Ad Pages Continue their Decline

Advertising pages for business-to-business magazines plunged 31.54% in February and declined 29.70% during the first quarter (down 26.95% in January). Consumer magazines saw ad pages plunge 25.9% during the first quarter, according to the Publishers Information Bureau. Fewer ads means less paper consumed.

Oil Prices Increase

Although demand has not increased significantly, the price for a barrel of oil continues to hover above $60. Note, oil hit a recent low of $35 in March of 2008 (and a high in 2008 as well of over $145). Oil is a large cost factor in the production of paper; accordingly, a price increase in raw materials while finished paper products are offered at a discount, adds more profit pressure to those marginal mills.

Boise adjusts Newsprint Pricing Down

Boise shocked the market with their announcement to reduce pricing for newsprint. In an effort to stimulate demand with mill operating rates currently below 70% (actually closer to 60%) Boise is selling 30lb standard news for $430/MT ($460/MT for 27.7lbs). This represents a drop of $150 for June East Coast deliveries. The world’s largest producer of Newsprint, AbitibiBowater, immediately matched this price. RISI just forecasted that another million tons of capacity would be curtailed in next quarter.

Uncoated Papers Continue to be Sluggish

Demand for May on commodity rolls and cut size business papers remains low and all buyers are price sensitive. Prices eroded $10/Ton to $820- $865 for 50lb rolls. Spot pricing is as low as $800/Ton for large orders.

Paper Council Reports on Paper Shipments

The Pulp and Paper Products Council reported Printing & Writing paper shipments fell 21.1% in April, as compared to the same month in 2008. Coated mechanical shipments decreased 32.8%, coated woodfree declined 30.8%, uncoated mechanical shipments fell 21.3% and uncoated woodfree was down 12.2% SC-A and SC-A+ shipments decreased 26.9% in April, while SC-B and SNC+ shipments increased 13.1%. These figures are consistent with our previous news releases.

Pulp Producers to Raise US Prices

West Fraser and Canfor Pulp have both informed North America customers that they will increase northern bleached softwood Kraft (NBSK) pulp prices to $660/ton effective June 1. The moves follow previous announcements by Domtar and Northern Pulp that they will raise NBSK pulp prices to $680/ton.

NewPage Sends Message to Competitors

Currently, about a third of coated paper equipment is down, or has been turned off at some point, during the first half of 2009. Most of this down time has been at the NewPage facilities. The company has closed five machines and sold nearly 45% less tons in the first quarter. NewPage has given up market share as a result, and is growing frustrated that competitors keep their machines running. NewPage feels USA market has over a million tons of excess capacity. They think mills such as Verso and Kruger should now do their pro rata part (which is more than past curtailment from respective mill).

Newsweek Magazine Improves Quality of Paper

Newsweek Magazine just reported it will upgrade the quality of paper used for its weekly publication. The magazine has been losing money, but felt the more expensive paper will help circulation, and hence revenue. The magazine will switch from 30# publication and SCA+ to 36# coated #4 quality. This means a 20% increase in the weight of the paper and a substantial boost in the quality of the paper. The paper will cost more and distribution will increase in cost.

NewPage and Unisource Sign a Deal!

Unisource, one of the largest distributors in USA, just inked a deal with NewPage, to replace a Chinese supplier of coated papers. NewPage is USA's largest producer of coated papers. This program could mean more than 100,000 tons for NewPage, which is approximately 20% of the mills's annual production.

Corrugated Converters Voice In

Although longer term the forecast for corrugated boxes is forecast to increase 3 to 4% per year through 2013 (to 213billion square meters), many voice short term concerns. Yes, paper boxes continue to be the environmental choice for packaging to protect and transport items; but, reusable plastic crates are providing competition.
While suppliers, to the corrugaters, biggest concern is overcapacity, followed by plants inability to pay, energy pricing, and production moved off shore – the Corrugated container plants order of concerns are energy prices at #1, followed by customers ability to pay, and increased raw material costs.
Suppliers and converters are both cutting costs in most areas with exception of sales programs.

Truckload Rates to Drop Almost 3%

Some good news for paper producer's in and outbound shipping, truckload rates will drop 2.7% this year due to continuing overcapacity in the truckload market, after steep spot truckload rate declines in the first-quarter.
Shippers reported steep declines in first quarter spot truckload rates averaging 7.5% compared with a year ago and rates are down 2.3% from the fourth quarter.
Adding to the declining truckload demand is a continuing movement of freight from the roads to the rails. In the first quarter, shippers diverted 4.7% of their volumes from truck to rail because rail rates were still 11% lower than truckload rates on average, although that gap is the smallest in recent history.
With Crude oil just raising above $60/barrel, let’s hope shipping rates will remain low.

A few pokes to the Pulp and Paper Industry

Just saw this on blog
Asking why bankers, operators, and employees are considering opening up shuttered, inefficient mills that were closed because they were no longer profitable. One man's floor is another's ceiling..... Complete article http://www.linkedin.com/news?actionBar=&sik=1242911914283&aIdx=0&articleID=35282605

First Half 2009 Ad Pages Down

Mediaweek announced that magazine advertising pages for the first half of 2009, as compared to the same period in 2008, fell 23.8%, as they did in the first quarter, at 22.8%. Some analysts think this might suggest that the decrease rate might be leveling.

What’s Happening to Market Pulp?

After we have witnessed a declining price totaling $250/ton (down 29%) over the last eight months, NBSK prices remained at $635/ton in May. Note, we recently outlined Domtar is out with a $30/ton price increase for June. While the USA markets are not exactly strong, prices have risen the last 3 months in areas such as China, despite, a huge amount of supply has been taken
out of capacity. Further, we are approaching the seasonally slow summer period, and inventories are likely building.

Update on Containerboard

notes from report from Deutsche bank
PPW pre-released its monthly estimate of containerboard prices, suggesting that prices would fall not more than $10-15/ton. This would put the price of benchmark 42-lb linerboard East grade down about $75/ton over the last 7 months. However, reports suggest a price variance of around $50-60/ton between virgin grade and recycled grade producers. Box shipments in April fell 10.9% y/y on a blended basis, in-line with the YTD blended decline of 10.8% y/y. Despite weak Apr shipments, inventories declined 115K tons m/m, against an average decline of 23,000 tons m/m, over the last 10 years. However, we think permanent supply moves by International Paper and Smurfit could alter the tone of the market. By our estimates, the NA market may have just over 4MM tons of capacity overhang.

Domtar Announces Pulp Price Increase

Domtar, following the Alberta-Pacific price increase announcement, said it would raise NBSK pup prices by $30/ton, to $680. The change is effective June 1...... we will see how successful this is.

Early Reports for Paper Shipments

Reported by Mark Wilde of Deutsche Bank
Preliminary printing & writing paper #'s for April showed extremely weak vol's. Y/Y comps very ugly in coated papers (CFS -30.1% y/y, LWC -36.3% y/y). UFS also quite weak -13.2% y/y.

Kruger keeps Paper Machine Down

Kruger reported that No. 4 in Corner Brook, will remain idle indefinitely and its situation will be revisited on a monthly basis, but it will not begin making paper again until the paper company has enough newsprint orders on its books to make production a profitable venture.

Stora Enso Finalizes Acquisition

Store Enso has finalized the acquisition of Myllykoski Paper's remaining 49% minority shareholding in Sunila Oy.

Container Board Prices Soften

The Official Board Market report suggesting that containerboard prices had fallen $70-100/ton across the USA compare to March. Many industry reports state that pricing remains under modest pressure and has intensified in some markets.
We think prices will continue to ease; we do not see "sharp" drops in price well into the summer and possible end of year. Overseas producers are offering product at lower prices and raw materials have declined, while demand remains low – three factors to assure depressed pricing for a period of time to come.

Europe Also Reports Paper Shipments Fall

The Association of European Fine Paper Manufacturers announced a 23.3% decline, to 608,000 metric tons, in coated woodfree paper deliveries in March, as compared to the same period last year. Exports decreased by 41%. First quarter shipments were down by 27.3% and exports by 48.7%. Uncoated woodfree deliveries fell 10.1% to 506,000 metric tonnes. Export rates did not change. For the first quarter, deliveries decreased 17.2% and exports fell 26.7%

R.R. Donnelley wants to Buy Competitor Quebecor World

R.R. Donnelley has offered to acquire Quebecor World. Donnelley is offering approximately $1.35 billion for its rival; $700 million in cash, $394 million of Donnelley’s shares (based on Monday’s closing price) and $275 million of cash on Quebecor’s balance sheet.

Paper Industry Continues to Struggle

The American Forest & Paper Association (AF&PA) reported that U.S. printing and writing paper shipments of 5.4million tons through April were 24.2% lower than a year earlier. AF&PA data shows year-to-date coated mechanical paper shipments at 939,240 tons were 37.2% below 2008. Four-month shipments of coated free sheet at 999,655 tons were 28.7% lower.

Uncoated free sheet volume of 3.003 million tons through April was down 15.6% while uncoated mechanical shipments through four months at 445,678 tons were off 31.5%.

Hearst to make changes to a Magazine

Hearst Magazines will increase Good Housekeeping’s trim size to a larger format, cut its rate base and raise the cover price in an effort to update the 124-year-old title’s perception.

Over the past couple of decades, older women’s service titles have lost ground to newer, so-called women’s lifestyle publications like Martha Stewart Living Omnimedia’s Martha Stewart Living and Time Inc.’s Real Simple, whose readers tend to be younger and more affluent.

With the January 2010 issue, Good Housekeeping will increase its trim size by 10 percent to 8 ¼ by 10 7/8 inches while lowering its rate base to 4.3 million from 4.6 million. The cover price will increase to $3.49 from $2.50, keeping GH still well below the cover prices of the lifestyle monthlies, which cost $4 and up.

GH will still have the second biggest rate base among women’s service and lifestyle books after Meredith Corp.’s Better Homes and Gardens, which has a guaranteed circ of 7.6 million.

Price Increase for New York Times .. Again

notes from MediaWeek

The New York Times is raising its prices for the second time in less than a year to help the newspaper offset a steep drop in advertising revenue.

The newsstand price for the Times' weekday and Saturday editions will go up to $2 effective June 1, up from $1.50. The 33 percent increase comes just 11 months after the third largest U.S. daily newspaper last raised its prices. The price for the national edition of the Sunday newspaper will rise to $6, an increase of a dollar. In New York, the Times' Sunday newspaper will cost $5, also a $1 more.

The company that owns the Times lost $74 million during the first quarter as its advertising revenue plummeted by 27 percent from the same time last year.

Lincoln Paper Idles Machine

Lincoln Paper and Tissue will idle an uncoated freesheet paper machine at its Lincoln, ME facility on Friday. The closure is expected to last for one week. The machine, PM 5, has annual capacity of 35,000 tons and has been shut down intermittently for 151 days since October of last year.

Verso’s Bucksport Mill Back Producing Paper

Verso’s paper mill in Bucksport, ME is bringing all four of its paper machines online for the first time in six months. All machines should be up and running mid May. The mill will produce a specialty grade of paper on PM 2 for a limited 2-week run.

Printers Still not Healthy

A few recent reports from the trade-
-RR Donnelley posted an alarming drop of 92 percent in first quarter net profits this week.

-A decline in orders and the dismal economy has forced Quad/Graphics hand again, prompting the nation's largest privately-held printer to lay off 140 employees

-Although not doing well in the current quarter, Quebecor World is projecting to turn modest profits over the next two years, according to bankruptcy court filing it made Wednesday. The company expects to earn $7 million in 2010, a figure that will rise to $57 million in 2011 and $74 million in 2012

Cenveo to Buy Nashua Corp

Cenveo reported a merger agreement to acquire all of Nashua for $44million. Nashua is strong in labels and specialty papers; they concentrate on point of purchase and wide format markets.

Market Pulp, maybe there is HOPE!

Spot pricing for market pulp appears to have stabilized and remained flat. Actually, we hear reports that pulp pricing may even be increasing in Asia! USA NBSK still offers spot pricing at $470-500/MT. Mills have taken much down time and global inventories have declined. Latest news is Fraser shutting down its 250,000TPA hardwood pulp mill in Thurso, Canada later in May.

Major Paper Producers Match Production with Demand

I have reported on mill ‘s curtaining production in current past releases and this continues to occur in this ‘over supplied’ market. The weak economy has reduced advertising buying space in magazines; the internet has cannibalized newspaper readers; cataloguers have become smarter with lists, hence reducing pieces; less durable good purchased means less packaging materials; more unemployment yields less copies in the office or less business papers consumed; and going ‘green’ equates to less paper.
A few current announcements to support this
-Fraser Papers curtailing production commodity groundwood paper grades at a 69,000 ton/year machine at its mill in Madawaska, Maine
-St. Marys Paper is idling two paper machines to reduce paper production by 8,500 tons in Sault Ste. Marie, Ont
-AbitibiBowater's three-machine mill shut 315,000 tons/year of supercalendered and uncoated mechanical paper capacity in Fort Frances, Ont
-Nippon Paper Industries USA idled the 165,000 ton/year uncoated mechanical mill, and taking about 6,800 tons of directory paper out of production in Port Angeles, Wash

USPS Posts $1.9 Billion Loss

The U.S. Postal Service ended its second fiscal quarter with a net loss of $1.9 billion. The Postal Service has now lost money for 10 of the last 11 quarters, and warns of a year-end cash shortfall of more than $1.5 billion. Year-to-date, the net loss is $2.3 billion, compared to the $35 million loss in the same period of 2008. Mail volume has dropped by 13 billion pieces, which translates to a revenue loss of $3.3 billion

Fraser Papers to Idle PM6 at Madawaska

Fraser Papers announced plans to curtail production of commodity groundwood paper grades at its mill in Madawaska, ME. The indefinite closure of PM6 began the week of May 4. Fraser will continue to operate the remaining five paper machines at the mill.

AbitibiBowater Still looking for Capital

Debt-laden AbitibiBowater desperately seeking capital for operations. The Canadian government will secure $100million. The company remains the largest producer in the world of Newsprint (45% market share in USA) and 16,000 employees – the firms is burning through $200million per month. AbitibiBowater acquired approximately $6billion in debt when the company bought Bowater. The sluggish demand for newspapers has hurt newsprint sales.

SAPPI's Cloquet Mill to Increae Production

Sappi reports they will nearly triple production of coated paper at the company’s 330,000 tons/yr mill in Cloquet, MN. Sappi is looking to expand the Cloquet plant by adding a new paper machine and a new natural gas-fired boiler. The mills 130,000 tons/yr PM 4 and 200,000 tons/yr PM 12 both produce coated freesheet grades.

U.S. Printing & Writing Shipments Decline 21.9% in March

Report from AF&PA
U.S. printing & writing paper shipments fell 21.9% in March and first quarter shipments were down 24.0%, the American Forest & Paper Assn. reported.
U.S. purchases (shipments plus imports less exports) of p&w papers dropped 22.8% in March versus a year earlier and fell 24.1% year-to-date.
Inventory levels for uncoated freesheet, coated papers and uncoated mechanical grades decreased 37,100 tons, or 1.6%, from February, AF&PA said.
Contraction of uncoated freesheet shipments for the second consecutive month put volume down 8.7% to 850,200 tons.
That was a sharp change from the 19.6% drop in January, followed by a decline of 19.3% in February. Because of the earlier strong declines, AF&PA noted, first quarter UFS shipments dropped 16.0% below last year.
Purchases of UFS also fell, declining 7.9% when compared to March 2008, as imports again exceeded exports. Inventories decreased 2.9% compared to last month, a decline of 32,300 tons.
Coated papers posted double-digit shipment declines for sixth consecutive month.
Coated freesheet shipments dropped 31.7% to 286,200 tons and were down 27.8% in the first three months of the year. U.S. purchases of CFS decreased 31.1% and were off 27.3% year-to-date.
Coated mechanical shipments again were the weakest of the four principal p&w grades. Shipments fell 39.5% to 248,100 tons, AF&PA said.
Year-to-date shipments of coated mechanical dropped 37.0% and purchases fell 39.8% compared to March 2008. Year-to-date demand for the grades is off 35.4%.
Inventories for coated mechanical paper rose 3.2%, or by 9,500 tons, from last month and CFS inventories decreased 1.8%, or by 11,500 tons month-to-month.
For uncoated mechanical papers, shipments fell for the seventh consecutive month after reaching an all-time high last July.
Shipments declined 27.5% to 135,200 tons, and for the first quarter were down 30.6%.
Since last July, uncoated mechanical paper shipments have risen just once more in August before the pattern of decline began as publishers cut printing of catalogs and newspaper inserts.
U.S. purchases of the uncoated hi-brites, SC grades and directory paper fell 26.4% in March and were down 26.0% for the year. Also, inventories rose 13,200 tons, or 13.4%, from February.
The Coy Paper Company monitors these markets and reports updates into these Pulp and Paper Industry new releases several times each week.

Mohawk and Wholefoods combine for 100% Recycled Papers

Whole Foods Market has recycled and reused its own paper for zero waste. The Company took its own paper waste and had it de-inked and recycled into paper pulp. The pulp was then sent to Mohawk to be manufactured into new paper for their production. Because Mohawk manufactured the paper with wind-generated electricity, an additional impact was created.

Containerboard Prices Continue to decline

List prices on both 42-lb linerboard and medium fell another $15/ton in April. Box shipments in March fell 12.1% vs March 2008 this after 10.5% February 2008 vs 2009. Some industry experts state relative improvement in April box shipments Despite weak March shipments, inventories
declined 115K tons m/m, driven by a drop in operating rates to 77% (82.7% in Feb).
Many industry experts believe North America excess capacity could be s large as large as 4million tons . Two mills, International Paper and Smurfit-Stone may be close to announcing capacity
Closures. They are the market leaders with almost 50% of combined industry capacity. FYI, Georgia-Pacific is third largest producer.

Pulp Markets bottoming Out?

NBSK prices appear to have bottomed. USA NBSK list price decline slowed to a discount reduction of "only" $10-20/ton, with list price for April at $630-640/ton. US market pulp spot prices remained flat across all the four grades (USA NBSK spot remained at $470-500/ton). The first quarter brought extensive downtime and mill closures, and decline in global inventories (43 days of supply). Some even suggest that offshore prices are already rising.

Global Newsprint: March Inventory Data Disappoint Analysts

as reported by Dow Jones newswire
Nearly all segments of March's newsprint inventory and production data from the Pulp and Paper Products Council were disappointing for industry analysts.
"Mill inventories are out of control," said Kevin Mason, paper and forest products analyst for Equity Research Associates. "Dailies [newspapers] are cutting back and trying not to buy [newsprint], but consumption just falls off the map."
Inventories at all U.S. users of newsprint declined 4.5% in March from a month earlier to 679,000 metric tons from 711,000 tons in February and was off 15.0% from the 799,000 a year ago. This might be supportive if it weren't for the fact that total U.S. consumption fell 28.5% from a year ago, the analysts said.
As a result, newsprint price declines accelerated in April with list prices falling by as much as $40 a metric ton, said Mark Wilde, market analyst for Deutsche Bank.
Wilde and Mason keyed in on news the world's largest newsprint company Abitibi-Bowater was in chapter 11 bankruptcy proceedings.
Abitibi-Bowater controls about 40% of North American newsprint production.

"More companies can be expected to go bankrupt," Mason added.
The industry still may have 1.5 million tons of potential production idled for the rest of 2009, and more will need to come out in 2010,

Catalyst Snowflake Mill now FSC Certified

The Catalyst mill in Snowflake, AZ report that products from this mill, which has a 347,000 ton annual capacity, can now carry the widely recognized FSC label confirming that they were made from post-consumer sources. Note: this mill has always produced newsprint from 100% recycled fiber.

Katahdin Paper Mill to Restart

The Katahdin Paper Co. mill in East Millinocket will restart on May 5. The mills two 125,000TPA paper machines have been idle since April 9. The No. 6 machine, which makes directory paper, will run for a week starting May 5. The facilities No. 5 machine, which makes newsprint, will start up on May 11.