Thursday, June 26, 2008

Increased Costs Continue to Pressure Margins

Rising costs continue to squeeze paper and packaging companies.
As energy, transportation, fiber, resin and chemical costs surge, firms are faced with attempting to pass along these higher costs in the midst of sluggish downstream demand. Stuck in the middle of the supply chain, producers in both sectors find their margins under pressure as they race on a financial treadmill.

Coated mechanical inventories surge as battle lines are drawn for upcoming price hikes

By John Maine, Vice President, World Graphic Papers, RISI
RISI has been predicting a major reversal of the trend in North American coated mechanical paper "apparent" consumption, and the new data that was just released by the PPPC show that the turnaround showed up with a vengeance in May. The year-to-date figures had been up 3.4% though April, which was perplexing given all of the weakness in the major end-use markets such as magazines and catalogs. Despite this weakness, these end-users continued to buy paper, amassing a sizable inventory, while their true consumption of paper plunged.
The statistics released in May were shocking: North American demand declined a whopping 13.5%. End-users had finally run out of room for inventory and started cutting orders sharply to match the performance of their true consumption of paper, which has been very weak all year.
The result of the slump in orders for May was a sharp rise in mill inventory of paper. Up until the last two months, all of the inventory build had been at the printer or end-user level, while mill inventories declined and remained very lean. During April and May, mill inventories jumped 85%, rising from 155,000 tons in March, to 289,000 tons in May. These inventories are still below year-ago levels, so they are not out of line. However, the speed with which these inventories are rising (2 months) is dramatic, and the fact that end-user and mill inventories are now both high while demand is weak is very disturbing to the market.

Capital Spending of North American Paper Producers to Remain at 2007 Levels


As more companies focus on controlling energy costs and arriving at the most profitable grade mix, RISI predicts that 2008 capital spending will decrease slightly or remain at the same levels as in 2007. Last year, capital spending was markedly lower than it had been a decade ago and, right now, the likelihood is that 2009 will not see appreciable change. Projects that address energy costs or that restructure machines for value added grades or that will change the grade mix are the most probable options as they serve the interest of improving profitability.

NewPage Takes Additional Downtime


NewPage announced it will take approximately 34,000 tons of coated paper downtime next month in addition to the 25,000 tons the company announced on June 5. The two coated freesheet machine at the Kimberly, Wisconsin mill will account for approximately 18,000 tons of the 34,000 tons of downtime. The balance will come from closure of the Niagara mill on June 21, which produces lightweight coated (LWC) groundwood papers.

Business Papers Price Increase

A $60 per ton price hike on cut-size uncoated free sheet (business papers) is
here to stay. Other portions of uncoated market such as offset rolls are not enjoying same demand, so the new price will not hit all market segments equally. Most producers continue to warn about an additional "cost- driven" price increase attempts later this year.

UPM Launches Carbon Footprint Calculator

UPM has launched a new tool to calculate the carbon footprint of its paper products. Customers can now estimate their own carbon footprint based on the ten elements of the Carbon Footprint Framework for Paper and Board Products, which was developed by the Confederation of European Paper Industries (CEPI). The tool is accessible through the Paper Profile on UPM’s Web site.

COATED GROUNDWOOD UPDATE

• Notes from Deutsche Bank
Watch this space - - - the presence of large private owners appears to be changing behavior. Earlier this month in announcing market downtime, NewPage pointed to rising inventories as well as slower demand from advertisers. We have reason to believe that other players may be quietly taking downtime as well. It also makes a current pricing initiative interesting to watch since demand is slowing, but costs are surging. A host of players, domestic and offshore, have announced coated paper increases over the past
several weeks. In the US, Verso announced a series of $50/ton price increases for June 1 on light-weight coated (LWC) and other coated grades. AbitibiBowater and others have also announced hikes.

NEWSPRINT Update

June prices for 30-lb newsprint rose $20/mton to $700/mton - - - a 12 year high. Furthermore, Leading producers have announced a $60/ton price hike for later this summer. Many publishers are bracing for a $20 increase in late Fall.
Additional hikes will likely be dependant on the willingness of industry leaders to take a hard-line with customers in addition to removing capacity. The industries largest producer, AbitibiBowater suggested that it would look at further supply reductions as we approach year-end. On the demand side, consumption at USA dailies fell
13.7% over last 12 months.

Tuesday, June 17, 2008

SMART Papers Appoints New Sales VP

SMART Papers has named Don Butts vice president of sales for its Merchant Channel. Mr. Butts will be responsible for sales to all paper distributors in North America. He will be based out of the company’s Hamilton, OH headquarters. Butts spent 11 years at Domtar, six of which he held the position of vice president of sales. Prior to that, he worked for Boise Cascade in a variety of management positions. Before joining Boise, Butts worked as a national account manager for Mead Paper and handled the RR Donnelley account.

Paper.com markets all the Smart Paper products, all items ship within 24 hours after order placed.

Paper Continues to Witness Price Increases

We, at Paper.com, continue to witness price increases – this time on all carbonless, thermal, and coated bonds effective with shipments after June 30th. Producers site cost pressures from energy, transportation, fiber, and chemicals. This coupled with lower capacity and strong demand.
Another interesting development, specific to our thermal papers, the US Department of Commerce recently announced preliminary ruling for ‘dumping charges’ against mills in China and Germany. The tariffs range from 7 to 33%; making imports a very expensive alternative.
These increases are in addition to our previously announced for all copy paper, effective June 16, of approximately $1.50/carton on 20lbs and $1.80 per carton on 24pound.

Too many Environmentally Friendly Certifications!@#$%&

In the late 1990’s the Forest Stewardship Council (FSC) and the Sustainable Forest Initiative (SFI) were introduced. Both are third party certification parties that review the entire supply chain for a fee. The certificate confirms the chain of custody for standards that address the fiber content and the forest, which was harvested. Certified papers are more expensive. The board conducts an audit of the entire process from the tree to the production through to the distributor or printer. Paper.com has many paper items that are FSC and SFI certified in the new Green Store, along with thousands of other environmentally friendly papers. Including paper with all the popular certifications such as Green Certification, Alternative energy Certification, Tree Free Certification, Chlorine Free Certification, 25-100% recycled Certification, Green Seal Certificate, etc.

Update on Uncoated Free Sheet

Notes from Deutsche Bank Research Paper

Following initial announcements by Boise, Domtar, International Paper and several other producers have come out with $60/ton price hikes on cut-size (copy paper) and offset rolls for June and July. This would be the second price hike in 2008 on uncoated grades - - - the result of
significant cost increases in energy, chemicals, transportation and fiber. However, demand remains lackluster. Shipments declined 9.6% vs March ’07 and preliminary data suggests that April was similarly weak (down -10% in the US).

Update on Coated Groundwood

Notes from Deutsche Bank Research Paper
Most producers, both domestic and offshore, have announced coated
paper increases over the past several weeks. In the USA, Verso announced a $50/ton price increases for June 1 on light-weight coated (Publication) and other coated grades. AbitibiBowater and others have also announced hikes. In Japan, Nippon and Oji have both announced $100/ton hikes on export coated publication papers. Of note; US shipments rose an impressive 10.3% so far this year. With rising costs & weak US$, it creates an interesting
dynamic. There is growing evidence that demand is weakening. As we have noted, contacts in the printing distribution community are reporting that high paper prices and a slower economy are triggering reductions in some cataloging budgets. Late last week in announcing
25K of market downtime, NewPage pointed to rising inventories at a number of printers as well as slower demand from advertisers.

Update on Containerboard Grades

Notes from Deutsche Bank Research Paper

Flooding forced Weyerhaeuser to shut down is Cedar Rapids, IA, Containerboard mill (970,000/tpy). The impact is unclear -- the market is already tight with International Paper's Vicksburg mill outage. Major producers (70% of NA capacity) have announced a $55/ton price hike for July 1, and Smurfit and International Paper have now followed with a box hike.
In light of market dynamics, this is not a surprise. The big obstacle will be making prices "stick" in the wake of sluggish box demand. The cost story is mixed. While energy costs continue to
surge, rising export freight rates and problems finding shipping space have put pressure on OCC pricing since beginning of year.

NewPage Taking Mill Down Time

NewPage Corp. will be taking approximately 25,000 tons of coated paper market-related downtime in June and July throughout its mill system. Several machines will be involved, and each will take advantage of specific times to complete planned maintenance and capital work.

Meanwhile, two paper machines at the Niagara, WI, facility that were slated to run until this fall will now be permanently closed on July 12. This reduces production by an additional 50,000 tons. The Niagara machines produce lightweight coated groundwood papers used in magazines and catalogs

Corporate Express Recommends Staples Bid

Corporate Express will recommend a $14.36 per share takeover bid by Staples Inc. to shareholders, according to the Associated Press. The decision reverses an earlier plan to merge with French competitor Lyreco. Including Corporate Express debt, the offer values the company at around $4.8 billion.

Potsdam Specialty Paper acquires MeadWestVaco’s NY mill

-- Converting Magazine,
MeadWestvaco Corp. (www.meadwestvaco.com) will sell the MWV Specialty Papers Cedar mill in Potsdam, NY, to Potsdam Specialty Paper Inc. (PSPI). MWV Specialty Papers will continue to own and operate its Willow mill in South Lee, MA. The sale is expected to close in the third quarter of 2008.

PSPI is part of an investment holding company with offices in NY, Hong Kong, and Toronto, that has the financial resources to continue growing the business, expanding the product portfolio, investing in the people and facilities, and rapidly expanding the global reach of the business to new customers. PSPI will be part of a portfolio of global businesses that focus on niche products and markets in the value-added paper and coatings distribution business.

The mill’s current management team will remain in place following the sale, and all employees will transition to PSPI following the completion of the sale.

Friday, June 06, 2008

Paper Mill Revived

In 2000, the Newton Falls Paper Mill was one of 600 Paper mills operating in the USA when it closed later that year. The mill's story was not to dissimilar to the shuttered mills in Great Barrington, MA., Augusta, GA., Lufkin, TX., Brewer, ME., and Deferiet, NY. - older equipment that could not produce product as economically as the newer, bigger machines. However, the story was quit different for the Newton Falls, NY facility - they found an investor (funding $20milllion to acquire the mill) and many of the workers continued to believe in the mill's survival - the mill reopened recently and is manufacturing 200 tons a day of coated paper. The plant runs 24 hours a day - 7 days a week supplying paper to such important companies as WalMart, and Jessica Seinfield's cookbook. With all the recent mill closures, it is nice to learn of a mill that survived!

Tuesday, June 03, 2008

Text and Cover Paper Prices also Increase

The small specialty mills, which produce Text and Cover grades such as Wausau, Neenah, Mohawk, and Smart, are all talking about a price increase. The biggest challenge is the advancement of energy cost. Recent announcements for pulp have also added pressure to producers for a price increase. Crane & Company did officially announce a price increase of 5-7% depending of the grade. In Crane’s case, they added the additional factor of spiraling costs for the cotton fiber. Crane’s announcement is for shipments after June 20th. Stay tuned for more changes. Paper.com is still able to ship at current pricing, until June 20th.

Who’s NOT on the Web?

I quote interesting stats from article in Internet Retailer magazine
>55 million US Adults do not use the Internet at all
>36million adults over 62 (74%) do not shop on line
>12 million US Internet users will not shop online for fear of supplying personal and financial information
>34 million US households that have dial up (59%) will not shop on line (21million that have broadband – will not shop online)
>17 million African Americans (59%) do not shop on line
>19 million Hispanics (58%) do not shop on line
Meanwhile, 2007 yielded a 22% growth in online sales to $165.9billion. Websites such as Paper.com that cater to niche products are forecasted to continue to grow.

Carriers all announce price Increases

Websites such as Paper.com continue to negotiate hard with truckers and carriers such as UPS, DHL, and FEDEX to hold prices – but all have announced increases due to gas prices. Even the United States Postal Service went up in May! Until the price at the pump stabilizes, we fear additional increases.

Paper.com thinks Green

As a leading online paper website, Paper.com recently introduced over 1000 items of environmentally friendly items to the site, and continue to add items daily. The company also has selected UPS as its primary carrier because of its ‘green’ position
Did you know-
>UPS was the first to begin testing for alternative fuels to power its fleet? The company now has 1600 Compressed Natural Gas (CNG), hybrid electric, and electric/propane powered vehicles on the road
>UPS uses cutting edge route optimization systems to determine most efficient routes, using less fuel.
>UPS leads the airline industry in deploying noise and emission reducing technologies.
>UPS uses innovative packaging which range from eco friendly to reusable boxes and envelopes
>UPS encourages all end users to electronically communicate for a paperless experience.

Recent Printer Survey Results in

PIA/GAT reported on results from a recent survey-
23.8% of printers sited the most significant challenge for 2008 will be competition and pricing; followed by 16.8% stated inconsistent sales volume; and 15.7 claimed soft demand.
Meanwhile, printers that focused on direct mail printing grew in 2007 by 4.25%; Book printers saw growth of 2.27%; general commercial printers grew 2.09%; and quick printers enjoyed 0.73%

The Dust is Settling at NewPage Paper Company

As a result of the acquisition of Stora Enso’s North American division to NewPage, much restructuring has occurred. The combined company has announced it has streamlined its coated web lines including the discounted Focus Plus, Nova Press, Advantage, Polaris Press, and CapriPress.