US Pulp and Paper Industry Posts 4Q Results

Earnings for U.S. paper and forest companies fell 1.5% in the fourth quarter, compared to the year-ago quarter. The collective profit margin totaled 4.2%. It was the second consecutive quarter above 4% for the group of 21 publicly traded companies. Fourth quarter sales for the group increased 1.0%, driven by higher prices and increased volumes for most pulp and paper products.

RR Donnelley Fourth Quarter Loss Widens

R.R. Donnelley & Sons reported a fourth quarter net loss of $293.3 million, compared with a year-ago loss of $1.2 million. The results included pre-tax charges of $477.2 million. Quarterly net sales increased 25% to $3.09 billion, boosted by multiple acquisitions Donnelley made over the past year.

2007 Reduction in Uncoated Capacity

Mill Location tons
Inter’l Paper Pensacola, FL 350,000
Dirigo Gilman, VT 70,000
Georgia Pacific Wauna, OR 110,000
Boise Wallula,WA 135,000
Fraser Madawaska, ME 70,000
Domtar ME,WI,QC 240,000
Dryden, ON 315,000
Neenah Housatonic, MA 15,000
Urbana, OH 40,000
Wausau Groveton,NH 105,000
Valentine Lockport, LA 35,000
2007 total tonnage reduction 1,425,000 tons

Some Recent Notable Acquisitions

Acquiring Company Purchase year
Domtar Weyerhaeuser 2007
Abitibi Bowater 2007
Investor Group St Marys 2007
PaperlinX Cascades 2006
NewPage StoraEnso NA 2008
Aldabra2 Boise from Madison Dearborn2008
Brookfield Longview Fibre 2007
Rank Blue Ridge 2007
International Paper Central Lewmar 2007
Neenah Fox River 2007
Atlas Finch 2007
Apollo / Versa Int’l Paper coated 2006
Glatfelter NewPage Carbonless 2006
Koch Georgia Pacific 2005
Kohlberg Inter’l Paper Industrial 2005
Mohawk Inter’l Paper Specialty 2005
Smart Paper Fraser Wisconsin mill 2005

China’s Paper Industry continues to Grow

China may pass the USA as the world's leading producer of paper and board. RISI just reported on a survey that outlines in 2007, USA produced 84million tons compare to China at 65million. But China’s capacity continues to grow.

White Birch Completes Acquisition of SP Newsprint

White Birch Paper has bought the fourth largest newsprint producer, SP Newsprint, for $350million in cash. White Birch is now the second largest newsprint North American producer with AbitibiBowater as #1. (FYI. #2 largest in world is Norske Skog out of Norway). This acquisition increases White Birch capacity to 2.1 million tons or 18% of USA market share. The market leader, AbitibiBowater, has 47%, and #3 is Kruger with 10%. The top 3 North American producers have 75% of the domestic market share.
Note on Newsprint market: AbitibiBowater announced another $60/ton price hike increase for the second quarter. Just like the $60/ton increase for the first quarter

Another Wave of Price Increases

On the uncoated front, Domtar, International Paper, Georgia Pacific and Evergreen have all announced a $60/ton March price increase on 50lb offset rolls, with other uncoated freesheet grades set to follow. The increase comes shortly after many producers announced a $60/ton increase on business papers for February
Note: demand for uncoated is actually weaker; however, the market remains tight because capacity is shrinking (reduced by 1.4Million tons in ‘07), with further capacity reduction scheduled in 2008.

Publication Papers to Increase in Price

Recently, both Kruger and Myllykoski have announced $60/ton price increase for publication papers for early April. These two suppliers are smaller, but we think other producers will follow with the magazine and catalogue market remaining extremely tight. Deutsche Bank - Equity Research reported that price on 40lb coated papers have risen $190/ton between June of 2007 and January of 2008.
Shipment volumes rose 11.5% this December versus 2006 (+2.9% YTD).

Packaging Grades also see Increased Pricing

According to Mark Wilde of Deutsche Bank
The 7 largest producers (75% of North American market) have announced a $50/ton price hike for early March. Inventories remain lean, operating rates are high, and fiber costs are rising. The big obstacle will be making a containerboard price hike "stick" in the wake of sluggish box demand. December 6.8% drop in box shipments appears an "overstatement" on the downside, but it does raise a yellow caution flag. Smurfit-Stone plans to install six new
corrugators (one per month) in the first half of '08 to create "super" plants, which will be capable of replacing as many as 2-3 existing plants.

Saving Money on that Printed Piece

The power of the printed word and personalized promotional direct mail pieces continue to grow. Direct Magazine just reported that printed material could cost a marketing department 1-4% of a company’s revenue. A few suggestions to assist with keeping the cost down (note postage increase was just announced for May2008)-
-Adjust the size of your printed piece to a common press size – using irregular designs, even if you are off ¼ inch will cost you money
-With over 40,000 printers in USA it important to research and negotiate with the printer that have the proper equipment and a history of dealing with jobs similar to yours.
-Coordinate printing with other departments in your company – awarding more work to one printer allows you more leverage
-Split up and evaluate each piece of the job, printing and distribution equates to half the
cost of the job, paper, the other half. You may be better supplying paper to the printer. Web sites such as www.paper.com has over 35,000 papers all at competitive pricing. They will ship directly to your printer.
-Consider a lighter weight paper if piece is to be mailed.
-Do not be afraid to work with a printer away from a major city; printers farther away are generally more economical and produce excellent work.
-Ask about the different types of printing –digital, offset, letterpress, and flexography all generate different results at different prices.
-Talk to several printers for competitive bids, remember, the cheapest bid may not produce the best results – but a minimum of 3 bids keeps everyone honest.

AbitibiBowater sells Snowflake Mill

As part of the antitrust agreement, allowing Abitibi and Bowater to consolidate, the Snowflake, Arizona mill was sold. It was sold for $161million dollars, which most industry experts thought was low. Perhaps because the mill’s only product was newsprint, a shrinking market demand.

Paper.com as one of the World’s Largest Paper Websites Introduces Environmentally Friendly Papers

P. Scott Vallely, a paper industry executive; and John Engel, an expert in web design and internet marketing have announced the introduction of a new store on the Paper.com. website to market environmentally friendly papers. This section of the site has nearly 800 papers focused on a clean world. Many grades are produced with 100% recycled fibers, or completely tree-free, as well as Chlorine free. The site also markets papers that are manufactured with alternative energy. Dozens of the grades are FSC certified, and carry the Green seal certificate. Visit the “green Store” at Paper.com http://paper.com/department/green/
The site boosts to have the greatest assortment of ‘green papers’ and they are all available for immediate shipment and offered at competitive prices.

The website has nearly 50 vendor warehouses throughout the United States and ships within 24 hours after receipt of order – from a single sheet of paper to multi truckloads. The site now enjoys nearly 8000 unique visitors every day clicking onto www.paper.com

The company has recently made the list of top 500 retail websites in USA as reported by Internet Retailer.

Fraser Shutters Paper Making Equipment in New Hampshire

Fraser Papers Inc. says it is curtailing production at its paper mill in Gorham, N.H. "for an indefinite period" laying off 167 staff and 109,000 tons of paper production due to rising input costs, "particularly oil and market pulp."
The mill is curtailing production of commodity freesheet paper grades on two paper machines starting April 13. Production on another machine at the mill was suspended late in 2007, as reported by Paper.com. The company said it expects to continue operating two of the five paper machines in Gorham that produce specialty printing papers, namely principally light-weight opaque papers, and industrial towel.

Stora Enso Converts Paper Machine

Stora Enso will convert a coated magazine paper machine at its Anjala, Finland to produce both coated and uncoated book papers. This is estimated to be complete by October 2008. The project will increase the mill’s book capacity to 320,000 tons (up from 65,000 tons).

UPM to Cut Newsprint, Magazine Paper capacity

UPM has announced a consolidation of production equipment, which will mean shutting down equipment.
-Closure of Miramichi Canada – 450,000 tons magazine papers
-Temporary shut down newsprint machine in Kajaani, Finland and one in Steyrmuhl, Austria -250,000 tons
- Temporary shut down machine in Jamsankoski and one in Tervasaari (both in Finland) – for reduction in label papers

Domtar to Close Port Edwards mill and Reduce Dryden Capacity

Domtar is on schedule with its announced capacity reductions. It will close Port Edwards, Wisconsin, which had a capacity of 165,000 tons of uncoated Freesheet, sometime in the second quarter of 2008. In addition to this mill, Domtar will reduce production of its Dryden, Canada facility. The #2 machine, producing 332,000 tons will be shut down and the #1 machine will be started back up, it will produce 155,000 tons – both machines manufacture uncoated free sheet. Domtar’s net reduction with this announcement, as well as previously shuttered equipment, will be 340,000 tons.

Clinton Outspends Obama on Printing

From Printing Impressions Magazine
NEW YORK—When it comes to spending dollars on printed products during the last three months of 2007, Hillary Clinton stormed past Barack Obama, according to Federal Election Commission statistics. Clinton’s printing costs came in at roughly $1.3 million while Obama registered nearly $710,000.

Curiously, the leading candidates vying for the Democratic presidential nod swapped places on postage expenses: Obama’s receipts totaled roughly $1 million while Clinton spent $332,000. The former First Lady did triumph via a lower Verizon phone bill: $14,000 to Obama’s $70,000.

Newspapers continue to feel the Pressure

The New York Times reported that most of the industry’s executives and analysts believe newspapers will continue to be cannibalized by online, Internet competition and shrink. In 2007, combined print and advertising revenue fell about 7% and ad revenue was 20% below its 2000 peak. Circulation revenue has declines steadily since 2003. The Boston Globe and The Los Angeles Times both reported they have lost 30 to 40% of their circulation in the last few years. Local advertising has fallen, while national ads have actually increased somewhat. It was also noted that the real estate downturn has affected newspaper business.
Newspaper executives have done a poor job adopting to the Internet and being more creative on generating revenue. Perhaps the only savior now is the migration of newspapers now offering news on the Internet and joining the online world.
As reported in so many past news releases on our site, Newsprint, the paper used for newspapers, continues to decline in demand.

Smart Papers reintroduces Carnival Paper Grade Line

Smart Papers recently announced that it updated and simplified its Carnival Text, Cover, and Writings grades. The mill introduced a 98 bright white that offers vivid full-color print performance on traditional offset and digital printing equipment.
Paper.com markets the entire Smart Papers line, from the new selection of Carnival grades, to the popular Kromekote and scrapbooking grades and environmentally friendly Genesis line.