Containerboard Market Remains Strong

Shipments for containerboard and boxes continue to improve with box shipments up 4.8% from 2009. Inventory levels are also showing modestly reduced levels at both the mill and the box plants. This marks the third straight month of improved demand, shipments, and operating rates. Suffice it to say, the price announcement in April for $60/ton is firmly implemented.

Printed Magazines Desired over Digital

The Chief Marketing Officer Council conducted a survey and confirmed that 90% of adults that currently subscribe to magazines prefer the print format. It was noted that 24% of the respondents would review EReaders in the future. All 90% reported that they do use the Internet, mainly for research.

AF&PA Reports Increase in Shipments

The American Forest and Paper Association issued its report for April shipments for Printing and Writing papers. The numbers are up; paper shipments rose nearly 11% to 1.5Million tons in April (vs. 2009).
Coated Papers increase was 28% to 584,000 tons
Uncoatd Paper increase 2% to 899,900
Coated Free increased to 33% to 312,400
Coated Publication increased 22% to 272,000 tons
Uncoated Freesheet decreased slightly -0.6% to 745,800 tons
Uncoated groundwood increased 16.5% to 154,000 tons
Total year to date paper shipments increased 10.7% to almost 6Million tons

Coated Prices UP

The coated paper markets continue to witness strength and the current $40/ton price initiative is being implemented. Coated Free producer's backlogs are strong, primarily due to the anti dumping fees imposed by the USA against the Chinese and Indonesian mills. Both the Publication groundwood and coated free markets are seasonally strong.

Market Pulp Update

Market pulp continues to enjoy a snug market. The producers are taking advantage of the reduced supply and increased demand with the May 1 price increase of $40 to 50/ton. Although reports from China outline falling prices and given the downward trend of the Euro, pulp might have reached its peak offshore.
The North America NBSK market price is now $1000/MT. We await June .....

Fraser Sells both the Pulp and Paper Mills

Fraser Papers completed the sales of its specialty papers business to Twin Rivers Paper Company and of its pulp mill in Thurso, Quebec to Fortress Specialty Cellulose Inc. Fraser Papers remains under creditor protection pursuant to CCAA, with its stay of proceedings extended to July 9th, 2010.

AbibitiBowater to Reorganize

AbitibiBowater filed a plan to reorganize in an effort to emerge from bankruptcy. The plan will be filed in both USA and Canadian courts. The company’s common stock will be canceled and holders will not receive any recovery. The unsecured creditors would receive a pro rata share of equity in the reorganized company. The plan is subject to approval.

Paper Prices Continue to Increase

Folio Magazine, a large consumer of paper, recently published a spreadsheet that outlined grades that increased in price from all the major mills. I attach for your reference. http://www.foliomag.com/files/images/folio_table2.gif

Coated Producers begin to Announce Price Increases

UPM, Catalyst, and FutureMark all have announced price increases on their pubication grades for shipments after June 1; NewPage, will delay their increase until 7/1.

Magazine Advertisements to Improve First Half

Bullet points on article by Lucia Moses on Advertising -

After a disappointing first quarter and brutal recession, magazine ad pages finally seem to be heading into positive territory.

Industry advertising pages fell 9.4 percent in the first quarter, per Publishers Information Bureau, in contrast to many publishers’ statements that the ad climate was improving.

Moving into the second quarter- pages are trending up, according to a survey of major publishing houses.

After a flat first quarter, Hearst expected to report an 8.2 percent increase in magazine ad pages (excluding Food Network Magazine) for the first half of the year.

Condé Nast expects to post a 3.7 percent increase for its monthlies in the first half, with nine of 16 titles recording gains.

Time Inc. said it would be up about 6 percent in ad pages in the same period. Meredith estimated in a conference call that magazine ad revenue would be flat to up slightly in the second quarter.

“I’m encouraged,” said Lou Cona, evp, Condé Nast Media Group. “We’re seeing an increase in ad budgets. Companies that were completely focused on driving sales are now reintroducing brand-building measures into their media mix.”

Publishing execs said the gains were coming from a range of ad categories.

“We’re seeing it in beauty, packaged goods, primarily, but we’re also seeing some rebound in automotive,” said Michael Clinton, Hearst’s evp, chief marketing officer and publishing director. “A bit of the luxury market’s beginning to come back.”

Bright spots among titles include Condé Nast’s Wired, up 19.7 percent; and Teen Vogue, up 14.6 percent. Time Inc.’s Real Simple and Cooking Light, which redesigned last year, will be up an estimated 32 percent and 21 percent, respectively. InStyle will be up 18 percent driven by a 20 percent uptick in luxury ads.

And while how much the Apple iPad and other tablets will help magazines over the long haul remains anyone’s guess, some titles are starting to see a related paging bump.

Condé Nast’s Vanity Fair said ad programs tied to its launch on the iPad helped drive an 11.6 percent paging increase for the first half. Wired also cited its iPad edition as a factor in its first-half increase.

Not all are sharing in the gains. Many shelter and luxury ad-dependent books remain soft, as do travel and men’s lifestyle titles. Condé Nast’s W declined 13.8 percent for the first half and Details, 9.3 percent. Time Inc. said its News Group would be down due to a decrease in issues at Fortune.

Indeed, publishing execs still sounded a cautious note. “The economy seems to be tentative,” Condé Nast’s Cona said. “A lot of our business ties in to how the economy continues to do.”

Coupons Continue to be Strong

The redemption of coupons increased 27% in 2009 and newspapers remain the primary source of distribution. Perhaps the last frontier for newspapers' success. Newspapers accounted for nearly 90% of all the coupons redeemed with free standing inserts generating 53%. Although Internet coupons increased 263%, they still remain a small percentage of over all redemption. The increase in coupons is most likely a direct result of the challenging economy and lack of disposable dollars. Let's hope, for the survival of newspapers, that this trend continues - for more coupons - not a poor economy......

Pulp Markets Stay Tight

Any day now, we expect the producers of pulp to announce yet another price increase of approximately $40/ton. The global markets continue to witness extended backlogs and good demand creating lower inventories. Chilean pulp mills are slowly coming back on stream, but many domestic mills are taking required Spring Maintenance down time - so look for pulp to remain tight for several months.

Coated Papers Demand Continue Up

Most producers are reporting on continued demand improvement for both publication groundwood coated and free sheet coated papers. Printers and publishers paid approximately $5-10/cwt more for coated papers in April and manufacturers are surely reviewing a formal July price increase. The recent announcement on anti dumping will also assist domestic producers. Last week, the US imposed Anti-Dumping duties on Chinese and Indonesian imports. For Chinese mills, this adds 31-90% to the 4-
13% duties already in place, and Indonesian mill face an additional
11%.

Asia Pulp & Paper Hopes for the Best in Coated Paper Anti Dumping Case

Asia Pulp & Paper (APP), the leading exporter of coated paper from China and Indonesia (capacity of 15Million tons), fully expects the preliminary ruling to be overturned for the Anti Dumping case. They maintain the mills that export from China and Indonesia have never sold their products in the United States at less than fair value.

The preliminary ruling outlined the company illegally dumped paper in the United States. The USA Producers maintain the domestic market was being flooded with imported coated paper. The offshore produces state domestic shipments of coated paper are down because overall demand is down in this bad economy, not because of any alleged unfair practices of Chinese and Indonesian producers and importers.

In the current case, the preliminary anti-dumping and countervailing duty applied to Asia Pulp and Paper products are 43.65% on products from China, and 28.1% on products from Indonesia, as reported in our past releases.

The Department of Commerce’s final rulings are expected to be released in September. The last phase of the cases takes place in October or early November, when the U.S. International Trade Commission will determine if the U.S. paper industry has been harmed.

Internet Advertising passes Printed Advertisements

The year 2009 was a struggle for anyone selling advertising space, but it might have been a little easier for those selling space on the internet. For the first time, the percentage of dollars (12.6%) favored the global spending on internet advertisements versus the segments such as magazines (10.3%). Newspapers, also, continue to loose market share for advertising dollars to the web. The overall reduction in ad spending for 2009 was 12.3% ($22.7Billion), and I note online spending was also down, declined 3.4%.

Future Revenue for Printers Expected to increase

The Freedonia Group recently made a study available
Study Highlights:

-Revenue for the USA commercial printing industry, which includes prepress and printing services on a job order basis, is expected to increase 2.1 percent per year to $77.7 billion in 2014.

-Gains will be aided by a cyclical rebound in advertising expenditures and increased outsourcing by newspaper publishers. Although the volume of printed pages in periodicals such as newspapers will fall, commercial printers will benefit as many publishers outsource their printing operations.

-Digital printing is expected to achieve the fastest gains based on its lower cost, quick turnaround and ease of customization for shorter print runs. Digital technology is a game-changer in many printing applications -- such as direct mail and book publishing -- as it accommodates both variable-data printing, which allows for the creation of individualized products, and print-on-demand, which allows customers to shrink inventories.

Paper Up in March

Notes from a recent RISI report-
Pulp & Paper Product's Council reported that printing and writing paper shipments up 10% in March to 1.9Million tons, the fifth month of gains. Coated paper shipments grew to 665,000 tons, with coated freesheet up 27% and coated mechanical up 24%. Uncoated mechanical paper grew 6% to 431,000 tons while uncoated freesheet was up 2% to 829,000 tons. Total exports increased 37.2% in 1Q to 279,000 tons and mill inventories shrunk 22% to 1.55Million tons by the end of March.
These findings are consistent with our past releases.

Smurif-Stone to Exit Bankruptcy

Smurfit-Stone Container, one of the industry's largest containerboard and corrugated packaging producers, announced plans to exit chapter 11. The company will reorganize and become a much leaner organization.

UPM-Kymmene Posts Profit

The world's largest magazine paper maker,UPM-Kymmene, posted a first quarter profit of $93Million (euro70Million), compared with a 2009 loss. The company reported that sales rose 10%.

All Paper Grades up

•Uncoated free sheet (UFS) shipments up versus year-ago for fourth consecutive month.
•Coated free sheet (CFS) shipment surges; this is fourth double-digit growth versus year-ago.
•Year-ago shipments of coated mechanical (CM) robust enjoying better gains than Coated Free and fifth consecutive double-digit year-ago increase.
•Increase of uncoated mechanical (UM) shipments passes 20% for second time in past three months.
This is fifth consecutive month of increase. Maybe the improved economy and new paper demand is for real and sustainable!