papers).

Printing and Writing grades Update to Market

Notes from Deutsche Bank - Equity Research
Weak economy causing low demand and high producer inventory have yielded a decline in shipments of 6.4% year to date (down 20.1% Nov07 vs. NOV 08). January and February are traditionally slow months - so not much hope forecasted for next several months.
Virtually all the major uncoated free sheet (UFS) producers are cutting production to manage inventory. International Paper's announced target is 60K tons of uncoated downtime in 4Q. Domtar (#1 player) announced 4Q downtime of 173K tons and Boise (#3 player) is idling 2 machines at International Falls and significantly downsizing its St Helens, OR mill. More
recently, Glatfelter and Mohawk Fine Papers have also announced downtime.
Coated groundwood (LWC) shipments took the sharpest hit --- down 34.2% y/y in November. However, mill inventories have jumped from 110K tons to 252K tons over the past 12 months. Verso Paper recently announced 100K tons of downtime in 09H1. Earlier, Newpage, announced 40K tons of downtime in 4Q08 in addition to the earlier announced closures of Niagara, WI and Rumford, ME mills.
The groundwood coated publication price decline accelerated in December --- down $35-70/ton.
Meanwhile, list prices for Uncoated Freeshhet have held up better --- down between $5-15/ton.

Consumers Union Grabs Gawker's Consumerist Site

Adding to its growing portfolio of print and online properties, Consumers Union, the publisher of Consumer Reports magazine, bought watchdog blog Consumerist.com from Gawker Media

What Happened to Pulp Market?

As we approached 2008 and beyond the first half of the year, pulp prices continued a steady stream of price increases. Suddenly, we entered the forth quarter, and BOOM. Pulp inventories were on the rise, manufactures were curtailing production, and inventory surged from 29 days in September of 2007 to 44 days in September of 2008. Hardwood inventory increased to unheard of levels. 2009 comes along with the worst economic downturn in modern history and a new year does not appear to be reversing these trends. USA prices for NBSK saw a high of $880/ton. Challenge today is if prices decline to below $600/ton – this will be below manufacturing cost for the less efficient mills.
FOEX provided the following chart for monthly NBSK ‘list pricing’
June $880
July $890
August $887
September $873
October $849
November $823

DIP Burrows Paper mill under the Hammer

as reported by, Paper Industry Magazine
Can-Am Machinery has been retained to sell the fixed assets of the Burrows Paper Corp. 120-ton/day market DIP mill in Little Falls, NY.
The plant was built in 1994 with mostly Voith equipment and ran successfully producing excellent yield, brightness and total efficiency.
The equipment is reported to be well maintained and in running condition, and will be sold in whole or in part.

N.A. Printing/Writing Paper Shipments Fall

Total printing and writing paper shipments to North America fell 22.8% in November compared to the year-ago period, according to the Pulp and Paper Products Council (PPPC). Total shipments to N.A. fell 7.8% year-to-date. Coated mechanical shipments plunged 32.7% compared to November 2007, while coated freesheet shipments dropped 21.8% year-over-year.

Green Fades to Black

Eco-themed issues victim of slumping ad market
-By Lucia Moses

Two years ago, spurred on by a groundswell of interest in all things eco-friendly, green-related content was sprouting everywhere. For magazines, that meant a flurry of green-themed issues. But the economic downturn, coupled with cooling consumer interest, have some publishers pulling the plug on those products.
Among titles holding off on green issues in ’09 are Condé Nast’s Domino, Time Inc.’s Sunset, Mariah Media’s Outside and indy Discover. Active Interest Media’s Backpacker, already seeing the concept as tired, did not produce a second global-warming issue this year. “My sense is the idea of doing a green issue has been done so much it feels anachronistic,” said Backpacker editor Jonathan Dorn.
Domino’s 2008 and 2007 green issues sold below average, even though vp/publisher Beth Brenner pointed out that March is not a strong month for single-copy sales.
Not all green issues bombed. Outside sold above average on stands, while this year’s special from Condé Nast’s Vanity Fair, featuring cover subject Madonna, sold 370,000 copies at stands, only slightly below average.
Editors insist readers are still interested in green themes, although some said they are evolving coverage in response to green’s maturation. Hachette Filipacchi Media’s Elle—which made a statement by publishing its green issue on recycled paper this year—plans a water-themed issue in ’09, reminiscent of the blue issue of Rodale’s Women’s Health in 2007
Ending their green issues could serve a PR purpose for magazines, given that the very practice of publishing on paper is seen as at odds with protecting the environment. Still, some maintain that while tips for sustainable living are well-worn, readers continue to want targeted green content.

Pulp Mill Back on Line

The former Pope and Talbot pulp mill in Nanaimo, BC was restarted and under the new name of Nanaimo Forest Products. Its former employees, Pioneer Log Homes, Sampson Group, and Totzauer Holdings purchased the mill for C$13.2million. The mil secured 5 year agreements from end users for 100% of production.

Update on Packaging Market

Mark Wilde of Deutsche Bank reports on trip to packaging companies

First, Mr. Wilde considers packaging more recession-resistant than paper.
Volume drops for shipments as much as 10-15% were confirmed with Europe experiencing weaker demand than USA, also Russia and China shipments down. While pressure on prices is alive and well, raw material and energy costs have also fallen.

Mohawk Announces New Renewal Grade

Mohawk Paper Mills just introduced a renewable folding board for the luxury packaging market. The grade is made of 80% post consumer waste and is available in an 18-point board. The items are stocked in 28X40” sheets and is competitively priced.
Paper.com markets this grade for end uses such as cosmetics, jewelry, and beauty products.

The Comics are affected with fewer Newspapers

New York Times recently ran an article outlining the effects of fewer newspapers being distributed. With the trend of declining newspapers, the economic challenges effect many including comic strips. In the past, comics relied almost exclusively on newspapers to print and distribute the ‘funnies’. Syndications for comics are beginning to promote the web as a new means to read the comics. New sites such as Comics.com and the GoComics websites have become very popular.

Overall Paper Prices Continue in Free Fall

December continues to witness paper prices declining. Examples include $10-15/ton in newsprint, $5-15/ton for uncoated papers (freesheet), $25-70/ton in coated papers, and $10-20/ton in containerboard. Shipments and demand are very weak which continue to place strong downward pressure on prices. Look for additional downtime and possibly more consolidation and machine closures.

Containerboard Continues Slide

Even with our previously reported status of manufacturing curtailment, inventories were not reduced, infact, reports outline a slight increase. Obviously, demand continues to be weak. Lower volumes continue to place pressure on mills to reduce price beyond the $10-15/ton discount witnessed earlier in December.
November box shipments declined nearly 14.5% compare to November of 2007, this in spite of operating rates of only 85%. Look for more challenges as we enter 2009 and beyond.

Bonnier Acquires Scuba Diving, Accompanying Site

In a generally dormant market for magazine sales, Bonnier Corp. continues to buy. The publisher recently announced its acquisition of Scuba Diving and its companion Web site from enthusiast publisher F+W Media Inc. for undisclosed terms.

Paper Prices for Printers

PIA/GATF just reported that paper prices (although currently depressed) had increased steadily from the first quarter of 2006 to first quarter of 2008. The study confirmed average price increases as follow 4Q06 +4.35%; 1Q07 + 4.96%; 2Q07 +5.39%; 3Q07 +5.47%; 4Q07 +5.77%; 1Q08 +6.70%; 2Q08 + 8.93%.
If paper accounts for 22% of the printer's sales, these increases significantly affected overall costs.

Box Makers Demand Decreases

As reported from Purchasing Magazine
Corrugated box demand is down so linerboard sales—and prices—are down and producers are reducing production. In fact, North American containerboard downtime is now expected to be nearly 13% of industry capacity—or around 1.25 million tons— in the fourth quarter. Producers already have responded to unusually weak demand for corrugated by cutting unbleached kraft linerboard production by 2.5% through October this year.

Since more than two thirds of the downtime is expected to take place in December, the latest production tally by the PPI Pulp & Paper Week subscription newsletter suggests that containerboard mill operating rates for December could drop to the mid-70% range. Yet, that’s still somewhat of a moving target because more mills are expected to take curtailments over the period between Christmas and yearend.

KromeKote now available in FSC Certification

From Smart Paper Release
Smart Papers, manufacturers of Kromekote True-Photo, delivers outstanding photo and image reproduction, creating visuals that pop off the page. A brilliant 92-bright white shade also produces intense colors and maximum image resolution. The ultra-glossy, recycled-content digital papers are unmatched in the global marketplace. They combine the quality and feel of traditional photo paper with the unsurpassed printability of triple cast-coated Kromekote.

This new line of new archival and acid-free papers enable digital press owners to profitably meet the growing demand for custom short-run photos and photo applications like greeting cards, direct mail, personalized calendars and much more. The papers are guaranteed on HP Indigo, Xerox iGen, Kodak NexPress, Canon, Konica-Minolta and all production-rated laser printers. The papers are FSC certified and feature 30% post-consumer fiber.
SMART Papers is the only North American premium papermaker now in the process of becoming 100% fossil-fuel free, converting all of its energy production to 100% carbon-neutral waste wood biomass.

The website, Paper.com, markets papers such as Kromekote that are RIT-certified and available in 8- and 10-point caliper, 18x12 size and are sealed in 250 sheet packs, 1000 sheets per carton. All Kromekote True-Photo sheets are acid free, archival, process and elemental chlorine free.
Other applications include photo books, advertising materials, brochures and business cards.

International Paper to Reduce Work Force

International Paper Co. announced its plans to eliminate 1,000 to 1,500 salaried jobs by the end of next year. The company said the cuts are part of a cost-cutting measure that would result in savings of $150 million to $200 million. International Paper has just over 50,000 employees worldwide.

Tribune Company Files for Bankruptcy

The Tribune Company, a struggling television and newspaper operator and owner of Los Angeles Times and Chicago Tribune, filed for bankruptcy. The owner Sam Zell sited the recession as well as a shift of advertising dollars and readers to the internet as prime reasons for the company's recent trouble.

Market Downtime Hits Paper Companies Hard

It appears the literally every producer of paper products is taking significant market downtime in the forth quarter of this year in an attempt to control inventories. In many cases, downtime could amount to 10-15% of capacity. Although this downtime is expensive, if it avoids a sharp drop in industry prices, it looks like the right trade-off.

Newsprint Pricing Officially Reduced

The largest producer of newsprint, AbitibiBowater, rescinded $20/ton price increase originally announced for December due to poor demand. Consumption continues to decline with the increase of the internet and less advertising.

Market Pulp Continues Downward Trend in Price

List price for NBSK market pulp fell $45/ton this month to $750/ton. This yields a total reduction of $135/ton since the peak in August. Further discounts are reported for large spot orders. Producer inventories continue to increase (now at 47 days).

UPM Signs 10-Year Deal with Baltimore Port

UPM has signed a contract with the Maryland Port Administration, which guarantees that they will ship at least 320,000 tons of forest products into the port of Baltimore over the next 10 years. The agreement will result in 120 jobs and $2.7 million in tax revenue, according to the state. The contract signing took place in a $32 million portside warehouse that Maryland built for UPM.

International Paper to "Indefinitely" Close Pulp Mill in Bastrop

International Paper announced the indefinite closure of its pulp mill in Bastrop, LA. The decision to idle the 100 percent pulp mill operation is because of the continuing decline in pulp demand from its customers worldwide coupled with a weak economy across the globe. The shutdown process will begin immediately. The mill is currently taking downtime due to a lack of pulp orders.

Market Pulp

NBSK market pulp prices fell $45-50/ton to $795/ton in November. The list price is now down $90/ton since peaking in August. Even so, the gap with spot prices has widened significantly. Spot prices are reportedly $550/ton in the US and $500/ton & below in China.
Demand has been off sharply over the past 3-4 months - especially in Asia. As a result, producer stocks have piled up - rising to 44 days of supply from 29 days a year earlier.

U.S. Paper Production Down 9.3% in October

The latest statistics from the American Forest and Paper Association (AF&PA) shows that total paper production in the U.S. fell 9.3% in October from a year ago. Total U.S. paper production is down 3.5% year-to-date. Total U.S. printing and writing paper shipments were down 12.4% in October from a year earlier and down 5.0% year-to-date.

AbitibiBowater to Curtail Production

AbitibiBowater Inc. said it plans to idle or permanently close at least four paper mills and lay off approximately 1,100 employees as a result of the closures. The company will permanently close the Grand Falls, Newfoundland and Labrador newsprint mill by the end of the first quarter of 2009, removing 205,000 tons from the marketplace. AbitibiBowater will also permanently close the Covington, Tennessee paper converting center by the end of 2008, representing 70,000 tons of coated grades. The production curtailment includes the immediate idling of the Alabama River newsprint mill in Alabama and two paper machines in Calhoun, Tennessee. In all, the capacity reductions include approximately 830,000 tons of newsprint, 110,000 tons of specialty grades and 70,000 tonnes of coated grades.

Kraft Paper Market

The Kraft Paper market has been in a steady decline, mainly due to competition from plastics. The market has declined from a peak of 5million tons in the early 1970s to current demand of approximately 1.6million tons. The manufacturers have responded by shuttering equipment. Although, near term, experts believe this market could increase somewhat, given recent bad publicity on inability to recycle plastics; however, the trend for demand is still estimated to decline.
Top North American Producers by name, capacity and market share as follows
Longview Fiber 333,000 13.5%
KapStone 310,000 12.5%
Georgia Pacific 260,000 11%
Smurfit Stone 180,000 7.5%
Delta Kraft 180,000 7.5%
Tolko Indust. 180,000 7.5%
Canfor 155,000 6.5%
West Fraser 135,000 5.5%
Cascades 100,000 4.5%
Intern'l Paper 60,000 2.5%

Wausau Mill in New Hampshire Sold

Strong industry talk that the Wausau Paper mill in Groveton, NH was sold for $100,000. The mill will NOT reopen as a paper mill.

Book Publishers feel the Pressure

Many of the big publishers in the book business are trimming costs and reducing staff because of poor book sales. The New York Times reported such companies as Simon and Schuster, Houghton Mifflin Harcourt, Bertesmann, Doubleday and Bantam Dell all making difficult choices and stating it is the worst retailing environment in memory. Although book sales through September were actually up slightly, October and November witnessed deterioration in sales.

Fun Facts on Paper and Recycling

-More forests exist today than 100 years ago
-SFI (Sustainable Forestry Initiative reports that it has 153million acres certified which represents 13% of all world forests
-Only 25% of forested trees are destined for a pulp and paper mill.
Every year, the paper industry becomes more efficient with energy consumption, forest management, and Carbon neutrality.
-Paper Industry is four largest consumer of energy of all industries in USA
-Mills have all engaged in logistical software for most efficient routing of trucks
-Many mills consume at least a portion of their energy from alternative sources.

USA Post Office Reports Loss

The USPS has reported a net loss of $2.8billion for fiscal year ending September. The service blamed this loss on the economic slow down, additional costs, and the gradual popularity of the Internet. 202.7billion pieces were mailed, this represents a decline of 9.5billion pieces or 4.5% from 2007. In that the majority of mail consists on paper in some form, also translates into less paper demanded.

U.S. Uncoated Freesheet Downtime Spreads as Market Weakens

Notes from Pulp and Paper
Large and small producers alike are cutting production of uncoated freesheet printing & writing paper grades to match the sharp demand downturn in September and October.
U.S. shipments of uncoated freesheet fell 10.5% in October to 855,000 tons, according to preliminary data from the American Forest & Paper Assn. On top of a 5.4% drop in September, the 10-month decline moved to -6.1%. The November demand figures will not be better.

Producers have eliminated capacity to control flooding the market with unwanted tons with temporary machine shut down and some permanent shuttering of equipment.
Domtar Dryden, Ont 151,000tons
International Paper – Frankin, VA 150,00tons
-Also, IP in Ticonderoga, NY and Selma, AL 60,000 tons total
-Also, IP announce Riverdale, AL will take down time
Boise St Helen, OR. 200,000 tons
-Also, Boise will take down time in International Fall, MN
Finch Paper Glens Falls, NY is considering down time (capacity is 250,000 tons)

M-Real to Hike Prices in Early 2009

M-real plans to raise prices for coated fine paper and coated magazine paper by 8% effective in the beginning of 2009. Earlier this year, the European paper supplier increased prices for its U.S. market coated magazine papers by $60/ton and its U.K. magazine paper prices by about $80/ton.

Catalyst to Curtail Production at All Mills

Catalyst Paper Corp. said it will be curtailing production at all six of its mills during the seasonally slow Christmas period. The curtailments will vary in duration, but will begin December 19 and end in the first week of January. The recent announcement will remove an additional 21,000 tonnes of newsprint, 14,000 tonnes of specialty papers and 2,000 tonnes of pulp production from the market.

Pulp Inventory Increases

World pulp inventories rose in October to 47 days – up from 44 in September and up 19 days from 2007 levels. Compare to October 2007, shipments fell 9.5% to 3.2million tons. The operating rate fell to 83%.
China alone demanded 24% less tons (demand for October was only 306,000tons).
Obviously, as demand for paper declines, all the raw materials to produce paper also experience
a slow down in demand.

European Producers believe Prices will increase

Management of leading European paper producers all agree that prices will start to increase. This, for all grades including Newsprint, Super calendar, coated Groundwood because of massive curtailment of production, both temporary and permanent to control supply.
These producers expect to continue to shutter equipment, if demand not support supply.

Bukeye Takes Downtime for Cotton Fiber

Buckeye Technologies Inc. announced today that, due to softening of demand in the markets that use its cotton specialty fibers, Buckeye will be taking market downtime at its Americana Cotton Specialty Fibers facility in Brazil and reducing production by one shift at its Memphis Cotton Specialty Fibers facility.
This will result in the Americana facility being idled for the entire month of December and the Memphis facility operating at about two-thirds capacity going forward

Pulp Prices Fall

Dramatic reductions in pulp pricing have occurred over last 90- days, with recent drops of $200-250/ton. This is 25-35% less than price levels in May and June. Pulp inventories remain high, mainly as a result of China slowing purchases to almost nothing.

Recent Uncoated Price Discounts

Industry reports that most producers of Uncoated Freesheet discounted prices by $10-15/ton for converting and business papers / cutsize. As outlined in this Paper News Blog, most of the producers for uncoated paper have taken market related down time, but many of the manufacturers that traditionally sell coated papers have 'turned off' the coater and flooded the market with uncoated paper.

Paper Shipments Tumble as Producers Slash Supply to Match Falling Demand

Associated Press -- Newly released figures on paper shipments confirm the sector's rapid contraction as producers accelerate capacity cuts in to retain pricing power, analysts said.
Goldman Sachs analyst Richard Skidmore, in a note to clients Sunday, said U.S. printing and writing paper shipments fell 12.7 percent in October year-over-year.
Shipments of so-called coated freesheet, a glossy paper, dropped 15.4 percent, and shipments of coated groundwood, a lower-cost grade of paper used in catalogs and advertising inserts, declined 19.4 percent.
"Responding to accelerating demand declines, producers have quickly acted to permanently close and temporarily idle capacity. Producer efforts to balance supply with demand have been impressive," Skidmore wrote.
International Paper Co. on Friday closed its pulp mill in northeastern Louisiana, terminating 550 employees. International Paper, based in Memphis, Tenn., earlier this month began what was expected to be a seven-week shutdown at its Bastrop mill. But Friday the company said the shuttering would be indefinite.
And early this month, Weyerhaeuser Co. said it was closing a Georgia mill indefinitely due to softening engineered wood product demand amid the ongoing housing downturn.
Deutsche Bank-North America analyst Mark Wilde termed such supply cuts "aggressive," though perhaps not sufficient to eliminate pricing pressure.
"The key issues will be margins," Wilde said in a research report late Friday.
Besides supplies of coated freesheet and coated groundwood, other grades of paper whose supplies are being reduced are uncoated freesheet, uncoated groundwood, containerboard, which is used to make cardboard, and market pulp, a raw material for various grades of paper.
"We forecast the next few quarters to be challenging for the industry as demand deteriorates, downtime rises and prices move lower," Skidmore said.
He expects prices for uncoated freesheet to decline through the middle of next year.

Fraser Papers Announces Temporary Shutdown of Thurso Pulp Mill

MARKET WIRE - Fraser Papers Inc. announced today that it plans to take up to 14,000 tonnes of market-related downtime at its hardwood kraft pulp mill in Thurso, Quebec. The shutdown will allow Fraser Papers to balance its pulp inventory with current customer requirements. Fraser Papers plans to close the mill December 15, 2008 and restart January 6, 2009, subject to orders.
Fraser Papers is an integrated specialty paper company that produces a broad range of specialty packaging and printing papers. The company has operations in New Brunswick, Maine, New Hampshire and Quebec.

Total Printing/Writing Paper Shipments Drop

U.S. printing and writing paper shipments overall dropped 9.1% in October from the previous month and fell 12.5% compared to October 2007, the American Forest & Paper Assn. reported. Total U.S. coated paper shipments dropped 5.0% to 750,900 tons in October from September and decreased 17.3% compared to a year earlier. Coated freesheet paper volumes declined 4.7% month-to-month and 15.4% year-over-year. Coated mechanical paper volumes were down 5.2% in October from the previous month and 19.4% lower than October 2007.

PC Magazine Folds Monthly Print Edition

fr PC Magazine
In the latest contraction of the computing magazine category, Ziff Davis Media said it would fold flagship PC Magazine with the January issue and convert the brand to an all-digital format at PCMag.com.

All magazines are facing a tough road these days, but computing magazines had already been particularly impacted by readers’ growing preference for the Web. This year, 27-year-old PC Magazine was forced to cut its rate base to 600,000 from 700,000 and reduce frequency to 12 issues per year from about 25; its ad pages dropped 35.8 percent to 330 for the first six months of this year, per Publishers Information Bureau.

Also this year, rival monthly PC World, published by International Data Group, cut its rate base to 600,000 from 710,000, citing growing paper, postal and ink costs.

Time Spent on Top News Sites in Decline

By Jennifer Saba, MediaWeek
Following the same trend in September, the average time spent per person on newspaper Web sites declined in October year-over-year as monthly uniques soared.
The data is from Nielsen Online (owned by E&P's and Mediaweek's parent company) and tracks the average time spent per person at a site during October.
Some sites, however, made big increases.
The New York Times was up to an average of 40 minutes versus 35 minutes in October '07. Politico, which increased its monthly uniques 178 percent, managed to up the average time spent on the site from 9 minutes in October 2007 to almost 19 minutes in October 2008. The Houston Chronicle doubled the average time spent on its Web site year-over-year to 30 minutes.
Below is the average time spent per person for the month of October, ranked in the order of that site's unique visitors. This is a custom list from Nielsen Online and can fluctuate based on several factors including news cycles.

Boise Cuts Paper Production

Boise Inc. announced plans to restructure its St. Helens, Ore., paper mill that includes halting pulp production entirely and reducing annual paper output capacity by 200,000 tons. The move is expected to be complete mid-January.

Poor USA Paper Demand

The last 60 days have been nothing short of a disaster. Poorest demand for the pulp and paper industry in ages. Mark Wilde of Deutsche Bank predicted 4-5millions additional tons of paper capacity in North America will be out of system before 2009 draws to an end. Recall, he also forecasted that 3-4million tons of pulp, on a worldwide basis, will be shuttered by end of 2009 as well.
Estimated market demand for shipments so far through October YTD for 2008
Newsprint down 20.7%
Coated down 5.3%
-Note in October alone coated free down 16.3%; coated Groundwood down 20.7%
Uncoated Free down 6.3%
-Note in October alone, this segment down 10.5%
Containerboard down 3.3%
-October down 8.6%

Uncoated free sheet supply is also being reduced

From Deutsche Bank - Equity Research
Domtar recently announced that it would cease paper production at its Dryden, Ontario mill, removing 151K tpy of capacity. Earlier this summer, Domtar closed a 165K tpy mill in Port Edwards, WI. Last week, Domtar's largest competitor, International Paper, announced
plans to permanently shutter a 150K tpy machine at its Franklin, VA mill just before Thanksgiving. IP is also taking a reported 60K tons of Q4 downtime across its other uncoated mills. On Monday, the #3 producer, Boise, announced that it would shut 2 paper machines at
its St Helens, OR mill, removing 200K tpy of uncoated white paper.

With sharply slowing domestic demand, weak offshore markets, and rapid appreciation in the US$, we expect prices for virtually all paper grades to come under pressure as business slows seasonally in December. The "best case scenario" is that a disciplined approach
to supply & inventories will mitigate pricing pressure. The good news is that many key input costs are also falling. The key question in 2009 will be the interplay between probable lower prices & volumes on the one hand and lower input costs on the other hand.

Most major containerboard producers are reducing supply

From Deutsche Bank - Equity Research
International Paper (#1 producer) has idled 2 large machines with almost 700K tpy of capacity this autumn. IP is also "slowing back" production at other mills to the tune of 200K tons in Q4. With less fanfare, the #2 producer, Smurfit-Stone, has permanently shuttered a
135K tpy machine and is idling machines at 5 different mills during Q4. The #3 and #5 containerboard producers, Georgia-Pacific and PCA, are reportedly operating their mills on a "slow-back" strategy.

Pressure Continues on Paper Prices

The Paper industry continues to face challenges on prices given the slowing economy and raising US Dollar. There is also much pressure from the market on producers given falling production costs with the reduction in pulp, energy, transportation and certain chemicals.
List prices of Uncoated Free sheet are discounted $30-40/ton for rolls. International Paper, Domtar, and Boise have all announced machine closures, idling, or market downtime.
Coated Groundwood - paper used for Magazines and catalogues - continue to witness slow demand and suppliers have done well by reducing capacity to stabilize pricing. NewPage, Verso, Kruger, Domtar, and AbitibiBowater have all announced market downtime.
Shipments are down 9.5%.

International Paper to Shutdown Machine

International Paper announced that it is permanently shutting down its No. 3 uncoated freesheet paper machine at its Franklin mill in Virginia. The closure, scheduled for November 23, will affect about 50 workers and will remove approximately 150,000 tons of uncoated freesheet paper from the market. Furthermore, the company is planning to take approximately 60,000 tons of lack of order downtime at its U.S. coated freesheet paper mills in the fourth quarter.

NYT Runs 50,000 Extra for Election Day

-By Joe Strupp, Editor and Publisher - Media Week

Demand for copies of today's historic Obama presidential election coverage has sparked two of the nation's largest dailies to gear up their presses again for more.

The New York Times is printing another 50,000 copies of today's historic paper while The Washington Post is planning a 26-page extra edition, expected to hit newsstands this afternoon.

"There has been immense demand for the paper. There are lines around the building. We are thrilled people are still interested in the print paper," said executive editor Marcus Brauchli. "We are scrambling to pull together a special edition."

He had few specifics on the extra, but said at least 150,000 copies would likely be printed.

NewPage to Further Reduce LWC Production

NewPage Corp. announced plans to curtail lightweight coated (LWC) paper production by 40,000 tons in the fourth quarter as a result of a downturn in demand. The production curtailment is in addition to previously announced market-related downtime.

Paper Market Shipments

Notes from Deutsche Bank - Equity Research
Coated paper volumes fell more than forecasted. Coated Mechanical (LWC- Magazine Papers) fell 21.7% in October vs. October 2007 (-6.9% YTD). Coated Freesheet demand is somewhat better, but still fell 16.3% in October vs. October 2007 (-9.4% YTD). Weak demand for catalogues and magazines hurt the coated markets.

Uncoated shipments were off as well. Shipments of Uncoated Free Sheet fell 10.5% in October vs. October 2007 (6.1% YTD). Even Uncoated mechanical was weak, with shipments falling 3.1% in October vs. October 2007 (+10.6% YTD). This marks the first decline in over a year.

Magazines Announce Lay Offs

Time Inc. sent memos to employees at Fortune, Time, People and Sports Illustrated asking for volunteers to take buyout packages. The offer was part of Time Inc.’s reorganization plan announced a couple weeks ago and was limited to editorial employees at magazines that have contracts with the Newspaper Guild. The company is looking for roughly 100 volunteers from editorial, with about 40 from Sports Illustrated alone.

Meredith Publishing just reported they lay off 12 Senior Vice Presidents last week because of sluggish magazine sales and declining revenue.

Nukote introduces HP Indigo product line

from Labels and Narrow Web magazine

Nukote International has unveiled a new line of HP Indigo receptive substrates. In stock are white BOPP, clear BOPP, glossy paper and semi-gloss paper roll labelstocks. Specialty Indigo products such as synthetic paper in roll form or in cut sheets are also available.

“The release of the HP Indigo line adds to Nukote’s expansive selection of imaging products. We continue to invest in research and development to support customers as they take advantage of new opportunities,” says Steve Baiocchi, president of sales. Nukote’s Indigo product line has been certified for HP Indigo by the Rochester Institute of Technology Printing Applications Laboratory.

Nukote International, based in Rochester, NY, USA, provides a variety of products for more than 30,000 imaging devices, including ink, laser, toner, ribbons, thermal, wide format, industrial and packaging inks, specialized security coating, and extruded film applications.

Emails Grow

Not sure when the paperless office will formally be here, but the internet continues to cannibalize traditional paper demands.
Retailers and wholesalers expected to send 158 billion e-mail marketing messages in 2008 and 258 billion by 2013, according to 
Forrester Research.
Not too long ago, this was letters, direct mail, magazine advertisements and catalogues......

Uncoated Freesheet also witnessing Price Pressure

Reports in the market confirm producers of roll stock for uncoated freesheet are discounting to about $30-40/ton. Some of the production ending up in the market is from large coated manufacturers that have 'turned of the coater' and flooded the market with cheaper uncoated paper. We are beginning to also hear of discounts for large spot orders of cut size. Both Domtar (North America's largest producer) and Boise (#3) will idle equipment in an effort to stabilize supply and pricing.

Publication Papers Remain Weak in Demand

Producers of Groundwood containing papers for publications continue to take market related down time to maintain a balance because of weak demand. Magazines pages have been reduced, fewer catalogues are being mailed, and newspapers have reduced Sunday Inserts - all hurting Groundwood demand. Resulting from poor advertising pages (down 12% this year) and no relief in sight - 2009 is forecasted to be difficult for manufactures.
We have reported in past of paper producers taking down time - NewPage (Kimberly, WI); Kruger (Trois-Rivières -Québec -Canada); Domtar (Columbus, MS); AbitibiBowater (Catawba, SC). Although this will assist, we beleive manufactures will begin to 'officially' reduce pricing.

Pulp prices on the decline

Pulp prices continue to witness pressure due to demand reduction. Producer inventories have increased to 44 days (up from 30 days). Spot pricing of $500/ton for large orders of NBSK are rumored on shipments exported to China. Domtar and Canfor Pulp have reduced NBSK list to approximately $40-50/ton. We forecast today's spot pricing could become market pricing soon.

Two Newspapers Report Stable - nondeclining circulation

We continue to report on the decline of readers, and thus newspapers, in the USA. Newspapers such as the New York Times posted a 3.6% decline through September 30; Boston Globe reported a 10% drop.
However, the Wall Street Journal kept its circulation stable at 2million readers; USA Today and Chicago Sun Times also reported level sales at 2.3million and 313,174, respectively.
Most newspapers claim the internet is Cannibalizing business.

US News Magazine Becomes Monthly

US News and World Report, once one of the 'big 3 newsweeklies' (along with Newsweek and Time Magazine), announced it will now publish only just once per month. Newsmagazines have been struggling and hurt by the free availability of news and analysis on the web.
US News had averaged 1.8 million readers compare to 2.7million for Newsweek and 3.4million for Time.

Select Printers Announce Results

Quebecor World Inc. reported a net loss of US$64.2 million in the third quarter, as revenue declined to $993.6 million from $1.17 billion in the prior-year.

Valassis Communications posted a net loss of $5.2 million for the three-month period ended Sept. 30, compared to a net profit of $16.4 million in the prior-year quarter.

Appleton Reduces Carbonless Capacity

Appleton will idle some carbonless production capacity at the Appleton, Wisconsin Plant. The company also plans to transfer some production of thermal paper grades from the Appleton Plant to the company’s mill in West Carrollton, Ohio. .

According to Appleton, its Appleton Plant has historically been the first of the company’s facilities to be affected by changing demand for carbonless paper. Unprecedented economic conditions worldwide have compounded the effects of the ongoing decline in the use of business forms made from carbonless paper. Despite Appleton’s recent success at increasing its share of the world’s carbonless paper market, a sharp decline in demand for the product has created excess production capacity and staffing levels at the Appleton Plant.
Paper.com has all the Appleton carbonless products ready for immediate shipment.

Verso Paper to Take Coated Paper Downtime

As reported by PaperAge Magazine

October 28, 2008 - Verso Paper today announced that it intends to take approximately 50,000 tons of downtime related to coated groundwood production, primarily during the fourth quarter of 2008.

The specific timing and facilities impacted to achieve this curtailment will be determined as the fourth quarter progresses, Verso said.

This downtime is in addition to the approximately 43,000 tons of coated groundwood downtime that Verso has already taken or announced in the second half of this year, the company added.

“We remain committed to running our manufacturing operations in a manner to achieve a balance between our supply of paper and the demand for paper by our customers,” said Verso president and CEO Mike Jackson. “Based on what we currently see relative to demand and inventory levels, this additional downtime is necessary to help us maintain that balance.”

Verso's coated groundwood paper is used in catalogs and magazines.

Appleton Prevails in Trade Case Against Foreign Competitors

The International Trade Commission (ITC) has supported paper manufacturer Appleton in its complaint that Chinese and German companies are trading unfairly. The commissions ruling clears the way for the U.S. Commerce Department to impose anti-dumping and countervailing duties on lightweight thermal paper imported from those countries. Appleton claimed that the Chinese government subsidized its manufacturers and that both China and Germany sold their products in the U.S. at less than fair market value.
Paper.com markets many of Appleton's paper products.

In-Plant Printers Continue to Grow

In Plant Graphic Magazine recently released their survey of the in-plant market. These are companies that have elected to commission printing equipment on premise. When asked what the in-plant printing department produced the most of, they replied, in order of volume (top 5)
Brochures
Newsletters
Business Forms
Pamphlets
Manuals
More than half reported majority of the pieces printed were variable data printing for such jobs as,
Address labels
Recipients name
Whole paragraph of text
Interestingly, the vast majority state they have an in-plant printing center for more than convenience and service - most are a profit center!
Paper.com, a major website with 40,000 paper items, is a big supplier to these in-plant printers. The company will fulfill as little as one ream of paper and ships within 24 hours.

Watch your International Source!

NewPage Paper Company just released a document outlining Asian imports make up to an estimated 40% of the North American coated sheet paper market, but in many cases, consumers and corporations are not aware of the real source behind the paper they use. Many importers use private label brand names or re-branded names that obscure their identity and true manufacturing origins. It’s just one of a variety of surprises that can be found beneath the surface of paper’s global supply chain.
Unless they choose paper from a known source, with a verifiable supply chain, many North American paper buyers risk unknowingly supporting environmentally destructive practices. Paper processing that is not well regulated can cause air and water pollution, especially in countries where environmental policies are inadequate or not well enforced.
Note; nearly 80% of US mills use recovered paper and are certified by third party associations. Thirty-eight percent of wood fiber used in the United States for paper production comes from recovered paper, or post-consumer recycled fiber.

USA Newspapers Continue to Struggle

Circulation of US newspapers declined 4.6% in the past year as readers now rely on the internet. We also note reduction is due to publishers raising prices and limiting distribution. Weekday print circulation at 500 newspapers fell to slightly over 38million copies (versus 40million a yer ago).

Rachael Ray Goes Green

Rachael Ray's publisher, Reader's Digest, just reported that the magazine 'Every Day with Rachael Ray ' switched to 85% recycled paper, with 10% being post consumer. They claim the new paper is every bit as good in quality and will save 125,000 trees, 7800 pounds of hazardous air pollution, eliminate 380 garbage trucks of solid waste, and over 25 million tons of carbon dioxide. The publisher also chose a paper mill closer to the printer for savings of gas. The trucks deliver rolls of recycle paper to the plant and pick up printed waste to be returned to paper mill for future production.

Paper Industry Continues Sustainability to Environment

The paper producers now all offer grades with recycled post consumer fiber, many reclaim chemicals, all recycle water, and most consume alternative energy. The fact is, the industry has always been a good steward to the environment – they have always recycled broke, water, and chemicals. In fact, manufacturers plant 1.7million trees per day, more are planted than harvested. We now enjoy 12million more acres of forestland today than were in existence 20 years ago.
Of note, the USA publishers currently print 18,000 magazines and less than 1% print on recycled paper consistently. This might be because paper made from post consumer fiber typically costs a little more.

Longview Fiber closes paper machine

Longview Fiber Paper and Packaging is closing one of its paper machines Tuesday and laying off about 90 hourly workers by next week.
Fiber President Frank McCone says the slowing economy reduced demand for products produced at the No. 9 machine, including lightweight containerboard used in corrugated boxes and Kraft paper used in cement bags.
McShane says the move is a business decision and the company will re-evaluate whether to restart the machine next year.
The pulp and paper mill was sold to Brookfield Asset Management for $2.15 billion last year, ending 80 years of local family management.

Some Printers Growing

According to the PI/GATF survey, some printers experienced good sales revenue growth this year. For the first six moths, printers that had a staff of 1-19 grew 0.08%; 20-49 decreased 0.79%; 50-99 increased 1.55%; over 100 declined 0.99%.

Wausau on Target for Paper Machine Shut Down

Wausau Paper is on target for shuttering one of two paper machines in the (Otis) Jay, Maine plant. The company will stop production of 40,000 tons of release liner and other specialty grades on this machine on or before December 31, 2008. Management sited the size and speed of the machine no longer allowed for efficient production.

Containerboard Market

Containerboard producers were unsuccessful in customers paying the $60/ton price increase for October. Main factor responsible for this was poor demand and high end user inventories. The declining economy will NOT assist containerboard demand. We look for a difficult several months ahead.

Newsprint Pricing

Much to my surprise, Newsprint producers are enjoying at least a portion of the announced price increase. Surprised because the demand for newsprint continues to decline. Interesting observation includes the re introduction of East / West coast pricing. The East coast end users are paying nearly $15/ton more than the West Coast. AbitibiBowater will take an additional 150,000tons of down time beginning of 2009 - in addition to the previously announced curtailments for end of 2008.

UNCOATED FREE SHEET UPDATE

So far this month, producers have only enjoyed approximately $5/ton of the announced price increase for rolls (no increase for cut sheets). We think pricing pressures will grow due to the increased shipments from imports of Brazil and Europe as well as coated freesheet producers supplying base sheet as alternative. I would bet large spot orders are already enjoying discounted
prices. Shipments through September were own 5%.

Bleached Paperboard SBS Market

The 2008 capacity for bleached packaging papers is forecasted to be 6.1million tons, and bleached bristols account for an additional 1.2million tons. The folding carton market consumes the vast majority of these products at 54%. Market related shuttered equipment now allow for the top five producers to produce 85% of this capacity, these manufactures include
Company/Capacity/mkt share
International Paper/1,520,000/25%
MeadWestvaco/1,350,000/22%
Georgia Pacific/815,000/13.5%
Rank Group/765,000/12.5%
Potlatch/550,000/12%

Versa on Track with Mill Transition

As an update to our previous post, the Versa paper mill in Bucksport, Maine is on target with the
project transitioning the #1 paper machine (which had produced publication paper) will produce specialty coated papers. This will effect 84,000 tons of production.

Quebecor World Continues with Parade Magazine

The bankrupt Quebecor World Company recently reached an agreement with Parade Magazine to print 100% of the USA Sunday Magazine. More than 400 Sunday newspapers carry this magazine, reaching approximately 71million weekly readers.

Container Board Market Softens

from Deutsche Bank - Equity Research

* Weak shipments, higher inventories
September containerboard & box numbers showed a sharp decline in shipment volumes and higher inventory levels. While we think that they exaggerate just how bad demand is, there is little question that conditions are weak. The $60/ton price initiative for Oct. appears to be dead. The real question is whether the industry can keep prices from falling. We think it will take aggressive action by the industry to reduce supply.

* Shipments - sharply lower
Box volumes fell 1.9% y/y in Sept., but adj. for two more shipping days this yr, they fell 11.3% y/y on an "avg. week" basis. Most observers tend to focus on the avg. week number, which would make the volumes look truly egregious. We think that the "real" number is a blend of the two, or a decline of about 6.6% y/y. Although this is by far the worst y/y blended comp this year, we think they may exaggerate the weakness in the mkt. Sept. '07 was a difficult comp,
and Aug. was a suspiciously strong month, suggesting that some business may have been pulled forward into August this year.

* Inventories - higher, again
Sept. saw inventories move higher again. Combined mill and box plant inventories rose 90K tons m/m. The last 10 yrs, inventories typically rose by an avg. of just 11K tons in Sept. meaning that inventory build relative to seasonal expectations was 89K tons. This follows a
negative variance of 72K tons in August. Total inventories now stand at 2.45MM tons. We would no longer characterize them as particularly lean on a historical basis, though they do remain below avgerage.

* Prices - $60/ton initiative a question mark
We think that it's now clear that the $60/ton price hike initiative for October is a dead issue. The big question is whether the industry will be able to retain the $55/ton price hike which was implemented in July. A number of factors are working against the industry, including soft demand, rising inventories, and a rising US$. We think that it will take aggressive action by the industry to maintain prices.

Magazine Ad Pages Down 12.9% in Q3

Advertising pages for consumer magazines plunged 12.9% in the third quarter, according to the Publishers Information Bureau’s latest report. Rate-card-reported ad revenue dropped 8.8% compared to 2007’s third quarter. Year-to-date ad pages fell 9.5% and ad revenue declined 5% compared to the same period in 2007.

Cost of Producing Paper Finally Declines

The paper industry finally catches a break with decreased raw material costs. The slowing economy has led to a decline of costs such as energy, resin, pulp, and some chemicals. This should assist the paper industry's bottom line given the recent price reductions for the commodity grades as a result of the poor market conditions.

Mark Andy Press Manufacture Sold

Mark Andy Inc. was acquired on October 8 by newly formed MAI Holdings, held by American Industrial Partners Capital Fund IV (AIP). The seller was Morganthaler Partners, which acquired the company two years ago. Mark Andy Inc. consists of the Mark Andy narrow web press manufacturer in Chesterfield, MO, USA; and Comco International, manufacturer of midweb presses based in Milford, OH, USA.

Newprint Prices Continue Downward

Both the Publishers and Newspaper producers are finding increased inventory levels of newsprint on their floors. Accordingly, although the two biggest newsprint producers are maintaining the latest price increases - all others seem to be 'giving in'. We think the 4Q08 announced increase of $40-60/ton is in big trouble. USA consumption continues to decrease (YTD down 14% to 525,000 tons).

Coated Paper Market Challenged

Publication Papers (LWC-Light weight coated groundwood used in magazines) continues to struggle as demand weakens. Many major printers report discounted prices are available. This is a surprise in that typically this time of year is generally robust. One may wonder what the producers will do in December and January, when demand historically is weak.

Pricing on heavier weights (free sheet) are doing somewhat better I would imagine there is pressure to 'give-back' at least a portion of the recent price increase. I note, many coated free sheet manufacturers can turn off the coater and produce uncoated free sheet, yielding less coated supply.

Pulp Markets Weak

Many pulp producers are beginning to announce closures, including International Paper Company in Albany, NY, and most recently, Evergreen's 200,000 ton Eureka facility. This is due to weak demand and increased worldwide inventories.
Expect more temporary market related curtailment in upcoming months.

RISI Reveals top Pulp and Papre Companies

The annual PPI Top 100 is the only ranking of the world's largest pulp and paper companies by net sales. This valuable report from the September issue of PPI magazine is available online at www.risiinfo.com/ppitop100.
Of note is the growth of European companies now on this list.
The website, Paper.com, markets many of the products from these producers.

Glatfelter Introduces Video on Paper Making

The Glatfelter Paper Company just introduced a new interactive mill tour that does an excellent
job of explaining the pulp and paper manufacturing process. The presentation takes the viewer through two fully integrated pulp and paper mills. The tour also outlines Glatfelter’s management of the environment.
Paper.com also has this link to Glatfelter, at www.paper.com and the site markets all the Glatfelter carbonless papers. The direct link is http://www.glatfelter.com/learning/interactive_tour.aspx

Heidelberg Posts Quarterly Loss of $28 Million

From Printing Impressions
HEIDELBERG, GERMANY—According to its preliminary results, Heidelberger Druckmaschinen AG (a manufacturer of printing presses) will post a second quarter loss of as much as $28 million on sales of about $1.1 billion, a 10 percent decrease compared to the same period last year. Its restructuring costs in the quarter could be as much as an additional $28 million.

RRD, Houghton Mifflin Harcourt Reach Accord

From Printing Impressions

CHICAGO—RR Donnelley and Houghton Mifflin Harcourt Publishing have agreed on an $875 million multiyear print management contract extension. The deal expands on the previous relationship between the printer and publisher. Houghton Mifflin Harcourt is a leading publisher of instructional materials for pre-K through grade 12 schools.

European Fine Paper Deliveries Unchanged in August

Total European coated woodfree paper deliveries were flat at 791,000 tonnes in August compared to the year-earlier period, according to CEPIFINE, the Association of European Fine Paper Manufacturers. European uncoated paper deliveries fell slightly by 0.9% to 693,000 tonnes compared to August 2007. CEPIFINE figures include Norway and Sweden in addition to the 27 countries in the European Union.

Wausau Announces FSC for Astrobrights

Based on the raising interest for sustainable paper solutions, Wausau Paper announced they achieved the Forest Stewardship Certificate (FSC) for the Astrobrights brand. Paper.com will market all the popular Astrobright colors in the Green Store.

Mohawk Paper Mill Will Hold Prices

Mohawk Fine Papers just announced it would hold current prices firm for the foreseeable future. Over the past year, mills have witnessed severe cost increases in raw materials and energy – they have answered this challenge by shuttering equipment and increasing prices. Paper.com is a large distributor for Mohawk grades and is happy to support this position of stable pricing.

Domtar, Canfor Reduce NBSK Pulp Prices

Domtar and Canfor Pulp have both informed North American customers that they will reduce prices for northern bleached softwood kraft (NBSK) pulp effective October 1. The two largest N.A. market NBSK producers will lower prices to $850/tonne, a reduction of $20/ton. The move is the result of weak demand, declining prices and increased market pulp producer inventories globally.

Domtar Announces New CEO

Domtar has announced that John D. Williams will assume the role of CEO on January 1, 2009. Williams has been President of SCA Packaging Europe for the past 3yrs.

Uncoated Mechanical (Groundwood) Papers Update

Uncoated Mechanical Papers, also known as uncoated Groundwood specialties continue to enjoy good demand. Among USA four main printing and writing segments, this area was the only one that grew. Shipments were up 14% for 3.1million tons over the past six months. These are papers that are of publication quality and have a higher brightness than standard newsprint and are smoother. Typical end uses include newspaper inserts, direct mail fliers, catalogues, Sunday Newspaper Magazines, telephone directories and commercial printing.
At a glance
2008 estimate
USA Shipments 2,100,000 tons
USA Consumption 6,200,000 tons
Canada shipments 4,300,000 tons

Top 5 producers / Capacity / Market Share
AbitibiBowater / 2,530,000 / 38.5%
Catalyst / 890,000 / 13.5%
NewPage / 890,000 / 13.5%
Fraser Paper / 500,000 / 7.5%
Irving / 440,000 / 7%

Printing and Writing Paper Shipments Sluggish

Shipments of printing and writing grades for August were weak, especially for coated paper and newsprint. Coated Free sheet demand fell nearly 13% while publication (groundwood coated ) fell over 20%. Many producers curtailed equipment - Kruger 17,000tons; Verso 30,000tons; NewPage 200,000tons and Domtar will take down time. September pricing was stable, after a $5/ton increase in August and $20 in July (note: manufactures HAD announced a $50/ton summer increase). My previous update announced a $60/ton increase for October 1 - this remains in jeopardy.
Meanwhile, uncoated Freesheet (business papers) are witnessing competition from imports - the likes of Brazil and Europe as well as from mills that have turned off their coaters and are now producing uncoated papers. August saw a decline in shipments of nearly 8%.

Pulp Market Continues to Slide

The pulp prices are declining and producer inventories are increasing and global demand is weak. Chinese demand, which had been strong, is now all but gone. Pulp prices for both list price and spot price have fallen by $50-70/Ton and October is not forecasted for any improvement. Producers will now reduce supply in an attempt to correct for market conditions. We think the winter will not be kind to the pulp industry (note, Canada and Finland are the two big players).

Catalyst to Take Downtime at Snowflake Mill

Catalyst paper announced that it is cutting production at its Snowflake mill in Arizona for eight days beginning Oct. 20. The downtime will remove approximately 8,000 tons of recycle newsprint from the market as well as reduce old newsprint (ONP) fiber requirements by about 10,000 tons.

USPS Mail Volume Declines Further

The U.S. Postal Service expects to end the current fiscal year with a volume decease of 9 billion pieces when its financial results are released in November. Postmaster General John Potter said that a reduction in work hours will be necessary to “share up business” as a result of the loss.

Coated Publication Groundwood Market Continues to be Soft

September pricing for groundwood coated grades remained flat, after increasing in both August and July. Mill and printer inventories have been rising and consumption falling. Producers are taking down time to maintain discipline in the market.
Also, we note in the Groundwood market - trade reports suggest a private equity buyer is close to acquiring Tembec's idled St. Francisville, LA mill (300K tpy of coated capacity).

Newsprint Continues to Increase in Price

September prices for 30lb standard newsprint rose $15/ton to $750/ton, a 12
year high. This is the 2nd consecutive month that the full announced $20/ton
hike failed to take hold. Publishers report their inventories are rising
and a historical seasonal slowdown may yield more supply cuts to maintain pricing.

One Small Paper Mill does Well

The operators of Grays Harbor Paper in Washington State continue to do well because they now focus on niche business as a provider of 'green' paper products. The mill manufactures white, non-coated paper, basically the paper used in office copy machines. They are considered a national leader in sustainable manufacturing and green paper products. Grays Harbor Paper company now makes 9 percent of its paper entirely from “post-consumer materials” and 27 percent of its paper contains at least 30 percent recycled material. Grays Harbor Paper supplies all of the recycled paper sold at Staples office supply stores nationwide.

Google Receives 71 Percent of All Searches

Paper.com continues to be one of the biggest internet marketing companies for paper products on the web. Most of the end users visit the site through Google.
Google accounted for 71.01 percent of all U.S. searches in the four weeks ending August 28, 2008, Hitwise announced today. Yahoo! Search, MSN Search and Ask.com each received 18.26, 5.32 and 3.45 percent respectively. The remaining 46 search engines in the Hitwise Search Engine Analysis Tool accounted for 1.95 percent of U.S. searches.

Paper Recycling Remains High

In light of new revelations about the extent of global warming, consumers 
are putting new pressure on companies to provide environmentally friendly 
products and services. And while the shift to becoming a "green" business
is time-consuming and potentially costly, there are many advantages to 
reap.

Meanwhile, consumers are doing there part. American Forest and Paper Association (AF&PA) reported that 56% of the paper consumed in America was recovered for recycling in 2007. This statistic is ahead of schedule - and therefore AFPA set a new goal of 60% recovery by 2012.
The 54.3million tons of paper recovered in 2007 equates to 360 pounds for every American.

Websites such as Paper.com market recycled papers. The thousands of Green Papers stocked for immediate shipment range from 30 to 100% produced from recycled fibers.

Quebecor World Creditors Seek Lawsuit

From Printing Impressions Magazine

MONTREAL—Some creditors of bankruptcy-protected Quebecor World have asked the court for permission to file suit against the printer, seeking $376 million they claim was paid to 14 private lenders prior to bankruptcy to buy back its debt.

According to a Bloomberg report, creditors asked Judge James Peck for permission to sue, contending Quebecor World paid the amount to Barclays Bank, Deutsche Bank and other parties that redeemed notes for the company on October 29, 2007, less than 90 days before the bankruptcy filing. Bloomberg quoted the creditors as saying the payments were made on account of antecedent debt owed by Quebecor World in private notes and exceeded what the parties would have received under a liquidation.

Magazine Ad Spending Down 1.4%

The Nielsen Company’s Monitor-Plus services report released today showed that advertising spending decreased 1.4% for the first half of 2008 compared to the same period last year. Advertising spending for business to business magazines fell 8% and spending for national magazines were down 3.1%. Nielson’s figures vary slightly from the Publishers Information Bureau’s, which showed a 2.8% drop in ad revenue for the same period.

Fun Facts on Recycling

Americans create 4.5 pounds of waste each day between work and home. This means by the time you are 70, 50 tons of trash has been created. The good news is now, 30% is recycled - the rest goes to landfill. It is estimated, that by the time you are 70, you will have recycled 8,100 pounds of Newspapers, books, and magazines. Note: first curb side collection of newspapers started in Missouri in 1974.

US paper mills struggle with sour economy, cheap imports and rise of digital communication

Notes from article By Dinesh Ramde, Associated Press Writer

It's a scene that has played out in small paper towns from California to Maine. The number of jobs in the domestic paper industry has shrunk about 20 percent in recent years as costs rise and imports become cheaper. Demand all around has been dampened by the slow economy as well as the shift of eyeballs away from the printed page toward the screens of PCs and cell phones.

The state of Wisconsin still has more jobs in the paper industry than any other state, mainly because of its proximity to vast rivers that supply millions of gallons of water for the treatment of wood pulp. The state had about 35,500 paper-industry jobs in 2007, down 26 percent from the 48,000 jobs it had six years earlier. Nationwide about 117,000 jobs have vanished in that span, according to data from the U.S. Bureau of Labor Statistics.
After Wisconsin, the next largest paper employers are California and Pennsylvania with about 28,000 jobs each in 2007, followed by Illinois and Ohio with about 24,000 each. Each figure represents a decline of about 20 percent from 2001.

Magazine Ad Pages Down

The consumer magazine business is a disaster!
Total magazine ad pages measured by the Publishers Information Bureau are down 9.2% through August, compared to the same period last year. Virtually all the major publishers are feeling the pinch. Of 37 big publishing groups measured by TNS Media Intelligence, 32 or 86% have seen ad pages fall. For the 32 publishers that are experiencing declines, the average decline was 14% for the year-to-date.

UPM continues restructuring measures

UPM continues actions to secure its profitability in a business environment of slow growth and rising costs. UPM plans to close its least competitive paper and pulp capacity in Finland as well as to streamline operations in all business groups.
The planned actions to close capacity would improve UPM's cost competitiveness

Verso Paper Machine at Bucksport to Lightweight Paper

Verso Paper Corp.
announced that it will begin transitioning the No. 1 paper machine at its Bucksport Mill, in Maine, to manufacture specialty papers starting on September 22. With this move Verso will begin supplying value-added specialty papers to customers, which leverage Verso's core coating and
lightweight paper production techniques. Once fully transitioned, this change will reduce Verso's coated groundwood production capacity by 84,000 tons per year.

Hewlett Packard Announces Green Policy

Hewlett Packard announced a new policy for vendors that supply the more than 300,000 tons of paper HP purchases for retail. The suppliers must now market only certified papers with recycle content.

United States Postal Service talks about Environmentally Friendly Initiatives

The USPS recently issued a promotional brochure, Environmailism, which offers helpful insight to producing environmentally friendly direct mail pieces.
-Ask for the highest recycled content available for the grade of paper you are interested in
-Many grades are available from 30 all the way to 100% recycled, or even tree free.
-Print on lightest paper possible
-Ask for papers made of alternative fiber – tree free, cotton, etc vs. trees
-Design piece smaller to use less paper
-Seek inks that are not petroleum based – such as Soy based
-Opt for less ink coverage on printed promotion
-Print on both sides and use less paper
-Reduce run to exact match of material you need – watch for waste
-Be sure size of promotion matches paper sheet size and press size
-Merge and purge mailing list – remove invalid names
-Provide for opportunity for customer to opt out
-Maintain ‘do not mail’ list
Remember, you can always visit or call the paper expert at Paper.com for suggestions of paper from their new Green Store

Pulp Market Update

Notes from session with Mark Wilde of Deutsche Bank and Brian McClay of TerraChioce

-Pulp buying and thus demand lowered considerably in last several weeks, especially in China, and as market pulp output and producers’ stockpiles continued to rise, particularly for hardwood grades.

-Pulp demand was also considerably lower in most other world markets rejecting increased paper mill market-related downtime

-Global pulp demand will continue to be weaker than normal through year-end, well below pulp supply, as papermakers in virtually all regions curtail production on a temporary basis to better match supply with slowing demand, and as more permanent paper mill closures in the US and Europe take effect.

- Pulp prices will continue to fall until enough capacity is removed to re-establish market balance early in 2009 for softwood and later next year for hardwood grades.

- Another 1.6 million tons of capacity to come on stream around the world in 2009 followed by more than 2 million tons each in 2010 and 2011, virtually all of it hardwood

-These declining price levels should trigger significant closures in North America, particularly in Canada, perhaps approaching 2 million tons over the next 6-9 months,
with most of that softwood pulp. Possibly 2 million tons taken out of European pulp production as well. High cost facilities will be first to go.

- A slowing economy combined with permanent market share losses to online and other lower-cost alternative media pushed US print activity to a 21-year low in North America

--Non-national metro dailies, will start going out of the print business altogether.

Capital Spending by Paper Industry expected to Drop

Lack of demand and pressure on profitability has forced paper companies to limited spending on capital expenses. Most mills will only spend on projects which reduce energy consumption, restructure equipment to product more value added grades, or modify equipment to manufacture a different product mix

Deluxe to Close Three Plants, Cut 570 Jobs

Deluxe Corp., a printer of bank checks, is closing three manufacturing facilities and a call center, resulting in the loss of 570 jobs. The company said it will close its North Wales, PA manufacturing plant and its Thorofare, N.J. manufacturing plant and call center in the first quarter of 2009. The Greensboro, NC manufacturing plant will be shuttered by the end of next year.

Print Catalogs Remain Primary Sales Channel

A survey conducted by the Direct Marketing Association revealed that the print catalog remains the largest revenue generator amongst all channels, accounting for nearly 50% of total sales in both 2007 and 2008. Results of the 106 multichannel merchants polled showed that 62% consider catalogs their primary sales channel. Only 20% of those polled cited the Web as their primary channel and just 6% said retail was. Of those respondents surveyed, 59% indicated that they have increased circulation, while 15% reported no change. Additionally, 44% of the merchants reported increasing page counts and 42% reported no changes at all in pages.

New York Times Saves on Paper

New York Times just announced it will begin to combine sections of the paper to save on costs. As an example, the paper's metro section will become part of the paper's A section - which is National and International. The sports section will be combined with the business section, during the week days. These combined sections will start in early October. Like so many newspapers, the New York Times finances have worsened and they must reduce costs in various ways, including reduce page sizes and number of pages, as well as shrinking their staff.
The paper will save several million dollars with this recent move.

Wausau Papers Modifies Ice Line

The Exact Ice paper line has added a 100pound cover and is now available in 7 text and cover weights, including 50, 60, 70, 80 and 65, 80, and now 100 pound cover.
Paper.com will be marketing this grade once inventory levels are satisfied.

Many Newspapers Reduce Paper Consumption

In an effort to survive and save money, newspapers are now transitioning their paper from the standard 30pound (48.8gsm). As many as 70% of the newspapers are now ordering 45gsm. Large publisher, Gannett confirmed it saved $7.5million by reducing basis weight and they are now evaluating 42.5gsm. Many forecast that within 24 months, everyone will consume 45gsm and this will now be the standard.

Hazen Paper Purchases old Neenah Mill

Hazen Paper of Springfield, MA reached an agreement to purchase the Housatonic, MA plant from Neenah (this mil was acquired by Neenah as part of the Fox River purchase). Hazen specializes in film and foil laminations, gravure printing, embossing, and coating as well as security tickets, tags, and labels. No mention of status on the one paper machine at location.

Unisource Implements Fuel Surcharge

Paper, packaging and facilities supplies distributor Unisource Worldwide will institute a fuel surcharge due to the rising cost of diesel fuel. The company had been able to offset the fuel increase by maximizing delivery routing and truck fleet utilization.

Unisource will now institute a fuel surcharge per line item to all orders shipped from its warehouses and orders received through Unisource’s Website will receive a flat surcharge per order.

With gas prices increasing costs to every vendor that delivers, Paper.com firmly believes that paper sales on the internet will grow at an even faster pace. The site has over 40,000 items and ships the majority of orders within 24 hours.

SMART Papers' Super-Luxury Kromekote Brand Achieves Important Environmental Milestone - Full FSC Certification

SMART Papers' premium cast-coated Kromekote is now fully Forest Stewardship Council (FSC) certified, giving corporations and graphics professionals immediate access to the most luxurious and environmentally responsible printing and packaging papers in the world.
Kromekote is the first triple cast-coated brand to achieve full FSC certification. The achievement represents another important advance for SMART Papers and its commitment to supply the widest range of FSC premium coated and uncoated printing and packaging papers in North America.

SMART Papers is North America's largest independent manufacturer and marketer of premium coated and uncoated printing papers. The company is currently building a new energy facility at its manufacturing center that will be fossil fuel free by late 2009, enabling all of the company's papers to be fully carbon neutral. "SMART Papers' carbon-neutral future will give customers total confidence they are getting the most environmentally responsible printing papers available from any U.S. paper manufacturer," said SMART Papers President Dan Maheu.

Ultra-glossy Kromekote is widely regarded by printers and designers as the "gold standard" in printing papers. Now, the brand sets a new "green standard" for premium environmentally preferable coated papers, with both FSC certification as well as papers with 30% post-consumer waste (PCW) fibers.
SMART Papers recently announced FSC-certification for its Kromekote Recycled products. Today's announcement expands the certification to encompass the rest of the brand including Kromekote Text and Cover, Folding Board, Colors and Metallics, Foils, Textures and Digital products.

SOURCE: SMART Papers

Printer Survey on Environmental Programs

The Printing Impressions Magazine just published a survey with results of many questions for environmental programs that printers are interested in. Of particular note,
we outline, in order of popularity, which environmentally friendly steps USA the printers actually implemented –
Purchasing paper containing post consumer (waste paper)
Purchasing FSC paper
Using environmentally friendly inks
Developing internal recycling programs
Recycling solvents
Purchasing more energy efficient equipment
Planting trees
Direct-to-press processless plates

Digital Printing Still Growing

Overall print sales for 2008 are expected to grow over 2%, with both toner based and inkjet leading the way. PIA/GATF released the following growth projections
-Overall growth. ..............2.2%
-Ink Based Printing ……...0.8%
-Toner/Digital Printing .….6.2%
-InkJet ……….....……………..6.0%
Most printers, although frustrated with increased paper prices, are generally optimistic about 2008 sales.

Market Pulp Demand is Questioned

Although worldwide market pulp shipments for 2007 represented its sixth consecutive month of growth (40.4million tons), balance of 2008 may witness a steady or slight decline in demand. North American pulp mills shuttered 2.4million tons since 2005, and Pope and Talbot recently announced bankruptcy and will curtail 3 mills as well as Catalyst will close 200,000 facility.
NBSK, the benchmark grade, saw little change in price since the first half of 2008, with list price staying at $880/ton. Because many more paper making plants will continue to close due to poor economics and declining demand, this will result in less demand demand for pulp.
Top market pulp producers for North America include
Weyerhaeuser 2Million tons 9.7% market Share
Domtar 1.5million tons 7.5% market share
Canfor 1.4million tons 7.1% market share
Tembec 1.3million tons 6.3% market share
Georgia Pacific 1.2million tons 5.8% market share

Quebecor World begins Consolidation

Cash starved Quebecor World has announced it will consolidate divisions to become more efficient. It will integrate six divisions into three business units. The magazine, book, and directory divisions will become the Publishing Services Group. The US Retail, catalogue, Sunday magazine and direct mail will be combined to form Marketing Solutions. The Logistics and premedia groups will also combine.
The company also announced the sale of its European operations to Hombergh/De Pundert Group (HHBV) of the Netherlands.

Tag and Label Markets Continue to Grow

Times are tough for most paper markets, but the Tag and Label markets seem to be enjoying steady growth. Although these converters also share in the challenges of rising raw material costs, fierce competition, and a poor economy, but overall global growth has been steady at 4-4.5%. It is estimated that BRIC countries – Brazil, Russia, India, and China – will witness robust growth in future. The USA market is forecast to grow 5% annually, and reach $18billion by 2011. The pressure sensitive labels continue to account for the majority of this growth.
Top Label and Tag converters include
RR Donnelly
Avery Dennison
CCL Industries
Fort Dearborn
WS Packaging
Multi Color
Spear
Nashua Corporation
Standard Register
Hammer Packaging

Another Major Coated Freesheet Maker Raises Prices

Verso Paper has announced an increase of $60 per ton for its Influence and Velocity coated freehseet paper grades, effective October 1.

Paper.com announced that NewPage did the same last week for nine of its brands.

Smart Papers Goes ahead with Co-Generation

As we previously reported, it is now confirmed that Smart Papers will build a 40MW co-generation system to produce both steam and electricity to operate the mill. This project will establish the site to be a zero process waste discharge facility and now generate carbon credits.
Paper.com markets the mill's premium cast coated, matte coated , as well as the uncoated text, cover, and writing grades. Many of these grades are Forest Stewardship Council (FSC) certified.

Magazine Industry Troubled

So far, 2008 has not been good to the magazine industry with an increase in postage, fuel, printing, ink, and paper costs. This, coupled with a recessionary economy. The hope is the recent olympics and a presidential campaign will assist a boost in readership. So far, pages and revenue as well as circulation are off significantly. To date, only 41 new magazines were launched (compared to 50 in 2007 and 72 in 2006).
This effects the paper industry in that consumption is also now down for publication coated grades.

American Eagle Mill continues to Grow

The American Eagle mill of Tyrone, PA, continues to enjoy sales growth. The mill is operated by a group of employees that purchased the closed facility from Westvacao in 2001. The plant now employs 265 workers and produces 90,000TPA of printing and converting grades. The product line includes 100% recycled, 50- 80pound, as well as 30% recycled reply card as well as envelope grades on two paper machines. The mill can produce 50-120pound uncoated grades.

Ordering Paper online Grows

International Paper's xpedx merchant division posted $1.4billion in ecommerce sales in 2007, for a 12% increase from 2006. Xpedx confirmed 5.8 million orders were conducted, or about half of the total xpedx sales.
Paper.com, with 40,000 items and nearly 60 distribution centers also outlined aggressive growth for 2007. Industry experts forecast this tend to continue.

Acacruz Plans Pulp Capacity Expansion in Brazil

Acacruz Celulose announced plans to build a pulp mill in Brazil. Management stated the completed facility will produce 1.4million tons of hardwood market pulp. The plant will be operational by 2015. Once complete, Aracruz will supply 25% of the world's market hardwood pulp, or, about 7 million tons per year.

Soporcel Installs new Cutsize Sheeter

Portuguese pulp and paper manufacturer, Soporcel, ordered two cut size converting and packaging lines from ECH Will and Pemco for the new paper mill under construction. The new equipment will produce 500,000TPA.
The Soporcel sheet is a worry-free copy paper that is one of the brightest on the market. Paper.com markets this sheet at approximately the same price as the lower brightness grades.

Climax Paper Plant Purchased

As previously announced, the purchase was completed for the Climax Paper facility in Loweville, NY last month for $6.9million. The mill produced heavy weight cover and converting grades on a cylinder paper machine.

MeadWestcavo Completes Sale of Specialty Papers Cedar Mill

MeadWestvaco Corporation announced it has completed the sale of its Specialty Papers Cedar mill in Potsdam, NY, to Potsdam Specialty Paper, Inc. (PSPI) on September 1, 2008. Terms of the agreement were not disclosed.

Kruger to Take Additional Downtime

Kruger announced it would take two more weeks of downtime on its 263,000 tons per year PM 4 at the Wayagamack mill starting September 1. The plans will remove approximately 10,000 tons of coated mechanical paper from the market.

White Birch to Increase US newsprint price by $60 per ton

North America's second largest newsprint producer, White Birch, told customers it would increase newsprint prices by $60/ton in the fourth quarter.
The hike follows an announcement by newsprint market leader AbitibiBowater last week that it would implement three monthly increases of $20/ton effective Oct. 1.
The new hike is the fourth $60/ton quarterly increase by North American newsprint producers this year.
Trade papers are reporting increased buyer resistance.

Wausau Paper Shut Down Otis Mill Machine

Wausau Paper will permanently shut down the #10 machine, one of the two paper machines, at the Otis Mill facility located in Jay, Maine on or prior to December 31, 2008 . Number 10 paper machine, with a capacity of 40,000 tons annually, presently serves the release liner market and a variety of smaller niche markets.

COATED GROUNDWOOD Market Update

The new coated market leader, NewPage, announced it will close Kimberly, WI mill by
Sept. 8. NewPage will also take two weeks of previously announced downtime at its Rumford, ME mill to rebuild a turbine.
Verso announced that it will take two weeks of downtime (13K/tons) in September at its Bucksport Mill in Maine.
UPM-Kymmene Corp. closed its two ground wood pulp and paper mills at Miramichi in Canada. The decision came almost eight years after UPM spent nearly $1 billion to buy the two mills
from Repap Inc.
The Finnish company closed the kraft mill in 2004, leaving 400 out of work.

Coated Freesheet Price Increase

North American coated freesheet (CFS) producers have told customers they will implement a $60/ton price increase on sheets and web grades effective October 1.
Suppliers that have announced include NewPage, Verso, Sappi, West Linn, Nippon and Appleton.
No mention, yet, for price increase for Groundwood coated publication products. US demand in the Groundwood market has not been as strong as free sheet.

Falling Pulp Prices

Surprise Surprise, Pulp prices are finally coming down, after months of increases......
We hear reports that “spot” market discounts of 15-20% on pulp prices, especially for large orders.
The fundamentals have shifted - demand is slowing, shipment volumes have eased, and world producer inventories are up nearly 24%.
Faced with slow demand, many mills are reportedly pressing suppliers for downward price adjustments.

Pulp & Paper Week Index revised the July NBSK list price from $890/mton to
$885/mton and held it flat for August, largely ending pricing
momentum. Pulp prices appear to have reached a near-term peak.

Newsprint prices boosted by $60/metric ton

by Tom Stundza
There has been an estimated 10.5% drop in U.S. newsprint consumption so far this year, yet list prices for the benchmark publication paper product are at $720/metric ton, a 12-year high. And now, the largest North American supplier, AbitibiBowater, has told customers the Montreal-based firm plans to raise prices by $20/month for the rest of the year, a move that would take newsprint prices to $780/metric ton in December.

Newsprint is used to print newspapers, other publications and advertising material. North American newsprint shipments of 624,000 metric tons in June were 12.5% lower than a year ago and in line with an overall demand drop of 12.3%, the Pulp and Paper Products Council has reported to its members. Production at midyear was down 10.7% year-over-year and 9.2% year-to-date. Overseas shipments also were reported down so that North American mill inventories of 334,000 metric tons at the end of June were 26% lower than a year earlier.

However, AbitibiBowater CEO David Paterson expects higher newsprint prices based on growth in newsprint exports. “Clearly, we'd expect the second half of 2008 to be better than the first half," Paterson tells reporters at the Reuters Paper Summit. Still, Paterson admits the company is facing resistance to price increases in North America and it is seeing an acceleration in demand declines due to its earlier pricing actions. 
Purchasingdata.com, for example, has yet to show transactions at $720 with the July average of $710 and the August average at $707.

Wausau Paper Announces Grade Changes

Wausau Papers announced that the Astropaque grade line will be discontinued.
-They recommend purchasing alternatives such as
-Royal Resource
-Royal Compliments
-Exact Ice
-Exact Opaque
Paper.com has all these alternative grades in stock and ready for immediate shipment. The site also has inventory of the Astropaque items, which will be offered at a discount.

Paper Industry Recap

American Forest &Paper Association, the leading paper association, reported printing & writing data for July which confirmed the poor market conditions for coated paper shipments - Coated Free Sheet demand fell 8% and Groundwood coated - publication papers fell a over 19% . Uncoated paper demand was more in-line with trends, with Uncoated Freesheet shipments down only 4.3% and Uncoated Groundwood shipments up over 18%.

2008 Mid-Year Economic Report

by, Elisha Tropper, president, T3 Associates, Harrison, NY, USA
Elisha Tropper, an industry consultant and former label company owner

Energy Crunch: Oil prices are at all-time highs, impacting everything from fuel prices, home heating bills and commodity prices to global oil exploration, the development and expansion of alternative energy sources (solar, nuclear, agricultural), and a potpourri of political, military, ethnic, and religious conflicts.

China 2.0: The changing business face of China is significantly convoluting what for the past decade has been a relatively simple global business equation. Most visibly, rising production costs are impacting the market positioning of Chinese goods. These higher costs have arrived in the form of inflation (raw materials, utilities, freight, etc.), a reduction or elimination in the VAT rebate for exports, and a rash of new labor laws enacted to protect workers and ease international concerns of abuse, resulting in, by some estimates, an increase of as much as 40 percent of the labor costs. In addition, the no-longer fixed Chinese yuan has dramatically risen against the US dollar (10 percent in 2007 alone), resulting in lower export profits. The effects of these changes are beginning to affect the world economy, as lower cost nations are making inroads into the low-end manufacturing sectors, while the (relatively) shrinking margins of Chinese manufacturing is putting pressure on global manufacturers who based financial investments on higher profitability.

The Fed: The US Federal Reserve has succeeded in its effort to devalue the dollar, and is now striving to stave off the inflation that appears to be following. We could debate Fed decision making all day long, but the consequences, however unintended, of the current policies have damaged US credit abroad, slowed economic growth, and enabled foreign investment in US assets at a discount.

Credit Markets: The housing and credit market crunch has dramatically (and disproportionately) had an impact on just about everything financial from Wall Street to Main Street. For businesses, the credit approval process is tougher, loan covenants are stricter, and despite low interest rates, the capital markets are tighter then they’ve been in very long time.

Election Day: The upcoming US presidential election will have significant ramifications across the board, including the economy, taxes, and international diplomacy (or lack thereof). For example, it would be difficult to imagine any new administration, in the face of budget deficits and political pressure, capable of fending off a congressional effort to raise capital gains taxes, let alone personal income taxes (regardless of the potential damage such moves might make to the overall health of the economy).

There is no doubt that each of our businesses is and will continue to be affected in a very significant way by some combination of these events and pressures. The challenge for us is to harness an understanding of how these economic developments in their various permutations potentially impact our existing businesses, and plot the course of action that gives us the best opportunity to grow and thrive.

Digital Printing Continues to Improve

Many believe the future of printing is in the future of Digital equipment. The markets are segmented into several target markets, namely,
Prints – Photo, labels, decals
-Pages – Documents, direct mail, promotions
-Poster – display, signage
-Reply card – Promotion,
-Packaging – Flexible packaging.
Digital printing involved any reproduction process that does not use a static image carrier. Every page is a new impression.
The digital presses continue to improve in quality, speed, integration of finishing, and ability to use larger sheets. Color printing dominates this market. Digital pareses are the perfect choice for variable data and ability to personalize every page. Toner quality now allows for resolutions of up to 1200dpi at speeds of 40-110 pages or 200ppm if roll fed.
Paper.com recently focused on this market and markets literally every major mills grade. The site has most sheet sizes in stock and ready for immediate shipment.

Paper …. The New Industry

The paper industry has undergone a transformation. In the past, mills ran to full capacity – no matter what ….. even if it meant reduced pricing of products. Today, inefficient mills and/or paper machines are being shuttered, or at least curtailed until market conditions improve. Operators are now controlling supply and inventory levels are lean. With the reduction in the US Dollar, USA producers can export paper successfully. Paper mills are shading non-strategic assets – forestlands, saw mills, packaging plants, etc. Producers are also reducing the products manufacturer – evaluating and only committing to the most profitable items. Yes, the paper industry has changed, and we continue to predict that paper prices will increase and end users will have fewer grades and producers to chose from.

Paper Economics

With demand declining for both Coated and Uncoated Papers, one would logically conclude that price is also declining (Economics 101). However, after years of disappointing financials, new operators owning and managing manufacturing sites, and strict adherence to capacity rationalization – paper is steadily increasing in price. Manufacturers are producing to demand. That being said, producers are still struggling with raw material increases for important components such as fiber, energy, transpiration, and chemicals and can not raise prices fast enough to keep up with cost. Look for more paper price increases.

Uncoated Free Sheet Market

Shipments for June were down slightly- 0.8% . Virtually all trade sources reported that pricing is relatively healthy. Approximately $40/ton of the proposed $60/ton mid-June price hike on cut-size business paper has gone through, with $15-20/ton of the late June offset increase showing in July. Note, a number of major producers and importers have hinted of yet another hike attempt in September. The key issue will be demand.

Coated Groundwood Market

Prices increased $20-40/ton in July for publication papers. However, with mill & printer inventories up sharply and consumption falling, the full $50/ton price hike was not successful. Shipment data for June was down: -12.9% from 2007, and the balance of this year appears worse. To maintain some measure of pricing stability, the new market leader, NewPage, is curtailing equipment and Verso announced that it will take two weeks of downtime (13K/tons) in September at its Bucksport Mill in Maine

Appleton to open expanded thermal-paper plant

-- Converting Magazine, 8/4/2008
Substrate provider Appleton will dedicate its $125-million expansion of the company's thermal-paper mill in West Carrollton, OH, tomorrow.
Capital investments include a new proprietary coater to produce thermal paper and construction of related facilities as well as enhancements to the mill's No. 92 paper machine. The expansion program will add 35 new jobs, the company says.
“The expansion will improve our capability to meet customer needs for enhanced product design and quality as well as increase capacity to satisfy projected demand for thermal products from our domestic and international customers," says Appleton CEO Mark Richards.
Paper.com has all the Appleton grades on site and ready for immediate shipments.

North American Label Market

America is the largest pressure sensitive label market in the world.
Current trends outline both the pressure sensitive as well as the wet glue labels are being cannibalized by competition from direct printing, in mold, and glue applied wrap around labels. Traditional label demand from around the world continues to grow at nearly 5% - but the mature markets of North America and Europe are only growing at 2.5%. Market demand breaks down as follows – Pressure Sensitive enjoys 45% of the market share; glue applied is 43%; and Sleeving and in mold are 8.6% and 2%. We are happy to report that paper is still the leading choice for sub straight, at 75% of total demand. One big hurdle for Pressure sensitive labels remains difficult environmental factors and ability to recycle the release liner. Also, RFID and digital printing remain formidable competition.

More Paper Price Increases

Several major paper mills recently made announcements for price increase of 5-7% . Notably, the Xerox 4200 and Digital paper families will advance; as well as Smart Paper's Kromekote grades; Nekoosa Carbonless; all SBS Board C1S and C2S; and all continuous stock computer papers - all will increase. Paper.com still has some inventory for immediate shipment at the old price.

Uncoated Free Sheet Update

Although shipments of uncoated woodfree papers are down 7.3% through June, the producers have been successful with the proposed price increase. We understand $40/ton of the proposed $60/ton mid-June price hike on cut-size (copy paper) paper has gone through, with $15-20/ton of the late June offset increase showing in July. The major producers and
importers have suggested t another hike attempt in September...

Coated Groundwood Market Update

Prices for publication papers increased $20-40/ton in July. Note: both mill & printer inventories are up sharply and consumption is falling, accordingly, the full $50/ton price hike has not passed through. USA shipments for June was unfavorable: -14.3% and July does not appear much better.

More trouble ahead for Paper Buyers

Problems continue to lie ahead for larger paper buyers for both price and availability. Several paper mills have recently announced permanent closure and others are taking ‘market’ downtime to control supply. In fact North America coated capacity has been reduced by approximately 20%. A different type of operator, the venture capitalist, is now managing the ‘new economics’.
AND, with the reduction of supply – with economics 101 – curtained supply generally generates increased revenue if demand exceeds supply.

Added Capacity by Brazil Producer

Brazilian pulp and paper producer, Suzano, is considering building an uncoated white paper machine outside of Brazil. The objective would be to forward integrate some of its
market pulp into paper, but do it closer to the final customer. One location reportedly under consideration is on/near the Texas gulf coast. Suzano would export pulp to the US for conversion into Paper. Suzano currently exports about 60K/tpy of various uncoated free sheet products into the US and has a near-term goal of moving to over 100,000/tons. Within Brazil, Suzano's estimated 2008 capacity is 1.64MM/mtons of market pulp and 1.1MM/mtons of paper.

More Sustainable Fast Facts

-56% of paper consumed in USA was recovered and recycled in 2007.
- The 54.3 million tons of paper recovered in 2007 would add up to 360 pounds for every USA citizen.
-The paper industry has a goal of recovering over 60% of paper by 2012

Smart Papers Constructing Biomass Co-Gen Plant

Smart Papers recently announced they would start a new $30million co-generation plant, which will use 100% biomass fuel. This will assist the mill in producing more environmentally friendly papers by reducing greenhouse gas emissions.

International Paper purchases Weyerhaeuser’s Packaging division

International Paper purchased the packaging division of Weyerhaeuser, which included 9 container plants (6.3Million tons); 72 packaging plants (99.4billion sq. ft); 10 specialty packaging plants, 4 bag Kraft plants, and 19 recycling plants. This affected 14,300 employees.

Paper, Packaging Companies Struggle To Make Profit

By Mike Obel,
Manufacturing.Net - July 25, 2008
NEW YORK (AP) -- Profits at paper, packaging and building supply companies are getting squeezed by raw material costs and falling demand for their goods as the U.S. economy and housing market languish.
Even as these companies cut costs by shuttering mills and raise customer prices, it's not fast enough to offset inflation. And if they raise what they charge too quickly, they could see a greater falloff in demand.
With the exception of newsprint and the price of land with timber on it, product prices are struggling to keep up, says RBC Capital Markets analyst Paul Quinn.
"While forest product prices are increasing, these gains are largely the result of capacity curtailments and closures rather than rising demand," he wrote in a July 22 client note.
Meanwhile, companies are still paying for the surging cost of materials like fiber, energy, chemicals and transportation. Take natural gas, both a fuel and a component for plastic packaging makers: In the last 52 weeks its price has shot up about 54 percent, even after the effect of a dramatic sell-off over the past three weeks.
Earnings also are staggering under the worst U.S. housing construction in decades and -- for companies with significant assets north of the U.S. -- a sharp rise in the value of the Canadian dollar against the greenback. Those conditions are freezing up demand for lumber and other goods used in buildings.
"We expect the industry to report aggregate net income of just $37 million for the second quarter of 2008, down 93 percent from the second quarter 2007, despite higher product prices," wrote Citi Investment Research analyst Chip Dillon in a July 21 note.
Among building products, paper and packaging companies that will release second-quarter earnings are Louisiana-Pacific Corp., reporting July 29, and Memphis-based International Paper, reporting July 31.
Analysts polled by Thomson Financial expect, on average, that Louisiana-Pacific will report a wider loss of 38 cents per share, while International Paper will report a smaller profit of 39 cents. Analysts' estimates typically exclude one-time items.
Share prices have declined with the sector's weakened results. In the last 52 weeks, the S&P 500 Paper and Forest Products index has tumbled 34 percent.
"The sector is a long way from a sustained recovery ... significant cost inflation remains the industry's main concern," says Quinn. "On the top line, we see little sustained momentum in commodity pricing, with the exception of newsprint and groundwood paper, offering limited ability to offset higher fibre, chemical, energy and transportation costs," Quinn wrote.
Quinn also said the average estimate of 11 cents per share loss is down from the 10 cents per share average profit seen in the second quarter of 2007, but narrower than the 17 cents per share loss seen in the first quarter of 2008.
Although there is evidence of sequential price increases and sequential improvements in earnings, new threats are looming.
Deutsche Bank-North America analyst Mark Wilde said in a July 21 client note that "reliable trade sources" report Brazilian pulp and white paper producer Suzano Papel e Celulose is considering building a plant on or near the Texas Gulf Coast.
He said as the industry scrambles to close mills and plants in the face of declining demand, "the specter of new capacity coming into the market is troubling

Mohawk Paper wins HP Award

Mohawk Fine Papers was named a Hewlett Packard Indigo Preferred Partner. Mohawk’s Digital products all have the proprietary i-tone finish for superior reproduction.
Digitally printed page counts are exploding 40+% and the quality of papers improves every year. Websites such as Paper.com have focused on marketing all the popular digital papers including Mohawk Fine Paper.

Uncoated Free Sheet

Although the uncoated woodfree shipments are down over the past few months, the $60/ton mid-June price hike on cut-size business paper as well as a late June offset increase seems to have been implemented with 100% success.
A number of major producers and importers have hinted about the prospect of yet another hike attempt – look for Fall announcement.

Digital Producer Expands Line

Wausau Paper now offers its new line of improved Exact Digital papers. The new line, marketed by Paper.com, includes a wide range of finishes, sizes, and basis weights. All 44 Digital items are FSC certified

Baltimore becomes Largest Paper Port

When the paper mill M-Real of Finland opened its new warehouse in Baltimore, and increased its shipments into USA, the seaport effectively became the largest port for paper imports. US Forest product imports have grown from 185,000tons a year six years ago to 1.4million tons a year today. M-Real reports it now ships between 1000 – 1400 truck loads of paper every year from Baltimore.

Market Pulp

DB Research Paper
Pulp appears to have reached a near-term top and prices are under modest pressure in some regional markets. The trade papers have yet to reflect this easing. The July price hike initiative on NBSK achieved only partial success, with the list price increasing by $10/mton to $890/mton. Other grades showing higher prices: SBSK (+$10 to $850), SBHK (+$15 to $820), and fluff (+$15 to $915). Trade reports suggest that the softwood market in Europe remains still over-supplied. In the European market, NBSK slipped by $5/mton to $895/mton. CTMP and hardwood prices have reportedly slipped in Asia.
How much could prices ease? With the US$ and costs rising, we think it won't take much of a price decline to trigger more capacity closures in CN & Europe.