International Paper and Glatfelter Announce Paper Price Increases

IP and Glatfelter announced a $40/ton ($2/cwt) price increase on uncoated freesheet offset and commercial printing papers, effective with September shipments.

Printer's Sales Remain Down

Printing Industries of America states 1Q2009 printer sales down average of 9.4%. BUT, digital segment up 8.8%; Inkjet up 7.1%.

Update on Kruger's Coated Production

Kruger will permanently shut down coated production at its Trios River Mill in October. 3 paper machines and 2 coaters are included in the shut down.

Wausau Announces Price Increases

Wausau will increase the transaction price by $2.00/cwt. on the following products:
Exact® Index
Vellum® Bristol
Exact® Tag
Exact® Opaque Colors
This is effective with late September shipments.

Neenah and Cranes Announce a Partnership

Neenah Paper Company and Crane & Co. Inc. announced they have signed an exclusive partnership agreement for Neenah to manufacture, market and distribute Crane's fine business paper brands: CRANE'S CREST®, CRANE'S BOND®, CRANE'S LETTRA®, CRANE'S PALETTE(TM) and CRANE'S® Choice Papers.

Doubledown Unable to Sell Magazine Assets

We reported on Doubledown (a publisher of magazines aimed at the Wall Street elite) going out of business in February and filing for Chapter 7 bankruptcy. Updating that release,
an auction was recently held for Doubledown Media assets and most minimum bids were not met.
Examples include; the minimum bid for Doubledown’s Dealmaker was $100,000. For Corporate Leader and Trader magazines the lowest acceptable bid was $50,000. The minimum bid for Cigar Report was $25,000.
The minimum bid for all five titles was $300,000.
None of the auctions were successful – all bids too low!

A Few Optimistic Positions on Paper ....

It appears the Pulp, Containerboard, and Uncoated Wood Free papers may see some relief and gradual improvement. In the past few weeks all three markets have stabilized, and in fact, Pulp and uncoated papers has actually witnessed price increases.
Although Containerboard has not enjoyed increased demand, the price levels appears to have stabilized. This has been largest assisted by massive curtailment of supply (see my past reports on Smirfit and International Paper downtime).
Pricing for uncoated papers are enjoying modest increases in transaction prices. In fact, the major producers have formally announced a September price increase of $40/ton for Offset, Opaque and Bristol grades. Many in the industry are forecasting the deep discounts will go away and the true effect of the September increase will really be $60/ton.

SAPPI Closes Paper Mill ' forever'

One of the largest producers of paper for magazines, books and high-end advertising, Sappi, North America, will permanently close the Muskegon, Mich., paper mill. I reported in March that this mill will be idled for an undetermined amount of time. This coated fine paper mill had an annual production capacity of 170,000 TPA.
The global economic downturn and reduction in demand of 32% this year has resulted in very weak demand for coated fine paper worldwide.
Products previously made at Muskegon have been and will continue to be produced at the other Sappi mills in Skowhegan, Maine, and Cloquet, Minn.

Portugal Paper Mill Studying New Machine

Portugal’s largest pulp and paper company, Portucelis, is considering expanding in the paper market at a time when larger rivals are cutting production.
The machine will have a capacity of 500,000 tons a year, making it the world’s biggest for the production of office and graphic paper. It will increase the company’s total paper production capacity to 1.5 million tons a year.

Big 3 Paper Producers in Europe Speak about Consolidation

From Reuters Wire Service
At Reuters Paper & Packaging Summit, Chief Executives from UPM, M-Real and Norske Skog spoke about the need for consolidation in the paper industry. UPM stated that they would be an active player, focusing on costs and balancing demand-supply.

Vibe Magazine to Return

As we reported in May/June, Vibe Media Group closed their doors, blaming the poor economy and a decline in ad spending. Vibe and Vibe.com recently announced that InterMedia Partners, a private equity firm founded by Leo Hindery, Jr., purchased the publication.
InterMedia is combining Vibe with the operations of another urban lifestyle magazine it owns, Uptown.

Catalyst Paper to Restart Pulp Mill

Catalyst will restart pulp production at its Crofton NBSK kraft mill on Vancouver Island, BC in October if market conditions continue to improve. The line will add 210,000 TPA.

Palm Paper's Newsprint Machine Starts up

The industry’s newest paper machine started up three weeks ahead of schedule. Palm Paper’s facility, on the River Great Ouse in the UK, will produce up to 400,000 tons of newsprint paper each year.

Reader's Digest Officially Files

As we reported late last week, Reader's Digest was evaluating a move to file for bankruptcy. This just became official. The filing will assist in reducing the $2.2billion in debt to $550million.

Another Reason for Fewer Newspapers

Just reading a piece from Jeff Jarvis (past editor of NY Daily News) and he outlines the fact that coupons are now available on line for free and listings for movies are now easily attainable online - this has hurt newspaper demand. He believes there was a large population that purchased newspapers for only the coupons. Many would also purchase a newspaper for the local movie listings – all now available online – for free. Certainly, two more factors leading to fewer newspapers is less disposable income for purchases such as a newspaper and electronic news seems to be picking up readers.

Pulp Shipments continue to Increase

Perhaps the only shinning star in the industry is market pulp; whereby, reports for July shipments confirm an increase of nearly 4% from July of 2008. China continues to buy pulp and is certainly assisting the demand.
Worldwide inventories have decreased and we hear pulp is now under 30 days (versus 36 days at this time in 2008). Pulp prices are witnessing increases as a result from companies such as Canfor Pulp, Domtar, Aracruz, Suzano, Arauco, Botnia, Donghae Pulp, Mercer Intl, Tembec, VCP, Sodra, West Fraser and Winstone (price inceases ranging from $30-50/ton).

Is Digital Better?

I just saw an interesting report on the International Paper website comparing the ‘green’ factor of digital / electronic media and traditional paper. The document confirms paper being more environmentally friendly.
A few highlights
-Sustainability – Paper industry plants 3 trees for every one forested – trees are renewable. Computers are made from environmentally unfriendly materials that cannot be recycled.
Energy – Most paper producers today have power supplied from carbon neutral resources. Powering up a PC comes from electricity, which is produced from nonrenewal fossil fuel.
Recyclability – Paper is completely biodegradable and the paper industry recycles and reuses nearly 60% of paper that has been returned from the market. Computers, servers, cables, and monitors continue to end up in landfill......and are not recyclable.

Update on Newsprint Market

Difficult for me to report an optimistic future for the Newsprint Market. I suppose one glimmer of bright light is that the balance of the world has not experienced as deep nor as fast a decline in Newsprint demand. Newspaper advertising in the USA continues to fall, and the trend does not appear to be stopping (FYI, advertising down 30% in the first quarter alone!).
USA newsprint demand for 2009 is forecast to be 5.3million tons. Production for North American producers was 10.4million tons in 2008 - the forecast 2009 is 7.6million tons.
Individual companies are particularly hurt; AbitibiBowater (world's largest producer of newsprint) lost $100/ton on its current shipments. Mr. Mark Wilde reported average selling price was $581/mton, while AbitibiBowater's average cost of manufacture was $688/mton. Note, larger buyers are reported to actually be purchasing paper at less than $400/mton. Again, not a rosy picture!

Market Pulp Prices Continue to Increase

Pulp prices in North America continue to increase with the latest announcements for NBSK list price in August heading north for the third month in a row, up $30/ton to $730/ton.
Currently, this market is witnessing reduced inventories - given strong demand from China and shuttered equipment reducing over all capacity.
Note, SBSK list price also increased $30/ton to $680/ton

More College Students Using Digital Texts

Notes from a report by Jim Milliot of Publishers Weekly

Many anticipate that 40,000 college students at over 400 colleges will use open source digital textbooks from Flat World Knowledge this fall. Flat World went live in spring 2009 with 1,000 students from 30 colleges using its offering.
The Flat World’s pricing/business model students allows access entire textbooks for free online; pay $19.95 for a PDF download; pay $29.95 for a black and white printed version or $59.95 for a color version, or pay $39.95 for an audio version. Books are available by the book or by the chapter. Study aids or also available for purchase.
Eric Frank, a cofounder of Flat World believes a quantum leap will occur for fall 2010 when he thinks the number of students could be between 120,000 to 200,000.
If more books are read digitally, this means less text paper sold ..... another challenge for the paper industry.

Hewlett Packard Concerned less People Printing

Hewlett Packard just reported a significant decline in ink cartridge sales. The challenging economy has resulted in massive layoffs and therefore fewer office workers producing printed copies. HP is evaluating a new environment upon which corporations are reducing costs and asking workers not to print unnecessary documents. This could be long lasting as the world is becoming increasingly more comfortable with digital documents.
Note, HP printing group accounts for nearly 25% of the total corporate revenue.

Several Shuttered Reed Publications back to the Presses!

Recall that Reed Business Information closed 13 publications in April and this week, John White announced his company will acquire these titles White will re-launch all by September, published under Associated Construction Publications Group (ACP), expecting collective revenue of $5 million in 2010.

Recycled PaperBoard Pricing 'on the move'

The industry just announced price increases for September shipments of $40/ton for all grades of coated and uncoated recycled paperboard by nearly all major North American producers to offset raw material cost increases. These producers include Strathcona Paper, Graphic Packaging, RockTenn, Sonoco, PaperWorks Industries, Caraustar, Newark Group and Ox Paperboard. Challenge is two fold - demand remains poor and most end users can not pass an increase through to their respective end users. Lots of resistence here .......

New Paper Mill in South Korea

Moorim announced a new Voith Paper paper machine to their DongHae site to manufacture woodfree coated, woodfree uncoated and machine finished coated paper with an annual capacity of 450,000 tons. This will be the 1st integrated pulp & paper mill in South Korea and is scheduled for start-up in spring 2011. It will be environmentally friendly, using the steam incurred during pulp production instead of fossil fuels.

Stora Enso to Shrink Workforce

In past releases, we had reported that Nordic paper companies experienced losses at the end of last year given slow demand from customers for newspapers and magazines. This year has not proven to yield any improvement and total production in the forest sector has slumped by some 30 percent.
On Finnish company, Stora Enso, will now lay off off up to 1,100 workers, cut production and close mills in Finland as the paper maker continues to struggle with dwindling revenue.
Stora Enso is one of the world's largest forest product companies making magazine paper, newsprint, fine paper, pulp and packaging boards.

Many Pulp, Paper and Board Companies Show Improvement

The Pulp & Paper Week publication just reported most US pulp and paper companies had higher earnings in the second quarter vs. first 3 months of this year. Lower input costs certainly assisted, but a major factor was from alternative energy black liquor credits (+$1.6 billion), which offset losses.

It's Chapter 11 for Reader's Digest

Household publication, Reader’s Digest, will restructure to reduce it's debt under a voluntary Chapter 11 filing. This will only affect their US businesses. The senior lenders will exchange much of their debt for equity.

Financial Times will charge per online Article

Financial Times, which has charged a fee for online news since 2002, announces model to accept 'micropayments' for individual articles. Many of the major newspapers are now reviewing models to generate revenue beyond online advertising as reported in past releases. Currently, most newspapers do not charge for online news.

July Paper Shipments look Promising

The American Forest & Paper Assn.just published the preliminary report for printing and writing paper shipments in July. The report outlined 1.464 million tons, down 15% vs. July of 2008, but up 5% vs. June 2009.
Results as follows-
Coated mechanical: 258,939 tons, down 19.1% vs. 7/08 and down 3.7% vs. last month.
Coated freesheet: 281.964 tons, down 16.2% vs. 7/08 and up 13.6% vs. last month.
Uncoated mechanical: 142.418 tons, down 25.1% vs. 7/08 and up 15.5% vs. last month.
Uncoated freesheet: 780.238 tons, down 11.2% vs. 7/08 and up 3.2% vs. last month.

Online Spending declined

Like printed advertising spending, online retail spending is starting to decrease. On line spending totaled $30.2 billion in the second quarter, a 1% decrease from $30.5 billion in the prior year. All advertising dollars are effected by the nearly 10% unemployment rate, rising gas prices, and consumers attempt to increase savings, - all contribute to reducing consumers’ discretionary spending.

Newspapers to soon charge for News on their websites

The Boston Globe and Herald as well as News Corporations’ New York Post and Times of London has announced it will start to charge end users to access their websites for news. All newspapers are aggressively seeking additional revenue.

Is the Economy bottoming out?

It is said the paper industry still follows the economic indicators, so it was good news to hear the Federal Reserve stated that the US recession was ending, due to consumer spending, financial markets and corporate inventory building stabilizing. The Fed cautioned that it would be a slow recovery and that they will keep short-term interest rates at virtually zero. Many economists believe we will not see any continuous signs until beginning of 2010.

Fraser Papers Will re-Open Pulp Mill

Reversing a news release we published earlier, Fraser and their union forged an agreement, which will allow Fraser to reopen the pulp mill in Edmundston, New Brunswick, Canada by the end of August.

In-Plant Printers Report on Recession

The MindFireInc just reported on results from a survey which included many of the In-Plant printers. During these difficult economic times, survey results reported-
-Two biggest challenges for the printers included reduced budgets and difficultly attracting new business.
-Most believe that ‘things will get worse before they improve’
-All agreed that to grow revenue requires new services, self promotional marketing, adding new equipment and visiting end users.
-When asked about reducing costs, all reported they would renegociate prices with suppliers, cut internal staff, and change suppliers

Paper Companies are beginning to Report Results

The USA paper producers are beginning to report results for the second half of 2009, and most are announcing losses.
-Cenveo reported quarterly net sales of $397.6 million, down from $524.5 million for the same period last year. Cenveo recorded a net loss of $18.3 million
-NewPage, USA largest producer of coated papers, net loss of $6 million in 2Q was an improvement over the $21 million loss in 2008,
-AbitibiBowater reported a net loss of $510 million in 2Q, double 2008. Sales only $1.04billion.
-Domtar Inc. turned a net profit in its second quarter
-UPM-Kymmene Corp. , the world's largest magazine paper maker, reported a second-quarter net loss of euro8 million

Time Magazine closes Southern Accents Magazine

The Southern Accents magazine issue will print the final issue with the September/October edition. Time Inc., publisher of the magazine, announced advertising pages had declined by 37.4% in the first half of 2009. This magazine was a bimonthly with a circulation of 400,000.

AbibtiBowater Shutters 2 more machines

AbitibiBowater will shut down 2 more machines, both at the Thunder Bay, Ontario mill. Paper machine #4, which produces 146,000TPA of uncoated mechanical paper (publication), and #5Paper Machine , a 250,000TPA newsprint machine. Both will remain down until the markets improve.

Update on Market Pulp

Notes from report by Deutsche Bank
North American NBSK list price rose for the second month in a row by $40/ton to $700/ton. This increase resulting from worldwide inventories for market pulp having declined, producer downtime and closures, as well as strong demand in China .
Local producers that have announced increases so far include
Canfor, Domtar, Northern Pulp, Tembec, and West Fraser slated domestic NBSK prices at $730/ton.
Other North American producers that have announced a $20-25/mton price hike on key hardwood grades include Alberta-Pacific, CENIBRA, Sappi NA, and VCP.
Meanwhile, in Europe, Botnia, Mercer Intl., Stora Enso, and Sodra have announced a $30/mton price hike on NBSK and hardwood grades.
Note, even spot price levels are expected to increase from the $560-590/ton net delivered from the July prices.

Market update on Containerboard

Containerboard prices, assisted with good demand, remain steady after falling $70/ton since its peak, last fall.
Note, it has been reported that spot prices for 42-lb linerboard range from $450-470/ton in Central US, and $410-440/ton in the Northeast region. Recycled spot prices are below $400/ton. US kraftliner export prices are still around the $320/ton FAS level.
I think these spot prices have remained constant for last 60 days, as well. (I welcome comments here)
Additional comments
-June box shipments down 6.5% from 2008
-Producers continue to streamline inventories and operating rates
-International Paper took 580,000 tons (21% of capacity) containerboard out during second quarter.
-Renew will restart 500TPD linerboard in St Francisville, LA

AbibitiBowater cuts Staff and Sells Timberlands

AbibitiBowater, North America's largest newsprint supplier and operating under chapter 11, reported it will eliminate 25% of its employees in its headquarters as well as sell $25.7million worth of timberland These are part of the $100million cost reduction plan we announced in previous release on this blog.
Meanwhile, Smurfit - Stone Container - another bankrupt company, will sell 1million acres of timberland.

More Downtime for Kruger

Kruger will reduce production at both its Trois-Rivières and Wayagamack mills for balance of this summer. Trois-Rivières will reduce coated paper production by approximately 7,500 tons and Supercalender Paper will be reduced 4,500 tons. Directory paper will be cut 2,000 tons at Wayagamack; note, coated manufacture at Wayagamack will not be affected.

Magazines Report less Sales at the Newsstand

Single copy sales for magazines sold at newsstands are predicted to be down for first half of 2009 (ABC audit not confirmed until late August). While some of this decline is a result of our poor economy, the majority resulted from publishers’ refusal to pay the increase for ‘per copy’ fees the distributors’ demanded. Statistics on specific magazines will be announced in coming weeks.

Coated Paper Prices Still in the Basement

Buyers and mills alike wonder when the decrease in coated paper prices will stop. For the mills, the black liquor credit, reallocating production to uncoated grades, and taking equipment out of production are all assisting; BUT, demand continues to shrink and buyers continue to deplete inventory already on floor. Unless magazine advertising increases, postal fees stabilize, and retailers boost catalogs – not much short term hope remains. One would assume the manufacturers are close to cash cost and, therefore, for survival ‘ have found the floor’.

StoraEnso Makes Loan to NewPage

NewPage is negotiating for a loan of $575million from StoraEnso. Note, StoraEnso already owns nearly 20% of NewPage (Cerberus Capital Management owns the balance). Recall, in 2007, NewPage purchased StoraEnso’s facilities in Wisconsin Rapids, Biron, Whiting and Stevens Point.