USA Paper Earnings Companies Hit Hard in 2008

Full year 2008 earnings of 18 publicly traded U.S. paper and forest companies fell 39.8% to $1.8 billion, compared to the year earlier. Sales for the full year declined 6.6% to $75.5 billion, or $4.7 billion less than sales in 2007. The 18 companies are those that report on a near-calendar fiscal year. For the fourth quarter, 17 out of 23 companies reported lower earnings year-over-year and seven reported losses.

Smart Papers and Mohawk Papers Unite

Smart Papers announced the sale of its premium uncoated printing papers business and brands to Mohawk Fine Papers Inc., Cohoes, N.Y and that it has named Mohawk the exclusive marketer to traditional paper distributors worldwide for Smart's Kromekote, Knightkote Matte and Smart Digital premium coated papers.
Smart Papers said it will continue to sell its coated brands directly to strategic accounts worldwide, including specialty and technical converters, OEMs, label manufacturers, laminators, packaging printers, gift and box wrap printers and greeting card companies. Smart Papers will expand its primary focus on manufacturing, marketing and product development of Kromekote, Knightkote, SMART Digital and its private label brands.
The premium uncoated brands Mohawk acquired include: Pegasus, Carnival, Synergy, Passport, Genesis, Magna Carta, SMART Brights, Feltweave, Nekoosa Linen, Nekoosa 25% Cotton, Nekoosa Bond, Skytone, Solutions and Proterra.

Wausau Still Opening New Distribution Center

The opening of Wausau Paper new Midwest distribution hub continues to be part of a previously announced $6.6 million capital project that will consolidate converting capacity and streamline distribution. 

The new center will be fully operational in June within a 300,000 square foot warehouse. This center will be an addition to the Allentown, Pennsylvania east coast distribution center. Paper.com carries all the popular Wausau grades, available for immediate shipment.

Federal Reserve reports Weakness Across the USA

Not surprising that the Pulp and Paper Industry remains weak, with much capacity shuttered given poor market demand. I include quotes from recent beige book report by FED by region (very dismay reading!)
Minneapolis – The downturn continues…..
San Francisco – Economic activity slowed further…….
Chicago – The economy remains weak ….
Cleveland – The economy weakened, industry shipments down ……
Boston – The economy continued to slow …….
New York – Economic activity deteriorated..
Philadelphia – Business conditions are weak …..
Richmond – Economic activity declined further ……
Atlanta – Home sales continued to decline …..
St Louis – Manufacturing continued its decline …..
Kansas City – Economy continued to deteriorate.........
Dallas – Falling demand ……

Paper.com Green Store very Successful

Paper.com continues to be successful in marketing Environmentally Friendly papers. The site offer thousands of products from all the major producers. The extensive line of papers allows for end users to choose 100 percent post consumer, FSC papers, papers made from Carbon neutral credits, items made from alternative power such as wind to generate electricity, Papers made with process chlorine free (PCF) and elemental chlorine free (ECF) pulps and many that are Green Certified and contain the Green Seal. With all these choices, why go anywhere else but Paper.com? Shop Paper.com Green Store now!

Verso Mills Idle Machines

Verso Paper said it will temporarily shut down paper machines at its two Maine mills this month due to poor market conditions. The company will idle all four machines at its Bucksport mill for two weeks beginning March 9. Verso will also idle three of its four machines at its Androscoggin mill in Jay between March 6 and March 23 on a staggered schedule.

Release Liner and Labels in USA

The label market in USA witnessed a slight growth. World demand for labels were broken down into following markets – 50% Pressure Sensitive; 35% glue applied; 8% sleeving; and 2% in mold.
At 51% most of the release liner ended up in label stocks, 12.5% in tapes; 9.5% industrial; Hygiene 8% Graphic Arts 6%; Medical 3%; and envelopes 2%.

Kodak commited to digital print

The Wall Street Journal reported that Kodak was planning to divest its NexPress business; however, Kodak chairman and CEO Antonio Perez has stated the company has no plans to divest NexPress or Digimaster.

White Birch Mill Takes Down Time

The White Birch Paper Mill (North America’s #2 producer) announced it will take market related down time at its Bear Island Mill in Ashland, VA. The mill will shut down between March 8-30 for reduction of 15,000 tons.

Catalyst Cuts Production at Crofton, Elk Falls

Catalyst Paper said it would indefinitely curtail production at its Crofton kraft mill, and remove about 400,000 tons of annual pulp capacity. The company also announced a five-week curtailment at its Elk Falls mill. The Elk Falls mill’s PM 2 and PM 5 have been idle and were scheduled to resume production March 31, but will now remain closed. The indefinite curtailment on Elk Falls 3 paper machines will remove about 526,000 tons of newsprint and uncoated mechanical paper capacity on an annualized basis.

Market Pulp

Markets remain oversupplied and worldwide shipments declined 14.5% in January, NBSK inventory increased by 3 days to 43 days of supply and BEK increased by 4 days to 56 days of supply.

Quick Newsprint update

Market remains weak with domestic newsprint consumption declining
21.6% in January. The US dailies report down -22.6% January 2009 versus 2008 and exports are down 40%. Newsprint price decline accelerated in February, with list prices down $20/ton. In the prior three months, list prices
declined $10/ton/month

Appleton Coated Joins other Producers with Reduced Tonnage

Appleton Coated LLC announced the elimination of approximately 9,900 tons of coated and uncoated freesheet production. The company has had four temporary shutdowns since Thanksgiving. A fifth is scheduled to begin early March and last for four days. Appleton also will move to a five-day workweek from a seven-day work schedule beginning sometime in March

Box Shipments

January brought weak shipments and lower inventories for containerboard and box numbers. However, due to low operating rates, inventories declined despite a strong seasonal pattern of inventory increases. To date, the industry has done an impressive job in keeping price declines modest in an extremely challenging environment. Shipments for box volumes fell 13.7% in January from 2007.

Fraser Paper Reduces Capacity

Fraser Paper will shut down four of the mill’s six paper machines as part of a plan to balance supply with demand. The company initially said it would temporarily idle two paper machines at its Madawaska plant. A many as 600 workers will be furloughed by the closure. The Madawaska, ME mill produces uncoated freesheet, lightweight coated, supercalendered and directory paper.

AbitibiBowater Takes Downtime at Catawba

AbitibiBowater will idle the No.1 paper machine at its Catawba mill on March 1, resulting in the temporary lay off of 123 workers. The 740,000 tons/yr plant houses three paper machines. The one-month closure of PM1 will remove an estimate 14,000 tons of coated mechanical paper production. The Catawba, SC mill was opened in 1959 and employs 940 workers.

International Paper Announces more Down time

International Paper announced it will take planned uncoated freesheet downtime at its Franklin, VA mill in March. PM1 and PM5 will be shut down this week and the week of March 16, and PM1 will be closed the week of March 9. The production curtailment is estimated to be 14,000 tons. The company will also curtail two machines at its Riverdale mill in Selma, AL beginning the week of March 16 and ending the week of March 30. PM15 will be down for 21 days and PM16 will be down for 18 days. The total production loss is estimated at nearly 34,000 tons.

Update on the Paper Market

Closures, cut backs, job losses, and trying to reduce capacity to meet demand have hurt the Pulp and Paper industry. North American has cut 4millionTPA of capacity and Europe 5millionTPA.
Printing and writing paper shipments for January showed sharp declines: Uncoated white paper shipments are down -20%, coated papers are off 26.5- 31%. Of interest are uncoated white papers only witnessed price erosion of $5-10/ton in January (December decline was $5-15/ton). Coated publication grades fell$15-35/ton in January (certainly better than December price reductions of $50-70/ton) and freesheet coated prices fell $20-60/ton in January. Look for further pressure on pricing and demand throughout first half of 2009 and beyond.
Market Pulp did not fair any better, list pricing in January for NBSK declined $30 to $675/ton - a reduction of @$210 from high in August 2008. Hardwood pulp fell $30/ton, BEK now at $615/ton.
Note, actual transaction prices decreased to approximately $400s for NBSK - well below the cash cost to produce fiber!

Kruger Takes Down Time

Montreal based Kruger plans on reducing newsprint production by 25,000 tons in first half of 2009. They will spread this reduction between their three facilities – Trois-Riviers, Bompton, and Corner Brook.

Tembec Mill for Sale

Tembec continues to seek a buyer for the St Francisville mill in Louisiana. This mill was purchased from Crown Vantage in 2001.

Domtar Announces Uncoated Downtime

Domtar announced plans to shut the 293,000TPA PM5 at its Plymouth, NC mill by the end of February.

Wausau Restarts Paper Machine

In January, Wausau started back up its #11 paper machine at Otis – located in Jay, Maine. Note, the second machine (#10) remains down. The mill produces paper for the release liner market for labels.

Verso Announces cutback for 2009

Verso Paper intends to reduce production by 100,000 tons of publication Groundwood for first half of 2009.

Catalyst Continues Down Time

We covered Catalyst Paper taking down time in our November releases, and management continues to match output with demand. Curtailments at both Crofton and Elf Falls mills in BC as well as in Snowflake, AZ remain. This announcement will result in additional 55,000 tons of newsprint taken out of production.

Georgia Pacific Shuts Down Machine

Georgia Pacific plans to shut down the #3 medium machine (268,000TPA – semi-chemical medium) at the Cedar Springs, GA containerboard mill.

Store Enso Announces closing several assets

StoraEnso has closed the Baienfurt folding boxboard plant (190,000TPA) and a publication paper machine (#3pm – 140,000TPA) at its Kabel plant – both in Germany.

Fraser Plans Downtime at Edmundston Mill

Fraser Papers announced plans to take market-related downtime at its pulp mill in Edmundston, New Brunswick. The two-week closure will begin February 23, 2009. The Edmundston pulp mill produces sulphite and groundwood pulp for Fraser’s integrated paper mill in Madawaska, Maine.

AbitibiBowater Closes Grand Falls-Windsor Mill

AbitibiBowater has ceased production at its newsprint mill in central Newfoundland. The closure resulted in the elimination of 800 workers. AbitibiBowater announced that it would close the 205,000 metric ton newsprint mill as part of an overall plan to remove 830,000 metric tons from the marketplace.

Top Printers by Category

Recent Survey of 2008 top North American printers by market and sales revenue
by Printing Impressions

Top 5 over all / sales in millions
RR Donnelly $11,587
Quebecor World $5.688
Cuneo $2,400
Valises $2,242
Transcontinental $2,209

Top 5 Direct mail / Segment sales in million of dollars
Visant $346
Transcontinental $331
IWCO Direct $280
Quebecor World $227
Clondalkin $195

Top 5 Book Printers / Segment sales in million of dollars
Visant $590
Quebecor World $568
Courier $294
Bertelmann $273
Transcontinental $198

Top 5 Publication Printers / Segment sales in million of dollars
Quebecor World $1,478
Quad $778
Cenveo $408
Brown $332
Transcontinental $265

Top 5 Catalog Printers / Segment sales in million of dollars
Quad $1,003
Quebecor World $910
Arandell $226
Transcontinental $220
Sheridan Group $137

Catalog Postal Rates Rise 2.3%, Periodicals rise 4%

The U.S. Postal Service released details yesterday of the next rate increase, which will take affect May 11. The postal rate for Standard Mail Flats (catalogs) will increase by 2.3%, while the average rate hike for carrier route flats is 4.3%. The postal rate for periodicals will increase 3.976%, which is more than any other class of mail. The Consumer Price Index (CPI), which is currently 3.8%, now caps postal rate increases. This year’s increase for catalogs is higher than last year’s 1%, but significantly lower than the 20%-40% rate increase in 2007.
The USPS is facing a $2.8billion deficit and total mail volume was down 9 billion in 2008.

Finnish Paper Mill Lays Off 1200 Workers

The world's largest magazine paper maker, UPM-Kymmene Corp., reported it will temporarily lay off 1,220 workers in Finland, as the economic downturn continues to hit the wood and paper industry.
The announcement follows UPM's earnings report last week confirming a fourth-quarter net loss of euro286 million ($267 million) and an 8 percent drop in sales to euro2.3 billion.
The company gave a grim outlook for the rest of the year, saying it will continue to close mills and curtail production, expecting poor demand to continue in 2009.
Last year, UPM closed mills in Finland and slashed 700 jobs. It also announced plans to cut thousands of jobs worldwide during the next few years.

Coy Paper Company Introduces new Website

The specialty paper company, Coy Paper Company LLC, recently introduced a completely revised website, www.coypaper.com . The site describes the company, featured and proprietary grades, as well as a section on industry resources, which include the popular Paper News. Paper News allows readers to stay up to date on many for the recent events occurring in the Pulp and Paper Industry.

Paper Machine Sets New Speed Record

Stora Enso’s Kvarnsveden mill in Sweden has set a new world speed record of Super Calendar paper production. The Metso supplied machine (PM12) set a new 24-hour record of 1,926 m/min on January 21. A top speed of 2,009 m/min was reached during the period. Kvarnsveden’s PM 12 was started up in November 2005. It is the largest production line in the world.

Cereal Boxes Shrink

The Kellogg Company is testing smaller boxes for its cereals. The new ‘space saving box’ allows for the same amount of cereal, but with 8% less packaging, this permits retailers more shelf space, consumers more room in the pantry, as well as less waste and less material means less cost to Kellogg. This is first change to the cereal box since the 1950”s. This translates into less packaging
and paper for Kellogg Company.

Katahdin Paper Mill to Take Downtime

Katahdin Paper temporarily shut down PM5 at its East Millinocket, ME mill. The 125,000TPA directory paper machine could be idled for as many as 28 days. The closure will affect approximately 140 hourly-paid workers and an unspecified number of salaried workers. The East Millinocket mill employs roughly 491 workers and is owned by Brookfield Asset Management, but is managed by Fraser Papers.

Largest InPlants

With the advent of digital printing, many universities, municipalities, and corporations have brought printing ‘inside’ rather than work with an outside printer. InPlant Graphics recently confirmed top 100 installations with printing presses ‘in plant’.
We include top 10-
USA Government Printing Office
Allstate Insurance
State of California
CVS/Caremark
State of Oregon
Stte of Washington
Principal Financial
Blue Cross/Minn
People to People
Spartan Stores

What’s Black & White and Red all over?

Newspaper’s bottom line!
2008 was not a pleasant year for newspaper companies (or paper manufactures that produce newsprint). Canada has always been the world leader in newsprint production….. and the USA #1 in consumption.
Some 2008 North American statistics-
Production 10,100,000 tons
Capacity 11,425,000 tons
Permanently shuttered in 2008 600,000 tons
Top mills
AbitibiBowater 4,775,000TPA 42% market share
White Birch 2,100,000 TPA 18.5% market share
Kruger 1,140,000 TPA 10% market share
Catalyst 890,000TPA 8% market share
North Pacific Paper (NORPAC) 55,000 TPA 5% market share

National Envelope to Close Plant

National Envelope just announced it will discontinue all operations at the Houston, TX facility effective April 6, 2009 and consolidate this facility into the Ennis, TX. plant. They will continue to operate five plants - Ennis, Tx., Lenexa, KS., Austell, GA., Smyrna, GA., and Nashville, TN.

Wall Street Analyst Surveys ‘The Street’

Mark Wilde of Deutsche Bank surveyed paper & packaging industry executives, highlights of his findings -

Main message for 2009 - ‘Volumes & Prices Will Be Lower'
For most participants, flat volumes look like the "best case" scenario. Low expectations prevailed across the industry – from timber to paper to packaging. The expectations of lower prices and weaker volumes were most pronounced in market pulp and newsprint. Most observers assumed a bottom somewhere around mid-2009. With economic news continuing to point to a deep slowdown, the case for a mid-year turnaround on most commodities is becoming tougher to envision.

Executives report on big issues in 2009-
1) Slumping demand,
2) Price erosion.
About 80% of respondents pointed to cost pressures as a key issue. A bit further down the “issues list” was the resurgent US Dollar. Several also did raise concerns about the credit worthiness of both customers and suppliers.

Finally, Wilde asked, what is required for turn around for Healthy Industry?”
"A miracle" replied one quick-witted executive. Responses focused on further industry consolidation with accompanying rationalization of marginal capacity. Many respondents argued for a greater focus on financial returns. One European player argued: "Euro needs to weaken against the US Dollar and other major currencies." Many companies tied to lumber and building materials pointed to a rebound in the housing market.

NYTimes Profits Decline

The New York Times Co. reported its fourth-quarter earnings from continuing operations fell 48 percent on write-downs on severance costs and non-cash charges on the value of the International Herald Tribune and New England papers, including its stake in the free Boston Metro daily.

Top Printers Winning bids to GPO

The USA Government Print Management revealed the following list of top printers awarded contacts during 2008.

Monarch Litho $38,100,000
NPC $35,660,000
RRDonnelly $27,475,000
Gateway Press $16,999,000
SourceLink $14,915,000
Cenvo $10,225,000
Vertis Communications $9,616,000
Signature Graphics $8,75,000

PaperBoard Output Declines 19%

U.S paper and board production declined 18.9% in December on a year-over-year basis, a decrease of nearly 1.5 million tons, according to the American Forest & Paper Association (AF&PA). Coated printing and writing paper alone plunged 29% for the month. Kraft linerboard production was down 30% in December to 1.22 million tons compared to December 2007. Uncoated freesheet and tissue production were much less harder hit, declining 13% and 4% respectively

Printing and Writing Paper Shipments Decline

Total North American printing and writing paper shipments dropped 21.6% in December to 1.675 million tons, according to the Pulp and Paper Products Council (PPPC). Total N.A. shipments for all of 2008 were down 8.7% at 24.14 million tonnes. Coated mechanical shipments declined 3.9% in December to 280,000 tonnes, and fell 16.3% to 4.18 million tonnes for the full year. Coated freesheet shipments dropped 28.0% to 263,000 tonnes and were down 9.2% to 4.15 million tonnes in the 12-month period.

NewPage Reduces Workforce in Rumford

NewPage Corp. will permanently let go 100 hourly employees and 30 salaried people or 13%.
The Rumford mill has higher costs than other NewPage mills around the country. 

 This staffing reduction is one action among many the mill is taking as well as additional initiatives to address the recent cost inflation in raw materials, wood, chemicals and energy. In other recent news, the No. 12 machine went down for a week on Jan. 19, then went back on stream Tuesday. The No. 15 machine is down now, due to be back on stream next week. The No. 10 machine then will go down for a week. 


The central NewPage office in Miamisburg, Ohio, issued a downtime release last week that said 150,000 tons of product would be reduced during the first quarter of 2009. All 10 NewPage mills are expected to be affected by the product reduction. Other mills are located in Kentucky, Maryland, Michigan, Minnesota, Wisconsin and Nova Scotia.

AbitibiBowater Announces 1Million Ton Capacity Reduction

We have reported on the various announcements throughout the 2H08 with AbitibiBowater curtailing production. Adding up all the actions results in nearly 830,000 tons of newsprint, 110,000 tons of specialty grades and 70,000 tons of coated publication grades – all removed from the marketplace through beginning of 2009. We note, AbitibiBowater is the largest producer of newsprint and groundwood specialties in North American.

Reader’s Digest Lay Off

Reader’s Digest Association said it would eliminate 8 percent of its overall workforce of 3,500, or approximately 280 employees. Management reported that they have no immediate plans to close any of their USA publications.

Recent Pulp Mill Closures

A few notable shuttered pulp mills
Botnia – Kaskinen, Finland – BHK/NBSK 450,000tons
Buchana Forest – Terrace Bay, Ont. Canada – BHK 125,000tons
Catalyst Paper – Elk Falls, BC, Canada – BSK 200,000tons
Borregaard – Riedholz, Switzerland – Dissolv 120,000tons
Stora Enso – Norrsundet, Sweden – NBSK 250,000tons
International Paper – Bastrop, LA – BSK 410,000tons
SSCC – Quebec – BHK 230,000tons
UPM Tervasaari, Finland - NBSK 210,000tons (sometime in 2009)
Pope Talbot - Mackenzie, BC, Canada – NBSK 200,000tons
Stora Enso – Kemijari, Finland – NBSK 250,000tons

Pulp Prices DOWN

According to FOEX, NBSK pulp index continues to trend downward, falling $7.40/ton to $608.11/ton.

Google Still King

With the advent of most paper companies introducing a website, thought I would comment on search engine platforms. Through 2008, Google accounted for 72.07% of all USA searches, according to Hitwise. Others such as Yahoo(17.79%), MSN(5.56%) , and Ask.com (3.15%) were pale in comparison. Note, the next 44 largest only accounted for 1.42%. Paper.com continues to have the most paper items on site, at nearly 40,000. The site advertises on all the major search engines, and agrees, Google is the king.

Domtar Takes Downtime

Domtar recently announced it will take a two week shutdown at its Espanola's Pulp and Paper Mill. Domtar is North America's largest producer of Uncoated WoodFree paper and sited poor market conditions as the reason to this closure.

Smurfit-Stone Files For Chapter 11

Smurfit Stone Container Corp, the largest manufacturer of containerboard and boxes in North America filed for Chapter 11 bankruptcy protection.  

This company operates 150 facilities in  North America.  Management sited the challenge of repayment of $3.5Billion in debt (nearly half the annual revenues of $7.5Billion).  The poor economy has hurt both demand for their products and created frozen credit markets to allow for restructuring its debt.  

Another Magazine Folds

Hearst announced it will fold TEEN Magazine, a magazine focused on teenage girls. Meanwhile, Garden & Gun, a regional title aimed at affluent Southerners, is threatened with folding unless it can shore up a buyer or investors in the next several days.
Teen is the smallest of and the latest in a string of teen titles to fold in recent years, following Hachette Filipacchi Media’s Elle Girl, Time Inc.’s Teen People and most recently, Hearst’s CosmoGirl!, which folded with the December issue.

Fraser Idles Paper Machines at Madawaska

Fraser Papers temporarily shut down an uncoated freesheet paper machine at its Madawaska, ME mill. The mill’s 64,000 tons/yr PM7 was closed on Jan. 19 and will remain idled until Jan. 26. Additionally, the facilities 70,000 tons/yr PM6 groundwood machine will be shut down Jan. 26 for seven to ten days.

Verso Paper Completes Paper Machine Conversion

Verso’s newly converted #1 paper machine at the Bucksport, Maine facility is currently producing trial runs. The machine had been producing coated publication paper and will now manufacture specialty papers for packaging in the food industry.

NewPage Futura Laser FSC Certified

NewPage reports their Futura Laser paper for digital applications is now FSC certified. This grade is known as an all around functional grade that online marketing companies such as Paper.com sell to digital printers.

Paper Producers Continue to Struggle

Preliminary figures are in for December 2008 shipments and it appears volumes are still under pressure. Printing and writing declined over 20% from December of 2007. Production for Uncoated freesheet is estimated to be down 12%; coated free- down 25%; publication coated Groundwood – down 35%; and uncoated Groundwood – down 27%. Clearly, manufacturers must evaluate curtailing even more tonnage to prevent a flood of unwanted paper. Newspaper readership, magazine ad pages, and catalogues all declining. Major printers such as RR Donnelly and Quad are taking presses off line.
Prices are following demand with Publication Coated down $35-70/ton and Uncoated Free down $5-15/ton.

State on the Pulp Market

Deutsche Bank conference on pulp (Mark Wilde and Brian McClay)
>World demand for pulp estimated to decline 5% in 2009 (Note: 2008 and estimates for 2009 call for first decline in pulp since 1970’s)
>Decline for 2008 estimated to have been nearly 3%
>Pulp prices continue to decline; Europe new list price NBSK $605 and BEK $525 – while spot prices reported to be $500 for NBSK and $400 for Hardwood.
>Softwood may recover before hardwood given reduced supply and stabilized demand. However, no recovery for either before 1H2010.
>Many pulp mills (especially Norscan) operating below cash cost.
>Current pulp inventories are higher than normal (5.2million tons); this level, after 3milion tons of shuttered equipment.

Containerboard Market Continues its Challenges

Operating rates for producers of containerboard were at its lowest level in December of 2008 at almost 70%. Demand is undoubtedly low due to the poor economy and lack of sales on products that require boxes. Capacity announcements for reducing production will be out soon.

UPS and FEDEX look to Increase Rates

Now that DHL will exit the USA domestic market, and fewer options exist for small package shipments, United Parcel and Federal Express will increase shipping rates. These two carries will inherit one million packages per day; given the DHL withdrawal and websites, such as Paper.com, have fewer alternatives. UPS recently announced one of the highest increases in history (5.90%) for ground shipments. One bright spot is the reduction of fuel surcharges, which peaked at 34.5% in September. The current surcharge (December 2008) is 6.75%. The increase in shipping fees will hurt the Internet business somewhat, adding costs in a challenging economic time.

Publications Continue to see Decrease in Advertising Revenue

Fr Media week -By Lucia Moses
Official numbers from Publishers Information Bureau (PIB) out Jan. 13 confirmed the pain that publishers have been feeling for the past 12 months. Rate-card reported ad revenue declined more precipitously as the year went on, dropping 13.8% in the fourth quarter and 7.8% for the year. Ad pages fell 17.1% in the quarter and 11.7% for the full year.

Paging falloffs were especially severe in automotive (down 25.8% for the fourth quarter and 24.3% for the year), reflecting the auto industry’s longstanding woes and causing sharp pain to men’s magazines; and financial, insurance & real estate (down 36.5% for the quarter and 17.3% for the year), which fell off a cliff in the fourth quarter amid the markets’ meltdown, to the detriment of business titles.
Also down sharply was the home furnishings and supplies category, reflecting the soft housing market; pages there fell 22.8% in the fourth quarter and 17.9% for the year.

Challenging Markets Harm Mills

Container manufacturer Smurfit-Stone announced it is evaluating Chapter 11. Most believe mill will succeed if the company can raise DIP financing. Smurfit-Stone has about $3.5 billion in outstanding debt, and has been shuttering and restructuring operations, including layoffs, as part of a multi-year plan to improve performance.
I note, AbitibiBowater also highly leveraged, like all other paper mills and is most likely also reviewing restructuring its financing.

Evergreen Packaging Plans Temporary Layoffs

Evergreen Packaging, formerly Blue Ridge Paper, announced it would lay off 138 workers from its Canton, NC mill for one week as part of a cost-cutting plan. Employees have been given the option to either take paid vacation time or file for unemployment. The plants capacity is approximately 300,000 tons/yr of uncoated freesheet and about 300,000 tons/yr of SBS.

Who’s Still Recycling?

At the end of 2008, demand for recycled raw material came to a stretching halt. For years, the cry for recycled product grew and end users were somewhat wiling to even pay a premium for paper made from post consumer recycled material. If fact, End users were demanding post-consumer waste be included as part of their sustainability efforts. Even though prices for recycled commodities such as corrugated, plastics, paper, steel and aluminum were at all-time highs, they were competitive with virgin materials.

Virtually overnight, prices for these recycled materials dropped 70 to 90 percent, depending on local markets. 
Recycled-plastic bottles have gone from 25 cents per pound to 2 cents per pound. Old corrugated containers have dropped from nearly $110 per ton to $10 per ton— if it can be sold at all. Inventories are building up at recycling centers, warehouses and docks. Unfortunately, many of these materials are likely to end up in landfills, where their potential for reuse will be buried. We now wonder what will happen to paper prices that contain post consumer waste.

President-elect Obama Chooses Neenah Paper for his Big Day

Neenah Paper Inc. will have an important role in the inauguration of Mr. Obama. Classic Crest eco-friendly paper was picked for the invitation to the inauguration of Barack Obama on Jan. 20. More than 1 million inaugural invitations have been engraved and printed. Neenah has also provided the paper for the last three presidents’ inaugurations.

Containerboard Market Update

Best estimates for pricing on containerboard for December shipments reflect a decrease of $10-20/ton. January forecasted to be more pressure on pricing, in fact pressure will be constant for at least first half of 2009. 2008 ended with lower operating rates (hovering around 85%) and inventories up while shipments were down. Two big machines remain down (Missoula, MT and Ontonagon, MI).

Quad Graphics Reduces Production Capacity

Quad Graphics said it would reduce production capacity due to changes in the economy. Approximately 550 jobs, or 5.6% of its domestic workforce, will be eliminated across the company’s nine U.S. plants, five of which are in Wisconsin. The cuts include both production and administrative personnel, and will be completed by the end of this week.

U.S. Commercial Printing Shipments Fall 8%

according to WhatTheyThink’s Economics and Research Center

U.S. commercial printing shipments fell 8%, or $741 million in November to $8.4 billion year-over-year. November usually marks the end of the strongest three-month period in commercial printing, however declines in newspaper inserts, magazine ad pages and catalog circulations reduced overall print demand this year.

Publication Papers Decline

Mills such as Verso (100,000tons) and NewPage (150,000tons) continue to take production of line to correct for weak demand. In spite of these efforts, publication paper prices (LWC) continue to decline (down an estimated $30-70/ton in December) and 2009 is not showing any encouraging signs. Magazine and catalog demand is weak, imported paper producers are more aggressive, advertising dollars are down, and the economy is not improving - all leading to a poor paper market as we enter 2009.
Note: NewPage will cut production by 150,000 tons system wide in the first quarter. Its mills have a total annual production capacity of approximately 4.5 million tons of paper, including approximately 3.3 million tons of coated paper, approximately 900,000 tons of uncoated paper and approximately 300,000 tons of specialty paper, according to its Web site. It is the largest coated paper manufacturer in North America, based on production capacity, with $4.7 billion in net sales.
Verso Papers is based in Memphis, Tennessee, and is a leading North American producer of coated papers, including coated groundwood and coated freesheet, and supercalendered and specialty products. Verso’s paper products are used primarily in media and marketing applications, including magazines, catalogs and commercial printing applications such as high-end advertising brochures, annual reports and direct-mail advertising . The company operates manufacturing facilities in Jay, Maine; Bucksport, Maine; Sartell, Minn.; and Quinnesec, Mich. These mills have a combined annual capacity of approximately 1.7 million tons of paper.

Pulp Continues to Slide

List prices on NBSK are estimated to be $710-720/ton going into January 2009 (down $170/ton from August). Customers for large volume, spot orders of market pulp are reporting prices ‘well below’ list price.

Meredith to cut 250 jobs, close magazine

Meredith Corp. will eliminate 250 jobs and close its Country Home magazine in March as it suffers from sharp declines in publishing and broadcasting advertising amid the recession. The company will announce a reorganization in the coming weeks.

Investor group acquires Chesapeake Corp.

Chesapeake Corporation announced that it has reached an agreement to sell all of its operating businesses to a group of investors including affiliates of Irving Place Capital Management, L.P. and Oaktree Capital Management, L.P., who intend to continue operating these businesses as a going concern.
All of the Company's operations - including all of its manufacturing and distribution facilities in the U.S. and around the world - are open and operating on normal schedules, fulfilling customer orders. The Company's non-U.S. subsidiaries were not included in the Chapter 11 filing. The proposed purchase price is $485 million.

Web Passes Papers as a News Source

The New York Times reported that in 2008 40 percent of Americans received most of their news from the internet; 35 percent received most of their news from a newspaper.

NYT Web Traffic Up, Ad Revenue Down

In what can be taken as another clear sign that online advertising is not immune to the slumping economy, traffic for The New York Times Web properties continued to climb in November, while advertising revenue slipped.

Internet advertising revenues for the Times collection of Web sites (NYTimes.com, About.com, Boston.com, etc.) dipped 3.8 percent last month. That decline represents a marked difference from earlier in the year, as overall online ad revenue for the Times properties has increased by 11.6 percent year to date.

Magazines Frustrated with Economy

Facing a brutal economy in 2008, big magazine chains closed some titles deemed to have a smaller chance of survival. This translated into significantly less publication paper consumed.

At Time Inc., shelter magazine Cottage Living went by the wayside. Condé Nast folded Golf for Women and took Men’s Vogue to a twice-annual supplement of Vogue from a standalone title. Hearst Magazines shut down CosmoGirl!, Quick & Simple and O at Home.

“They’re going to have more difficulty than the multi-title companies because they don’t have [the resources] to do all the integrated and added-value programs for advertisers, and they don’t have as much ability to cut costs,” said Martin Walker, a longtime magazine consultant. Already gone: pop-culture mag Radar; Jewish Living; Harvard grad-aimed 02138; and the New York Sun.

In flusher times, publishing chains or private-equity money could toss a lifeline to struggling independents. But with the credit markets dried up, M&A activity has slowed to a crawl. For the first nine months of 2008, consumer magazine deals fell 95 percent in dollar value while newspaper deals fell 93 percent, per the Jordan, Edmiston Group investment bank, which tracks media deal-making. And with the unsettled outlook for print, publishers have been focused on digital buys, not collecting more magazines.

New York Times Sells Front Page Ads

The New York Times has begun offering display ad placements below the fold on its front page. The move is a first for the paper, who has been struggling with declining ad revenue. The Times has previously sold small-classified liners on its front page, but never display ads. The company reported that ad revenue declined nearly 21% in November.

Neenah Announces new Digital Grade

Neenah Paper introduced an improved version of its Classic Crest Digital and Classic Linen Digital Papers are now HP Indigo certified. Paper.com markets these grades in three colors, four weights, and four digital sizes.

Chicago Papers See Troubled Future

Today, only two major dailies remain in this city of 3 million, and both are in serious trouble from declining circulation, plummeting advertising revenue and a new kind of competition that threatens to make newsprint itself obsolete (the internet!).
How long can the smaller Sun-Times survive as its parent, Sun-Times Media Group Inc., loses money every quarter? And what of the dominant Tribune, whose parent Tribune Co. sought bankruptcy protection this month because of its crushing $13 billion debt? The tabloid-size Sun-Times' average weekday circulation has fallen 3.9 percent from last year, to 313,176, and its Sunday circulation has declined 4.5 percent, to 255,905. hose declines actually were better than the industry average and not as steep as the Tribune's 7.8 percent drop. But the broadsheet Tribune, with a higher proportion of sales from outside the city, still sold about 203,000 more newspapers than its rival on weekdays and 609,000 more on Sundays, despite a higher newsstand price.

Newprint Consumption Down, Down, Down

Consumption at US dailies fell -20.4% in November (-15.6% YTD). Total
US Consumption, a somewhat broader measure, fell -18.0% in November
(-13.3% YTD).
The competition from other media channels (internet) continues to plaque circulation and decline for the newspaper industry.

Most of the producers have announced downtime through the balance of the last quarter of 2008 and for 2009 ---
AbitibiBowater (#1 player) has announced 830,000 tons of production
cutbacks for 2009 (17% of its capacity) with 590,000tons for beginning of 2009. Also, additional downtime of 21,000 tons at its Grenada, MS mill for January. White Birch (#2 producer in North America) has announced 50,000 tons of downtime for first quarter of 2009.

Miraculously, newsprint manufacturers have managed to keep inventories in reasonable balance. Measured in terms of "days of supply", newsprint inventories at the US dailies stand at
47 days of supply (627,000 tons). (Note: normal inventory for now is 40-44 days).

Recall that newsprint has increased $215/ton from $560/ton in October of 2007 to $775/ton this November. Although, newsprint prices slipped $10/ton to $765/ton in December. Producers were blessed with decline in key input costs (fiber, energy, and transportation costs).

Xerox Markets Erasable Paper

We previously reported on the research and development of a new paper that Xerox for working on late last year. Recently, the company showed an experimental sample of this ‘erasable grade’ to the public. The paper is designed to be printed on repeatedly – with the objective of reducing paper use in the office. The sheet contains a chemical the erases itself and can be reused in 24 hours.

Sappi Completes Acquisition of M-Real’s Coated Papers

Sappi Ltd. has successfully completed the acquisition of M-real’s coated graphic papers business for US $1.1 billion. M-real’s four coated graphic paper mills, the Kirkniemi and Kangas mills in Finland, the Stockstadt mill in Germany and the Biberist mill in Switzerland will now be part of the Sappi Fine Paper Europe operations.
The deal makes the Johannesburg, South Africa-based company the world's largest producer of coated fine paper with 23% of the world’s market share (15% for publication coated papers).

Printing and Writing grades Update to Market

Notes from Deutsche Bank - Equity Research
Weak economy causing low demand and high producer inventory have yielded a decline in shipments of 6.4% year to date (down 20.1% Nov07 vs. NOV 08). January and February are traditionally slow months - so not much hope forecasted for next several months.
Virtually all the major uncoated free sheet (UFS) producers are cutting production to manage inventory. International Paper's announced target is 60K tons of uncoated downtime in 4Q. Domtar (#1 player) announced 4Q downtime of 173K tons and Boise (#3 player) is idling 2 machines at International Falls and significantly downsizing its St Helens, OR mill. More
recently, Glatfelter and Mohawk Fine Papers have also announced downtime.
Coated groundwood (LWC) shipments took the sharpest hit --- down 34.2% y/y in November. However, mill inventories have jumped from 110K tons to 252K tons over the past 12 months. Verso Paper recently announced 100K tons of downtime in 09H1. Earlier, Newpage, announced 40K tons of downtime in 4Q08 in addition to the earlier announced closures of Niagara, WI and Rumford, ME mills.
The groundwood coated publication price decline accelerated in December --- down $35-70/ton.
Meanwhile, list prices for Uncoated Freeshhet have held up better --- down between $5-15/ton.

Consumers Union Grabs Gawker's Consumerist Site

Adding to its growing portfolio of print and online properties, Consumers Union, the publisher of Consumer Reports magazine, bought watchdog blog Consumerist.com from Gawker Media

What Happened to Pulp Market?

As we approached 2008 and beyond the first half of the year, pulp prices continued a steady stream of price increases. Suddenly, we entered the forth quarter, and BOOM. Pulp inventories were on the rise, manufactures were curtailing production, and inventory surged from 29 days in September of 2007 to 44 days in September of 2008. Hardwood inventory increased to unheard of levels. 2009 comes along with the worst economic downturn in modern history and a new year does not appear to be reversing these trends. USA prices for NBSK saw a high of $880/ton. Challenge today is if prices decline to below $600/ton – this will be below manufacturing cost for the less efficient mills.
FOEX provided the following chart for monthly NBSK ‘list pricing’
June $880
July $890
August $887
September $873
October $849
November $823

DIP Burrows Paper mill under the Hammer

as reported by, Paper Industry Magazine
Can-Am Machinery has been retained to sell the fixed assets of the Burrows Paper Corp. 120-ton/day market DIP mill in Little Falls, NY.
The plant was built in 1994 with mostly Voith equipment and ran successfully producing excellent yield, brightness and total efficiency.
The equipment is reported to be well maintained and in running condition, and will be sold in whole or in part.

N.A. Printing/Writing Paper Shipments Fall

Total printing and writing paper shipments to North America fell 22.8% in November compared to the year-ago period, according to the Pulp and Paper Products Council (PPPC). Total shipments to N.A. fell 7.8% year-to-date. Coated mechanical shipments plunged 32.7% compared to November 2007, while coated freesheet shipments dropped 21.8% year-over-year.

Green Fades to Black

Eco-themed issues victim of slumping ad market
-By Lucia Moses

Two years ago, spurred on by a groundswell of interest in all things eco-friendly, green-related content was sprouting everywhere. For magazines, that meant a flurry of green-themed issues. But the economic downturn, coupled with cooling consumer interest, have some publishers pulling the plug on those products.
Among titles holding off on green issues in ’09 are Condé Nast’s Domino, Time Inc.’s Sunset, Mariah Media’s Outside and indy Discover. Active Interest Media’s Backpacker, already seeing the concept as tired, did not produce a second global-warming issue this year. “My sense is the idea of doing a green issue has been done so much it feels anachronistic,” said Backpacker editor Jonathan Dorn.
Domino’s 2008 and 2007 green issues sold below average, even though vp/publisher Beth Brenner pointed out that March is not a strong month for single-copy sales.
Not all green issues bombed. Outside sold above average on stands, while this year’s special from Condé Nast’s Vanity Fair, featuring cover subject Madonna, sold 370,000 copies at stands, only slightly below average.
Editors insist readers are still interested in green themes, although some said they are evolving coverage in response to green’s maturation. Hachette Filipacchi Media’s Elle—which made a statement by publishing its green issue on recycled paper this year—plans a water-themed issue in ’09, reminiscent of the blue issue of Rodale’s Women’s Health in 2007
Ending their green issues could serve a PR purpose for magazines, given that the very practice of publishing on paper is seen as at odds with protecting the environment. Still, some maintain that while tips for sustainable living are well-worn, readers continue to want targeted green content.

Pulp Mill Back on Line

The former Pope and Talbot pulp mill in Nanaimo, BC was restarted and under the new name of Nanaimo Forest Products. Its former employees, Pioneer Log Homes, Sampson Group, and Totzauer Holdings purchased the mill for C$13.2million. The mil secured 5 year agreements from end users for 100% of production.

Update on Packaging Market

Mark Wilde of Deutsche Bank reports on trip to packaging companies

First, Mr. Wilde considers packaging more recession-resistant than paper.
Volume drops for shipments as much as 10-15% were confirmed with Europe experiencing weaker demand than USA, also Russia and China shipments down. While pressure on prices is alive and well, raw material and energy costs have also fallen.

Mohawk Announces New Renewal Grade

Mohawk Paper Mills just introduced a renewable folding board for the luxury packaging market. The grade is made of 80% post consumer waste and is available in an 18-point board. The items are stocked in 28X40” sheets and is competitively priced.
Paper.com markets this grade for end uses such as cosmetics, jewelry, and beauty products.

The Comics are affected with fewer Newspapers

New York Times recently ran an article outlining the effects of fewer newspapers being distributed. With the trend of declining newspapers, the economic challenges effect many including comic strips. In the past, comics relied almost exclusively on newspapers to print and distribute the ‘funnies’. Syndications for comics are beginning to promote the web as a new means to read the comics. New sites such as Comics.com and the GoComics websites have become very popular.

Overall Paper Prices Continue in Free Fall

December continues to witness paper prices declining. Examples include $10-15/ton in newsprint, $5-15/ton for uncoated papers (freesheet), $25-70/ton in coated papers, and $10-20/ton in containerboard. Shipments and demand are very weak which continue to place strong downward pressure on prices. Look for additional downtime and possibly more consolidation and machine closures.

Containerboard Continues Slide

Even with our previously reported status of manufacturing curtailment, inventories were not reduced, infact, reports outline a slight increase. Obviously, demand continues to be weak. Lower volumes continue to place pressure on mills to reduce price beyond the $10-15/ton discount witnessed earlier in December.
November box shipments declined nearly 14.5% compare to November of 2007, this in spite of operating rates of only 85%. Look for more challenges as we enter 2009 and beyond.

Bonnier Acquires Scuba Diving, Accompanying Site

In a generally dormant market for magazine sales, Bonnier Corp. continues to buy. The publisher recently announced its acquisition of Scuba Diving and its companion Web site from enthusiast publisher F+W Media Inc. for undisclosed terms.

Paper Prices for Printers

PIA/GATF just reported that paper prices (although currently depressed) had increased steadily from the first quarter of 2006 to first quarter of 2008. The study confirmed average price increases as follow 4Q06 +4.35%; 1Q07 + 4.96%; 2Q07 +5.39%; 3Q07 +5.47%; 4Q07 +5.77%; 1Q08 +6.70%; 2Q08 + 8.93%.
If paper accounts for 22% of the printer's sales, these increases significantly affected overall costs.

Box Makers Demand Decreases

As reported from Purchasing Magazine
Corrugated box demand is down so linerboard sales—and prices—are down and producers are reducing production. In fact, North American containerboard downtime is now expected to be nearly 13% of industry capacity—or around 1.25 million tons— in the fourth quarter. Producers already have responded to unusually weak demand for corrugated by cutting unbleached kraft linerboard production by 2.5% through October this year.

Since more than two thirds of the downtime is expected to take place in December, the latest production tally by the PPI Pulp & Paper Week subscription newsletter suggests that containerboard mill operating rates for December could drop to the mid-70% range. Yet, that’s still somewhat of a moving target because more mills are expected to take curtailments over the period between Christmas and yearend.

KromeKote now available in FSC Certification

From Smart Paper Release
Smart Papers, manufacturers of Kromekote True-Photo, delivers outstanding photo and image reproduction, creating visuals that pop off the page. A brilliant 92-bright white shade also produces intense colors and maximum image resolution. The ultra-glossy, recycled-content digital papers are unmatched in the global marketplace. They combine the quality and feel of traditional photo paper with the unsurpassed printability of triple cast-coated Kromekote.

This new line of new archival and acid-free papers enable digital press owners to profitably meet the growing demand for custom short-run photos and photo applications like greeting cards, direct mail, personalized calendars and much more. The papers are guaranteed on HP Indigo, Xerox iGen, Kodak NexPress, Canon, Konica-Minolta and all production-rated laser printers. The papers are FSC certified and feature 30% post-consumer fiber.
SMART Papers is the only North American premium papermaker now in the process of becoming 100% fossil-fuel free, converting all of its energy production to 100% carbon-neutral waste wood biomass.

The website, Paper.com, markets papers such as Kromekote that are RIT-certified and available in 8- and 10-point caliper, 18x12 size and are sealed in 250 sheet packs, 1000 sheets per carton. All Kromekote True-Photo sheets are acid free, archival, process and elemental chlorine free.
Other applications include photo books, advertising materials, brochures and business cards.

International Paper to Reduce Work Force

International Paper Co. announced its plans to eliminate 1,000 to 1,500 salaried jobs by the end of next year. The company said the cuts are part of a cost-cutting measure that would result in savings of $150 million to $200 million. International Paper has just over 50,000 employees worldwide.

Tribune Company Files for Bankruptcy

The Tribune Company, a struggling television and newspaper operator and owner of Los Angeles Times and Chicago Tribune, filed for bankruptcy. The owner Sam Zell sited the recession as well as a shift of advertising dollars and readers to the internet as prime reasons for the company's recent trouble.

Market Downtime Hits Paper Companies Hard

It appears the literally every producer of paper products is taking significant market downtime in the forth quarter of this year in an attempt to control inventories. In many cases, downtime could amount to 10-15% of capacity. Although this downtime is expensive, if it avoids a sharp drop in industry prices, it looks like the right trade-off.

Newsprint Pricing Officially Reduced

The largest producer of newsprint, AbitibiBowater, rescinded $20/ton price increase originally announced for December due to poor demand. Consumption continues to decline with the increase of the internet and less advertising.