Federal Reserve States Easing of Recession

The Federal Reserve reports the recession is easing and that the economic outlook has "improved modestly" since last month (March2009).
The worst of the recession -- in terms of lost economic activity -- could be past; although, weak sales and credit difficulties have forced businesses to continue to cut spending and lay off workers.
Against that backdrop, Fed Chairman Ben Bernanke left a key interest rate at a record low of between zero and 0.25 percent.

Boise's DeRiddle Mill Idled

Boise Inc. has indefinitely idled its #2 newsprint machine at its mill in DeRidder, Louisiana, which has been idled since February. The machine has annual production capacity of 186,000 tons of newsprint. The company plans to continue to run the #3 newsprint machine at the DeRidder mill as well as a linerboard machine.

OnLine vs. Traditional Newspapers

Media Week ran a recent survey of online newspapers , results-
Online-only newspaper readership is still very low in the United States. According to Scarborough Research, the number of adults who have read newspapers online-only during the week is 4 percent.

Below is the latest list of top newspaper Web sites. The percent change compares March 2009 to March 2008.


NYTimes.com -- 20,118,000 -- 7%
USATODAY.com -- 9,961,000 -- (-7%)
washingtonpost.com -- 9,367,000 -- 5%
Wall Street Journal Online -- 9,192,000 -- 34%
LA Times -- 8,643,000 -- 51%
Boston.com -- 5,742,000 -- 37%
Daily News Online Edition -- 5,658,000 -- 71%
Chicago Tribune -- 5,270,000 -- 38%
SFGate.com/San Francisco Chronicle -- 4,227,000 -- 11%
New York Post -- 3,827,000 -- (-18%)
DallasNews.com - The Dallas Morning News -- 3,536,000 -- 30%
The Houston Chronicle -- 3,095,000 -- 15%
Newsday -- 3,065,000 -- (-5%)
Atlanta Journal-Constitution -- 3,041,000 -- 28%
Politico -- 3,033,000 -- 45%
Chicago Sun-Times -- 2,737,000 -- 24%
MiamiHerald.com -- 2,686,000 -- 85%
Star Tribune -- 2,360,000 -- 34%
The Seattle Times -- 2,262,000 -- 70%
International Herald Tribune -- 1,984,000 -- (-23%)
The Coy Paper Company monitors the newsprint market and reports into this Pulp and Paper Blog several times each week.

Meredith quater reveals drop in Advertising

Meredith Publishing just reported on its last quarter with a drop in advertising revenue of 12%. Circulation for many titles are also down.

Conde Nast Portfolio Magazine RIP

After achieving a circulation of 449,005 Conde Nast pulls the plug on Portfolio magazine. Another negative for the magazine industry!

Label Market ‘feeling’ the Recession

2008 started off fine for the North American Market, than, like so many other sectors, demand and profit fell off the last half and especially the final quarter of 2008. In fact, early reports outline an actual decline of 1.5% for 2008 shipments (2-2.5% decline for pressure sensitive) from 2007. Most segments experienced decline in growth, beyond pressure sensitive including glue applied and in mold while film labels seemed to hold their own. Two best end user categories were beverage and household chemical.
Note, North America is approximately 27% of world demand, placing it as the third biggest market behind Europe and Asia. Future forecasts include label growth to follow GDP.

Newspapers report down demand

The average daily circulation of U.S. newspapers declined 7% in the six-month period ending March 31, according to the latest data from the Audit Bureau of Circulations, reflecting an increased rate of decline over the last two measured periods.
Some Highlights-
USA Today down 7.5%
Wall Street Jr up 0.6%
New York Times down 3.6%
LA Times down 6.6%
New York Post down 21%
Boston Globe down 14%
San Francisco Chronicle down 16%

Weathering the Paper Storm

Printing papers continue to suffer with decreased advertising, fewer readers and letter writing, acceleration in substitutes (more economical papers and electronic communication), and a poor economy.
Despite capacity curtailment and reduced prices, demand remains weak and supply high. Newsprint is especially affected with reduced demand with the greatest cannibalism of readers to the internet and falling circulation. Book publishers may also witness additional attrition with introductions such as Kindle. With fewer purchases – containerboard and packaging is down. Fewer products being sold yields less packaging plus, consumers are satisfied with reduced layers and reduced lightweight material – still allowing for a ‘sturdy’ container – but less paper. The Tissue market has not felt the same reduction in demand, but given the poor economy, end users are now picking the more economical private brands, which typically use less paper.
Raw materials such as fiber, energy, chemicals and transportation has declined and helped, but sales prices continue to slide. PPI reported that 5.7million (5% of paper production capacity) has been taken out of market in 2008. This should assist. Big challenge is the capital-intensive paper industry attaining credit for capital projects. Limited funds are available for growth and acquisitions. Most paper producers are in a survival mode – cash management and Balance Sheet strength is key.
The Coy Paper Company monitors current events in the Pulp and Paper Industry and reports into this Blog several times each week.

St Francisville, LA Mill May Restart

Tembec announced the sale of its St. Francisville mill, closed in 2007, to PanAmerican Capital Group for $6 million in cash and $10 million in interest bearing notes last week. Now, published reports say that the mill, which produced 240,000 tons per year of NBSK pulp and 340,000 tpy of coated paper, may be restarted; possibly even this year. The new owners have yet to disclose the product that might be manufactured. The state of Louisiana has offered substantial incentives, $6 million if the company creates at least 200 jobs by early 2010; with more to follow if employment goals are met.

NewPage to sell Kimberly, Wisconsin Mill

NewPage reported it would sell its Kimberly, WI paper mill, which produced coated paper, with the intention of trying to find a buyer who will not produce the same paper grades.

Some Good News for Quebecor World

Quebecor World Printing just signed a multi-year contract with Boardroom Inc. for over $100million for printing. The printer also filed for a plan of reorganization with US Bankruptcy court to emerge from creditor protection by this August .

Kraft Paper Shipments Down 3.3% in March

Some notes taken from session with American Forest and Paper Association
>Kraft paper shipments decreased by 3.3% compared to February 2009, a decline of 3600 tons.
>Total Kraft paper inventory increased 10.3% in March, 7300 tons higher than February.
>Total Unbleached Kraft shipments dropped by 3.7% from last month, and 29.5% compared to March 2008.
>The total Unbleached Kraft inventory increased 15.5% from last month.
>The total shipments of Unbleached Kraft Bag & Sack decreased 16.3% compared to February 2009, and 32.8% decrease compared to the same month of last year.
>Unbleached Kraft Converting shipments increased 4.5% in March compared to February 2009. The total year-to-date of 2009 shipments had an increase of 2.5%.
>Total Bleached Kraft shipments had a slight increase of 0.9% compared to last month, and a drop of 30.7% compared to March 2008.
>The total Bleached Kraft inventory dropped 7.5%, 1200 tons lower than February 2009.

Domtar Adds FSC Certification to Four Mills

Domtar Corp. has achieved Forest Stewardship Council (FSC) Chain-of-Custody certification at four additional paper operations. The newly certified mills include a coated groundwood mill in Columbus, MS and three uncoated freesheet mills in Hawesville, KY, Kingsport, TN and Marlboro, SC.

Cenveo Merges Two Operations

Cenveo has merged Anderson Lithograph and ColorGraphics into a single business, which will operate at the ColorGraphics location as part of the corporate initiative for executing a cost cutting and consolidation plan since 2005.

Nippon Paper Group Reduces Capacity 875,000 tons

Nippon Paper Group plans to curtail its annual production by 875,000 tons by the end of September in response to a sharp decline in demand. The company will shut down a total of 12 paper and paperboard machines as well as 3 coating plants, reducing its production capacity by 575,000 tons. Approximately 442,000 tons of that will be comprised of various paper grades. The remaining tons will be board.

New York Times Reduces Pages

Joining the crowd, the New York Times has announced several initiatives to reduce costs for the newspaper – all yielding fewer pages, which mean less paper, printing, and ink. The management reports eliminating several sections (out of both daily and weekend editions as well as their Sunday Magazine), also they will reduce staff salaries, cut spending on freelance work, and reduce number of pages.

Containerboard Prices Down

The list price for linerboard and medium fell $15/ton this month. I understand shipments have stabilized somewhat for April ... so far, but March was down 12% from March of 2008.

Newsprint Continues Downward Trend

The price of newsprint continues to decline with April 'list price' reduced by $40/ton. Inventory levels are not much help either - over 65 days. Producers have confirmed additional down time amounting to 400,000 tons for second quarter - hoping this will help.

AbitibiBowater Files for Bankruptcy Protection

AbitibiBowater filed for bankruptcy protection, siting the weight of the two recent acquisitions and a collapsed demand from newspapers for newsprint, as primary challenges. In addition, the recession has reduced the amount companies spend on newspaper ads, and rising newsprint prices have caused newspaper publishing companies to take such cost-savings measures as trimming the width of their pages. Further, declines in advertising and circulation have resulted in fewer pages printed overall, and in dozens of newspapers one or more of their print publication days have been eliminated. The impossible credit markets also provided challenge for the company to find financing.
The company insisted operations will continue as normal during its restructuring.

No layoffs, closures or pay cuts were announced with the bankruptcy, though such moves may be forthcoming as the restructuring progresses.

AbitibiBowater also said it arranged with Fairfax Financial Holdings Ltd. and Avenue Management LLC for debtor-in-possession financing of about $200 million.

Containerboard Demand Drop Cuts Output, Capacity

By Tom Stundza

The economic slowdown has continued to reduce demand for linerboard and slowed manufacturing at North American containerboard facilities. At the same time, U.S. capacity to produce paper and board moved down slightly in 2008 to 96.3 million tons -- continuing an eight-year fall, according to the American Forest & Paper Association's annual survey.

Capacity is expected to drop by about 2% in 2009 to 94.5 million tons, which will be well off the peak of nearly 104 million tons in 2000. In 2008, 41 paper machines as well as 18 entire mills were shut permanently, the AF&PA survey reveals. The capacity to make paperboard for boxes is expected to decline at least 2.6% from 2007 to 2009, according to RISI, the Bedford, Mass.-based forest products information service.

Meanwhile, Smurfit-Stone Container Corp., the largest producer of cardboard box materials in North America, is closing a mill in Missoula, Mont., for 10 days from April 20 due to shrinking demand for cardboard products. The plant already has had another linerboard machine shut since last November.

A RISI market review says that over the past six months, North American containerboard companies have taken downtime of some 2.15 million tons, or 32.5%, of annual linerboard capacity.

The researchers also say that companies have temporarily stopped production of 719,000 tons, or 28.1% of capacity, of corrugating medium volume in the fourth quarter of last year and first quarter of 2009. Some 31.3% of recycled containerboard capacity, or 2.87 million tons, also saw some downtime. RISI tells clients that these tonnages reflect “known downtime” reported by local media or released in company statements.

Quebecor Reaches Agreement with Creditors

Quebecor, which filed for Chapter 11 bankruptcy in January of 2008, announced an agreement with its creditors. Details were not available, but the firm said the accord will “substantially deleverage” the company. Quebecor said it will file an official reorganization plan by the end of April and is on track to emerge from bankruptcy perhaps as early as mid-July.

Containerboard Shipments Slows

Downtime and production cutbacks continue with Q1 downtime estimated at 1,500,000 tons. There is a great deal of excess capacity globally. With a flattened global cost curve and low freight rates, lower prices could spread rapidly.
List prices of both 42-lb linerboard and medium fell $15/ton in March. Reports suggest discounts to list prices have now spread to major integrated suppliers. Note - February's box ship's fell 10.5% February 2008

Has Pulp Bottomed Out?

The pricing for NBSK pulp decline for USA producers slowed to a further reduction of $10-20/ton, with list price for April at $630-640/ton. However, the hardwood pulp market remains oversupplied with effective list prices declining $30/ton in April and reports suggesting that prices may fall again next month.

Magazine Newsstand Sales Continue to Sink

Magazine newsstand sales fell 12% in the first quarter, according to Magazine Information Network (MagNet). The decline was largely due to a wholesale disagreements that led to disruptions in deliveries. Magazine newsstand sales fell 11% in the second half of last year, as reported by the Audit Bureau of Circulations.

New magazines for 2009

A total of 110 new magazines were launched in the first quarter of 2009, according to MediaFinder.com. The top three categories were health/fitness, home/furnishings and family, with eight new titles launched in each. On the other hand, 95 magazines folded in the first quarter, including Domino, Travel + Leisure Golf and Hallmark. The regional and lifestyle categories topped the list of ceased publications.

AbitibiBowater Announces Additional Downtime

AbitibiBowater has announced that it will continue taking downtime on the Catawba, SC coated mechanical paper machine for at least an additional 30 days. The machine had been out of operation for all of March. Production will be reduced by an additional 14,000 tons of paper.

AF&PA Reports on 2008 shipments (vs. 2007)

USA figures-
Segment / shipments/year over year
Uncoated Free 10,985,000tons down 8%
Coated Freesheet 4,512,000 down 9.7%
Coated Mechanical 4,165,000 down 10.7%
Uncoated Mechanical 2,196,000 up 5.0%
Total (incl other grades) 23,025,000tons down 7.5%

AbitibiBowater still negotiating

AbitibiBowater, the leader in newsprint, is still confirming a reorganization plan that might include bankruptcy filing. The company is restructuring $6billion in debt, brought on with its acquisition of both Consolidated and Bowater. AbitibiBowater’s main source of revenue is from marketing production to newspapers – an industry losing advertisers and readers to the web.

Uncoated Freesheet market in Trouble

The top four producers (Domtar, International Paper, Boise, Georgia Pacific) now control 75% of the North American capacity. Although they are doing a fine job in their attempts to match production to demand, 2008 yielded the lowest shipments since 1986 – down 1million tons from 2007. (Note: USA total printing and writing demand fell 8% to 23million tons).

Market pulp ....help!!!

The pulp market continued weak demand which yielded a decline in pulp prices, and high inventory . This despite major producers taking market pulp downtime (slated to continue well into 2009). This is in addition to the nearly 1million tons of downtime taken already this year.
Spot prices continue to decline – example NBSK down another $5/ton to $470-500/ton.

Containerboard Declines

Weak demand and low operating rates yielded costly down time for the containerboard producers. While prices for the fourth quarter of 2008 were reasonably healthy – given reduced raw material costs – margins remained steady. Unfortunately, the first quarter of 2009 yielded lower selling prices and weaker consumption. On average, prices were down $30/ton from 4Q2008 and most believe the trend for lower prices and lower demand will continue into 2009.
List prices of both 42-lb linerboard and medium fell $15/ton in
March

Thunder Bay Mill Purchased

A group of private investors purchased and will reopen Cascades' 180,000 tpy coated freesheet and groundwood specialty paper mill at Thunder Bay, Ont., The long awaited purchase will open soon and be the sole producer of double coated free sheet in Canada. The mill will be called SFP for Superior Fine Papers.

International Paper takes Another Mill Down

The International Paper Company announced it will shut down the Ticonderoga, NY mill for two weeks in May. Note, we recently announced they will also close the Franklin, VA mill in May. These temporary shut downs are market related - given the slow down of orders.

Sappi Announces new Digital Papers

Sappi Fine Paper North America recently announced the launch of its digital paper line-up including McCoy for HP Indigo, McCoy Digital and Flo Digital, with continued availability of Opus Digital, to round out the new tiered offering

AbitibiBowater Reduces Thunder Bay Capacity

AbitibiBowater will idle its Thunder Bay newsprint mill in Ontario from April 15 until April 28 due to a further reduction in newsprint demand. The shut down of the mill's two machines will curtail roughly 9,600 tonnes of newsprint and approximately 5,600 tonnes of uncoated mechanical paper.

NewPage to Idle PM at Luke Mill

NewPage will take downtime on one of the two paper machines at its Luke, MD mill next week. The closure is part of the 150,000 tons of downtime plan at various mills in the second quarter. The week long shut down will curtail about 5,500 tons of coated freesheet output. NewPage has already scheduled its Escanaba, MI, mill for ten days of downtime in April, curtailing about 20,500 tons of coated paper production.

Paper Prices keep Falling

Perhaps a slight sigh of relief if you are an end user is cheaper paper prices. After six months of witnessing a price increase every quarter – decreases were paid for the last several months and forecasted to continue. We predict at least $2.50/cwt – or $50/ton further price erosion across the board for second quarter 2009. Most end users have lean inventories and mill backlogs are quoted in terms of days – not weeks. All this despite over 2million tons taken out of the market between 2007 and 08

The Green Side of Paper

Almost every mill now offers recycled and environmentally friendly papers today. In fact, most mills now offer grades with 30% recycled fiber at same price as virgin. If post consumer fiber is required, mills DO command an up charge. If a grade has 10% PCW generally mills charge between $1-3/cwt or $20-60/ton. Most end users are also requesting third party certification – FSC, SFI, and PEFC are the bigger associations that do this – all charge for their certification (typically $1/cwt - $20/ton). Most mills are also working hard to reduce their carbon footprint and many are reviewing energy generated from wind turbines.

Wausau Paper Shutters Maine Mill

Report from Deutsche Bank - Equity Research
Wausau Paper announced a number of moves to conserve cash and improve financial performance. The two notable ones are the suspension of the dividend and the permanent closure of the remaining paper machine at the Jay, Maine mill. The dividend was previously $0.34 per year, which recently resulted in a 6.5% yield. The suspension will save the company almost $17MM/year.

The machine being closed at Jay, Maine had annual capacity to produce 28K tons of Specialty Products. The closure will result in $26MM in charges, $22MM of which will be non-cash. The closure, along with other cost improvements, is expected to save $20MM/year pre-tax. If successful, this would improve EPS by about $0.25/year, which is more than the company has earned in any year since 2004.

NewPage Announces Downtime Plans

NewPage Corporation will take 150,000 short tons of downtime in the second quarter to help maintain the supply and demand balance in the paper industry. The curtailment will be system wide, as customer commitments dictate over the next three months. NewPage had reported plans to take 150,000 tons of downtime in the first quarter as well, cutting production of coated mechanical, coated freesheet and supercalendered paper.

Lyons Falls Paper Mill Deal on Hold

The proposal is dead to have a Lewis County agency buy the former Lyons Falls Pulp & Paper for conversion into a business park. Reasons sited include too many property liabilities had surfaced, including asbestos.