Wednesday, December 30, 2009

More Permanent Closures announced by International Paper

From International Paper Release
International Paper announced plans to close its paper mill operations in Franklin, VA, and its containerboard mills in Pineville, LA, and Albany, OR. The company also announced it would permanently shut down the previously idled No. 3 machine at its Valliant, OK, containerboard mill. The Valliant Mill's other two machines will continue to operate. These permanent shutdowns will reduce the company's North American paper and board capacity by 2.1 million tons.
The company concluded that we have excess capacity in our North American paper and packaging businesses, and these decisions will better match our supply with our expected customer demand.
Since the onset of the global recession, the decline in demand for International Paper's uncoated freesheet in North America has accelerated, and consequently the company has decided to further reduce its uncoated freesheet capacity.
In its containerboard and coated paperboard businesses, International Paper expects demand to resume growth as the economy rebounds. However, the company's demand is not expected to return to 2008 levels in the near future. Therefore, permanent International Paper capacity closures are necessary.
The closures will impact about 1,600 employees and will result in permanent North American capacity reductions.
Following these permanent shutdowns, International Paper will have approximately 10 million tons of North American containerboard capacity, 2.6 million tons of North American uncoated freesheet production capacity, and 1.7 million tons of North American coated paperboard capacity. These capacity shutdowns will not impact the company's ability to serve its customers.

MeadWestvaco Downsizes 14 plants

MeadWestvaco reported they will restructure fourteen facilities in their global packaging markets group. 

These actions include further reducing corporate and business unit overhead expenses and closing or restructuring 12 to 14 manufacturing locations. This will result in the elimination of approximately 2,000 positions, or 10 percent of MeadWestvaco’s global workforce in 2010.
The company also announced they will not provide 2009 pay increases for salaried employees. The manufacturing-related reductions will include savings from facility restructurings and closures. The company feels that rationalizing assets as outlined will accommodate reduced demand and corporate financial objectives.

Caraustar Industries out of Chapter 11 bankruptcy

This week's big announcement was Caraustar Industries, Inc. has emerged from Chapter 11 as a newly reorganized private company eliminating approximately $135 million in debt.
The company’s Plan of Reorganization had minimal business disruption and was completed in record time. Caraustar also reported to have closed on a new $75 million revolving credit facility to provide adequate liquidity to meet all of its working capital needs, including any future capital investments.

Tuesday, December 29, 2009

2010 Paper Prices Might Increase

The year 2009 was certainly a challenge for the pulp and paper industry – slow demand and constant pricing pressure. Paper prices experienced a steady fall for most of the year and now appear to be leveling off. Several producers, and Coy Paper Company, are forecasting a gradual price increase for most grades for 2010. Demand might only slightly rebound, but raw material costs such as pulp, chemicals, transportation and energy will increase. Inventory levels, both at the mill and the end user, are down and manufacturers continue to curtail supply and imports are down. Lastly, support such as the ‘black liquor’ credit is gone. Therefore, even if demand does not increase, there are plenty of other reasons for paper prices to rise.

USA Consumption of Recycled Fiber Up

The AF&PA recently reported that recycled fiber consumption in the USA was 2.5Million tons in November, an increase of 0.9% vs. last month and an increase of 0.8% vs. 2008. This trend is expected to continue.

Release Liner Highlights

Release liner is the material that many labels (pressure sensitive) include as a backer sheet. This is the component of the label, which is used as a carrier and discarded once the label is consumed.
-World consumption – all release liners – 31Billion sq. meters
-Growth is less than 1%/year
-Super Calendar Kraft #1 material (44% of the market)
-Films increased to 20% of the liner market
-Clay coated now 13% of the market
-Linerless labels have failed to be successful
-Total label growth 2.1%
-Glue applied + 2%
-Pressure Sensitive +1.8%

USA Post Office for 2010

In our past releases we reported the USPS lost $3.8Billion for 2009Fiscal, which was $1Billion more than 2008. Total mail volume was 177.1Billion pieces – down 25Billion (12.7%) from the 202.7Billion pieces in 2008. Concern for 2010 is people learned to order product on line, accept digital communication as well as business invoices, correspond on email, and think greener – no longer accepting catalogues and direct mail promotions. The USPS needs to revise its model for fewer pieces mailed and accept this as a trend.

Tuesday, December 22, 2009

Rail Shipments Down with less Paper Demand

North American Rail freight volume of pulp and paper decreased and YTD carloads were down 20% through November. Last week, the Senate Commerce Committee passed comprehensive freight railroad reform legislation designed to increase competition and improve federal regulation of railroads. It is estimated that 30% of US paper, packaging and wood product manufacturing sites have access to only a single rail carrier. This monopoly status has led to high costs with poor customer service.

Will the Increased Containerboard Price Stick?

Pressure continues to mount for producers of container board after all the major North American manufactures announced the $50/ton price hike in the East and most producers are pushing for $70/ton in the West.

Demand continues to be weak – slow economy means less goods purchased and therefore, box volumes fell 12% year to date through November. Most buyers are trying to push back on price increases.

However, given the large supply reductions (recall our earlier blog that International Paper, Smurfit, and West Fraser will shut off 2.7Million tons) perhaps the price increase has a chance.

More Pulp Price Increases

Recently, Deutsche Bank hosted a conference on the pulp market and declared that after pricing had held flat for the month of December, the major softwood and hardwood producers once again announced price hikes of $20-30/mton in the US, Europe, and Asia, effective January 1.


Producers set NBSK price at $850/mton (+$20/mton) in the US, $830/mton (+$30/mton) in Europe, and +$20-30/mton in Asia, with China at $720-730/mton. China had been heading up the robust demand for pulp because of low inventories and tight supplies, but suddenly there are reports of slowing demand in China – perhaps the pipe line is finally full. Also, China started up 6 new pulp machines during the 2H2009 and 3 more will come on line 1H2010. China's new production will increase to 2.6Million tons of pulp by the end of 2010. Most North American buyers report that pulp remains fairly tight in supply due to equipment curtailments, especially Hard Wood. These same buyers predict this tightness will not last and a price correction will occur 2Q10.

P. Scott Vallely on CBS

Joe Connelly of the Wall Street Journal interviewed Mr. Vallely about the Paper.com site, one of the largest web marketing sites that focuses exclusively on selling paper. He commented on the success of the site to date and the recent initative to now market Paper.com for sale. Any interested buyers should email the management team at admin@paper.com . The interview was aired on WCBS radio 880.

Monday, December 21, 2009

China’s Sun Paper Announces Another Paper Machine

Sun Paper will build a $228 million, 300,000 TPA, uncoated mechanical (groundwood) paper machine at the Yanzhou City mill. This machine (PM24) will make publication papers in a basis weight range of 60-150 g/m2, in 2011. This will follow the installation of PM23, a 350,000TPA uncoated fine paper machine being installed in April 2010.
Sun currently produces 450,000 TPA of uncoated woodfree and mechanical paper, 100,000TPA of coated woodfree paper, and 300,000 TPA of cartonboard from this facility.

AbitibiBowater Restarts Another Paper Machine

AbitibiBowater reconfirmed that they plan to restart paper machine #5 in Thunder Bay, ON in early February. The 250,000 TPA newsprint machine was shut down indefinitely in August, along with PM #4, 160,000 TPA.

Update on Canadian Paper Market

It’s no secret, like the USA paper producers, Canada has also struggling with overcapacity and decreasing demand. The forecast is for the Canadian industry will lose an aggregate C$1.2 billion this year and the industry will not return to profitability until 2011. American Forest & Paper Association data show that the volume of shipments to the U.S. from Canada fell from 18% to 75% in various key paper categories during the first three quarters of 2009, versus the same period of 2008.

Canada has always been a world leader in Newsprint production with a capacity of over 10Million tons; however, newsprint makers estimate they will have only shipped closer to 7.2 million tons by year end. The future is not predicted to be much better with consumption at between 6.8 million and 6.9 million metric tons next year, and somewhat lower still in 2011.

Thursday, December 17, 2009

More optimism - 2010 Improvement in Paper Industry

The Fitch Rating Organization recently forecast a modest recovery for paper in 2010. The rating service reported that short term demand for uncoated freesheet (UFS) and coated mechanical paper (LWC – Publication paper) are stabilizing and expected to rise later in year. Unfortunately, coated freesheet and uncoated mechanical (groundwood) is projected to experience slow demand Paper margins will continue to be squeezed by the rising cost of pulp, possible transportation and chemical price increases, and lack of black liquor credits.

2009 
Results in Fewer Magazine Closures

MediaFinder.com reports fewer magazine closures in 2009, 428 vs. 613 in 2008 and 643 in 2007. The number of launches also decreased to 275 in 2009 from 335 in 2008. Regional magazines had both the highest number of start ups, 21, and shutdowns at 34. Business-to-business magazines saw 120 closings in 2009, less than 147 in 2008 and 158 in 2007. There were 85 b-to-b launches in 2009.

Wednesday, December 16, 2009

Another Prospective on the Paper Market

To compliment our report earlier this week on our Coy Paper news releases, we offer 'heard on the streets' comments that US Printing/Writing Paper demand and shipments were up 2.5% in November primarily driven by strong coated paper shipments.
November shipments of 1.435Million tons was the first monthly 2009 vs 2008 increase since February 2008 (vs. 2007). Total shipments YTD were 15.612 million tons, down 17% vs. 2008.
-Coated freesheet was up 10.4% to 293,600 tons in November
-Coated mechanical (LWC - publication paper) up 14.7% to 285,100 tons.
-Uncoated freesheet was stable at 714,800 tons, down 0.5% vs. last year. November shipments were down vs. October, due to seasonality.

Tuesday, December 15, 2009

Smurfit Finally Announced Down Time

Smurfit-Stone has announced 900,000 tons of permanent linerboard capacity closures at two locations.
-Ontonogan, MI corrugating medium mill (280,000 tons)
-Missoula, MT mill (620,000 tons)
Smurfit news follows the recent announcement that International Paper will shutter 1,400,000TPA of containerboard capacity and West Fraser's announcement of 450,000 tons
of capacity.
The producers will most likely continue to adjust supply to demand which will assist the recent price increase.

Magazines raise Cover Prices

Revenue generated from advertising pages is forecast to continue to be depressed. Accordingly, several publications look to survive by increasing the cover price for the magazine.
A few examples include-
-Condé Nast - The New Yorker, Golf Digest and Teen Vogue in 2010,
-Hearst - Good Housekeeping, Esquire and Veranda and is considering the same for Country Living
-Wenner - Men’s Journal and Rolling Stone
-Meredith - Better Homes and Gardens and Ladies’ Home Journal, Family Circle and Traditional Home
-Rodale is looking at doing the same at its health/fitness titles
Publishers are also reviewing decreasing the frequency they print magazines in an effort to save money.

Price Increase for Bleached Board

The producers of Solid Bleached Sulfate (SBS) board grades are beginning to tell end users about increasing the price by $40/ton. Although these grades have not had an increase since October 2008 (transaction price $1000-1050/ton), they also have not had to discount pricing like so many other paper grades during 2009. So far Georgia Pacific and MeadWestvaco have formally announced.
Recall MeadWestvaco shuttered a 200,000TPA paper machine in Texas and International Paper will close a 140,000TPA machine in Virgina.

Monday, December 14, 2009

Market Update Illustrates Optimism

Exempts from Deutsche Bank - Equity Research

The printing and writing paper shipments for November look dramatically improved versus at this time last year. The American Forest & Paper Association released market data. Deutsche Bank cautions that a good portion of the improvement owes to a "lapping" of weak numbers
from 4Q2008. Nonetheless, the numbers are striking and could signal the beginning of an inflection point in white paper markets. The best year over year comparables were in light-weight coated paper (LWC), where preliminary data suggests shipments were up 14.7% (-22.4% YTD). Spot discount pricing for LWC are slowly increasing.
Heavier-weight coated free sheet shipments were up 10.4% (-20.7% YTD). Uncoated free sheet shipments were down -0.5% (-12.6% YTD). The smallest category, uncoated groundwood, had the weakest performance with shipments down 15.0% (-23.4% YTD). Sequentially,
shipments in all markets were down from October levels. Much of that month to month easing would appear to be seasonal as the holiday printing season begins to ebb.

As noted industry shipments are now lapping 2008 shipments. Thus, enthusiasm should be tempered. Moreover, we think coated and uncoated free sheet markets remain vulnerable to
ripple effects from pending capacity start-ups of some 4.5MM tons in China as well as capacity overhangs in other markets. Quick note on pulp, looks like price increases have slowed, and demand has stabilized – China buying less and global inventories in balance.

Japan Exports to China to slow as China Adds Paper Capacity

In the next two years, China plans to add 4.6Million TPA of paper capacity,
-2,600TPA being coated woodfree
-2,000TPA uncoated.
The 4 manufacturers of coated paper
- Jinhai Pulp & Paper (APP China) 900,000 tons
- -Shandong Chenming 800,000TPA
- -Shandong Huatai 500,000TPA
- -Oji Paper 400,000TPA
Uncoated paper will be in balance with demand, because many smaller manufacturers are being consolidated into the larger ones, and there is growth enough in China to absorb the rest.
The coated market, however, is all new capacity. The high growth Chinese market will eventually absorb the excess by the end of 2014. In the meantime, they will be forced to find external markets for excess capacity and/or suffer low operating rates.


In 2009, Japan was the fastest growing market for Chinese exports, increasing 400% or 145,000 tons vs. last year. Japan’s paper producers have had difficulty competing on price, however; recently they have become competitive, resulting in October Chinese imports to Japan dropping 21% vs. Sept. The extent to which Chinese coated exports will be affected by the US anti-dumping investigation or fears over Dubai, will determine where the excess tonnage is sold in the next 2 years.

Friday, December 11, 2009

Paper.com Looking for Buyer

Paper.com LLC operations, arguably the largest web based paper marketing company, recently commissioned Moniker to secure buyers for the site. Paper.com has over 40,000 paper items and thousands of visitors each day; the site has nearly 2000 affiliate marketers and a category 'killer' URL address is now for sale. Contact admin@paper.com

Neilson Sells Magazines

Nielsen Business Media has agreed to sell eight of its media brands, including a number of its trade magazines, to e5 Global Media, a new company formed by Pluribus Capital Management and Guggenheim Partners.

The sale agreement includes The Hollywood Reporter, Billboard, Adweek, Brandweek, Mediaweek and Back Stage magazines, as well as Nielsen’s Clio Awards and Film Journal International. Also being sold is the Film Expo Business, which includes the ShoWest, ShowEast, Cinema Expo International and CineAsia trade shows.

Financial terms of the deal were not disclosed, although it was rumored to be priced at approximately $70 million

Two More Paper Mill Closures

This week, beyond the Paperlinx machine shut downs just reported, two more companies officially announced downtime. Note, most paper producers are constantly curtailing manufacturing due to poor backlogs - just not formally announcing it.
-Sappi Fine Paper to close Kangas Mill in Finland by 1Q 2010,.
-Nippon Paper Mill Down for 2 Weeks in Port Angeles, WA, this is the third shutdown this year.

Thursday, December 10, 2009

St. Mary’s Paper Plans Downtime

St. Mary’s Paper in Sault Ste. Marie, Ontario will idle paper machines #3 and #4 during the 1Q2010. PM #5 will remain operational. Management sited poor demand as the reason for this market related downtime.

The mill produces 240,000TPA of SCA premium, SCA and SCB paper grades under the trade names Sequence, Sequel and Synpress


PaperlinX Departs from Paper Manufacturing

Australia's PaperlinX has decided to close its Wesley Vale pulp and paper mill and one of the two paper machines at its Burnie mill and therefore reduce production at Tasmanian paper manufacturing operations, The closures mark Paperlinx's exit from paper manufacturing. Upon completion of this exit, PaperlinX said that it will be solely a distribution company, distributing paper, signs, display and graphics materials, and industrial packaging.

The Wesley Vale Mill produces 40,000 TPA of pulp and 145,000TPA of coated and uncoated papers for publishing, business forms and printing
The Burnie Mill has a capacity of 140,000TPA of uncoated business papers.

Truck Companies Forecast Improvement

Although transportation companies, many of which ship paper products, experienced a challenging 2009, the forecast appears to favor the truckers; allowing them to charge more for full loads. Unfortunately, for the truckers, the less-than-truckload market looks like it will remain a buyers' market for the short term. Most clients have limited inventory and are requesting trucks to replenish stock to their floor. Transportation, both inbound and outbound, are important cost components when quoting a delivered price for paper.

Wednesday, December 09, 2009

Five Publishers go ahead with Plans to 'Go Digital'

As Coy Paper reported in past, Time, Conde Nast, Hearst, Meredith and News Corp. will create an industry standard platform for magazines, newspapers, etc… for full color, touch-screen digital format that is attractive and interactive for the the Internet, smart phones and e-readers.

These publishers collectively represent nearly 145Million consumers. This will be a subscription fee based initiative for full access and the objective is to establish a revenue stream from advertisers.

Top 10 USA Paper Companies Post Earnings

The USA largest pulp, forest, and paper companies posted earnings of $1.2Billion in the third quarter of 2009, versus $733Million in, 2008 for increase of $500Million. All but two companies posted positive or improved earnings. Note, this improvement was primarily a result of an estimated $1.1Billion of tax credits for the use of black liquor as a bio fuel to generate energy.

Tuesday, December 08, 2009

Newsprint Market update

As of today, the newsprint producers AbitibiBowater, White Birch, Kruger, and Tembec have all announced price increases for the coming months.
These major producers have announced a $25/mton price for both January and for February. Meanwhile Norpac announced a single $50/mton for January and Catalyst Paper also announced a $50/mton price hike for February. Although demand remains low, with USA Dailies suffering a decline of over 23.5% in October, the paper supply has been reduced. Given the equipment closures for the last few years, most buyers are forecasting that these increases will be paid. Coy Paper forecasts that additional newsprint price increases will be announced during 2010.

Containerboard Market Update

As Coy Paper has previously reported, all the major containerboard producers have announced a $50/ton price hike in the East and $70/ton in the West. This is a difficult increase for most converters to absorb, given the poor economy and lack of orders for packaging. This recent price movement is a result of large supply reductions. Coy Paper has reported on closures such as International Paper and West Fraser shuttering 1.8Million tons, a better demand for exports, and the expiration of black liquor credits - all placing pressure on mills for this increase.
A recent report outlined the black liquor credit could have assisted mills cost by as much as $180/ton.

Canadian Pulp and Paper Companies Report on Profits


Eleven publicly traded Canadian companies reported combined third quarter loss of negative C$487 million. This was slightly better than second quarter of 2009 at negative $535.8 million and the first quarter of negative C$642.6 million. AbitibiBowater’s loss of –C$411.4 million contributed the most to the Canadian industry’s lack of profit. Only three companies were profitable in 3Q; Domtar C$62.5 million; Cascades C$35 million; and, Canfor Pulp C$11.4 million. All companies declined in sales, generating combined C$6.2 billion, down over 20% versus 2008 but up 1% vs. 2Q. AbitibiBowater (-34%), Catalyst Paper (-48%), Tembec (-28%) and Fraser Papers (-24%) had the worst sales declines in 3Q vs. 2008.

Hearst will Start Skiff Digital Reader Service

Sometime in early 2010, Hearst plans to start a digital e-reading service called Skiff, formerly known as FirstPaper. Skiff will sell digital versions of newspapers and magazines on electronic readers and other devices that have better graphics and look more like the print magazine, than Amazon’s Kindle. Hearst would be the first publisher with its own end-to-end digital publishing system including reading hardware.

Monday, December 07, 2009

Fraser Papers restructuring grades and name to Newco 


Fraser Papers is reviewing the option of buying its core specialty paper business and renaming the new entity to Newco This will allow the company to exit creditor protection. The plan is to sell the assets of the core business in Edmundston, NB, Madawaska, ME and two New Brunswick lumber mills to the new entity, Newco. Than, the new company would dispose of remaining assets, owned by Fraser, including Gorham Paper Mill in NH, two lumber mills in Maine, and Thurso pulp mill in Quebec.

Recycled Fiber Costs Increase

Recycled fiber costs continue to increase and prices for old corrugated containers (OCC) have recently risen over $10/ton.
The continuous higher fiber costs could put pressure on many mills with a concentration of recycled grades.

Kraft Paper Price Increases

For the second time, Longview will increase its unbleached bleached kraft paper grades $50/ton.

Friday, December 04, 2009

Finally, Smurfit Announces Price Increase

Smurfit-Stone announced a price increase which mirrors the new price levels made by International Paper, Georgia-Pacific and Temple-Inland which Coy Paper reported on earlier. These four producers represent nearly 75% of the domestic containerboard market.

Sports Illustrated Goes E-Zine

Time Magazine’s Sports Illustrated publication is talking about transitioning the print magazine to a digital magazine-friendly e-reader.
Time Inc. has been working with Web site design firm Wonderfactory for Sports Illustrated and several of their other publications.
Time is also working on an application that would translate all of Time Inc.’s magazines to the iPhone. A pay model for the tablet versions have not been determined.

Four New Companies Joined AF&PA

The American Forest & Paper Association (AF&PA) announced that ArborGen, Grays Harbor Paper, Marcal Paper Products, and Thilmany Papers are the newest members of the Association. The forest products industry employs approximately 1 million workers and generates 6 percent of the total U.S. manufacturing GDP.

National Geographic's Adventure RIP

After 1o years, National Geographic has decided to close National Geographic Adventure because of the weak environment for print advertising. The circulation has decreased to 636,750 and the advertising pages declined 25 percent. Management has not ruled out e-magazines, mobile apps, awards and a Web site going forward.

Wednesday, December 02, 2009

Temple Inland Also Raises Price of Containerboard

Temple-Inland joined the others with a $50/ton and $70/ton price increase on containerboard . Smurfit, with 7.1Million tons of capacity, is expected to also announce an increase.
We have heard that Smurfit is to shutter containerboard & corrugated packaging equipment.

Will India Be Next to Build a Paper Industry?

China, with 1.33billion people, has a growing appetite for consumer products and boxes to ship them in – but with India’s 1.18billion population growing more and more sophisticated – will they be the next country to build paper mills? India continues to be one of the poorest countries in Asia and has focused on the service industry, but data illustrates containerboard demand has only grown to 2.6million tons (versus China’s demand of 30.5million tons). India certainly is a country to watch for as the population becomes more industries and wealthy.

Tuesday, December 01, 2009

Coy Paper Appointed Distributor for Fire Proof Chemical

Coy Paper has been awarded the distribution rights for New Star Chemical's Hardindo Anti Fire Products. These include AF11, AF21, and AF31. Currently, the company is focusing on the AF21 product which is a colorless water based solution. Once applied, the sub straight is fire and flame proof and the original functionalities and properties of the item remain in tact.
Yes, this even creates a fire proof paper or card board grade!
The chemical is non-toxic, non-corrosive, biodegradable, and completely environmentally friendly.
The chemical offers permanent protection from fire once applied, Harindo AF21 will protect your home and family, hotels, night clubs, schools, libraries and museums, etc. from the ever present danger of fire, giving you peace of mind 24 hours a day. Contact Coy Paper at info@coypaper.com for more information.

International Paper Joins Pricing Increase for Containerboard

International Paper joined Georgia Pacific, Pratt, and Longview by announcing a $50/ton (East Coast) and $70/ton (West Coast) containerboard price hike for January. Coy Paper now assumes the other major producers Temple-Inland, Packaging Corp of America , Rock-Tenn, and Greif will follow. The price of containerboard had decreased $70-80/ton since last November 2008.

Four Magazines Partner up to Go Online

Time, Conde Nast, Hearst and Meredith are in discussions to partner and form a new company to create online access to magazines. The new entity will create the digital formats and develop an iTunes-like storefront, controlling distribution, pricing and profits.

Koehler AG Seeks USA Expansion

Papierfabrik August Koehler AG of Germany is looking to expand through an acquisition of a new facility in the USA. The company currently exports Thermal Papers, Carbonless, and décor papers from its 3 mills producing 483,000 MTPA and would like to grow the North America market.