Coated Free Sheet Market

The Coated Free Sheet Market, paper used for annual reports and high-end publications, is still suffering with poor demand, although the industry did announce a price increase earlier this year. The North American production capacity declined this year with many machines shuttered; such as 115,000 tons /Muskegon, MI (SAPPI); 170,000 tons /Pasadena, TX (Pasadena
Paper); 30,000 tons/Thunder Bay, ON (Cascade); 155,000 tons-Ottawa & Cornwall, ON (Domtar). To boot, several European manufactures also shut equipment down and USA ran at only 88% operating rate.
Top 5 North American Producers-
SAPPI 1,400M tpy 22.3% mkt shr
NewPage 1,280M tpy 20.4% mkt shr
International Paper 1,100M tpy 17.4% mkt shr
Stora Enso 915M tpy 14.5% mkt shr
Domtar 390M tpy 6.2% mkt shr

Coated Groundwood Market

The coated Groundwood paper grade - the paper used in magazines and catalogues, is still very depressed and deep discounts are often offered to buyers. North American production capacity for 2005 was 6.55million tpy and capacity is forecasted to decline to 6.25million this year. The USPS forecasted price increase for January will further hurt this market.
Top 5 producers in North American-
International Paper 1,160M tpy 18.9% mkt shr
NewPage 880M tpy 15.3% mkt shr
UPM 880M tpy 15.3% mkt shr
Bowater 865M tpy 14.0% mkt shr
Stora Enso 860M tpy 12.5% mkt shr

Smart Paper Still Operating as Bankrupt

SMART paper continues to operate under a chapter 11 status as we previously reported. Although the Ohio mill remains open, the Wisconsin mill has been shut down, hoping that CellMark will purchase and reopen. Fraser Paper, the operator that originally sold the Park Falls, Wisconsin mill to SMART is worried. They own a 40% stake in SMART ($75million) and $14million due them on pulp sales and asset rental. Fraser also made certain financial guarantees amounting to $8million when it sold the mill to SMART in 2005.

Shuttered Flambeau Paper Mill finds Buyer

The management group of CellMark recently announced their intent to purchase the Flambeau Paper mill in Wisconsin. This mill was shut down in March as a result of the current owner, SMART Paper, chapter 11 financial status. CellMark, together with Johnson Timber Company will buy the mill and CellMark would market the output. New mill will be called Flambeau River Papers. If successful, the mill would start back up in late this summer.

Uncoated Paper Producers looking at September Increase

The uncoated paper manufacturers are beginning to introduce to their end users the potential of a September price increase. The industry confirmed a price increase of $3.00/cwt - $60.00/ton for June and are forecasted to increase another $60.00/ton in September. The increase is justified due to increased pulp-energy-chemical costs; all important components to paper production. The market continues to be tight in supply and operating rates are in excess of 95%. Mills most likely
to benefit with increased prices include - International Paper; Weyerhaeuser, and Domtar.

Finch Paper up for Sale

The Board of Directors for Finch Paper has announced the decision to solicit offers to find a buyer for the mill. The board feels this is in the best interests of the shareholders to begin to evaluate potential offers for purchase of its paper mill and associated facilities.

International Paper sells Kraft Mill

International Paper announced the sale of its kraft paper business to Stone Arcade. The division was sold for $155million.

Pulp Pricce Still Increasing

NBSK market pulp pricing is now $725/ton in USA. This price has risen very aggressively since September when list price was $620/ton. Many producers are beginning to announce yet another increased of $20-30/ton for July shipments. Over 2million tons of market pulp production was curtailed during 2005. Clearly, this is a seller's market! Uncoated paper producers will most likely also announce an increase given this new cost pressure.

Typical Internet Buyer

Stats per Internet Retailer Magazine-
-2001-05 internet growth in sales 26%/year
-typical internet buyer 44yrs/female/$68,000household income/college edu/$360 ave order
-Over 100million USA adults have broadband at home
-2006F 175million USA adults will buy 'something' on line (up from 164million 2005A)
-This equates to 77% of adults
Paper.com has grown to include nearly 20,000 paper items. The site is available for paper purchases 24/7.

Top USA Paper Mills

Top North American Paper Mills, by total 2005 revenue are as follows-
1-International Paper $24.1billion 15,900,000 tpa
2-Weyerhaeuser Paper $22,630billion 13,900,000tpa
3-Georgia-Pacific $18,700billion 8,600,000tpa
4-Smurfit-Stone $8,400billion 8,190,000tpa
5-MeadWestvaco $6,170billion 3,560,000tpa
6-Boise Cascade $5,907billion 2,627,000tpa
7-Temple Inland $4,888billion 3,202,000tpa
8-Abitibi-Consolidated $4,568billion 6,100,000tpa
9-Domtar $4,249billion 3,144,000tpa
10-Sonoco $3,529billion 2,000,000tpa

National Envelope Acquires another Converter

National Envelope Company recently acquired Atlantic Envelope. This transaction gives National Envelope 6 more plants and end users such as FEDEX and Netflix. National Envelope now operates 22 USA plants.

Smart Paper Still in Chapter 11

The Smart Paper Mill, located in Hamilton, Ohio continues to run its operations under chapter 11. They recently announced the shut down of the Park Falls, WI mill (Smart purchased from Fraser FEB 2005). Smart Paper will be producing many of the grades manufactured in Wisconsin at its Ohio site.
Paper.com has the complete line of Smart Paper grades available and ready for immediate shipment.

Domtar Mill is Shut Down

The Domtar mill in Vangouver, BC has officially been shuttered. This mill produced 120,000 tpy of coated free sheet.

Magazine Ad Revenue Holds Steady in May 2006

Total magazine advertising revenue for the month of May increased 0.9%, closing at $2.2 billion, according to the Publishers Information Bureau. Ad pages fell 2.3% for the month, totaling 22,607. Year-to-date revenue for the category grew 3.6% over the same period in 2005, to $9.2 billion, while ad pages remained flat against the prior year at 94,358.
As goes magazine advertising pages ..... goes page count ... goes paper consumption.

Coated Paper Producers announce Price Increase

International Paper informed their customers that its coated and SC (Supercalendered) publications papers will increase by $2.00/cwt or $40/ton. To date, no other mill has matched this announcement on publication grades.
Other mills that announced a price increase on free sheet coated papers include SAPPI, Domtar, Appleton, and Stora Enso- all told their end users coated free sheet text and cover grades will increase by $2.00/cwt or $40/ton.
Paper.com has papers from all of these mills.

Greenpeace Evaluates Recycled Papers

Greenpeace released the results of their current survey on environmentally friendly papers. They polled people in both the USA and Canada-
-80% of Canadians and 75% of Americans are likely to purchase papers that are recycled
-71% of Canadians and 66% of Americans state they are less likely to buy from companies that cut down 'old forests' for there
source of wood fiber.
-86% of Canadians and 77% of Americans will buy recycled papers, if given the choice.
-7 of 10 Canadians and 66% of Americans would be willing to pay 5% more for recycled paper.
Paper.com has over 18,000 papers - many are recycled.

Paper.com is one of the World’s Largest Paper Websites ranks in top 500 on largest USA websites

Paper.com is in its third year of operations and has witnessed robust growth in sales. Paper.com has nearly 20,000 paper products – representing paper grades for the office, scrapbookers, schools, restaurants, weddings, and printers. The website has over 30 vendor warehouses throughout the United States and ships within 24 hours after receipt of order – from a single sheet of paper to multi truckloads. The site now enjoys nearly 8000 unique visitors every day clicking onto www.paper.com

The company has recently made the list of top 500 internet sites as confirmed in the 2006 survey by Internet Retail Magazine. The company was also ranked #60 for Specialty Retailers in USA.

Paper.com moves into new headquarters and hires a Marketing Manager

P. Scott Vallely, a paper industry executive; and John Engel, an expert in web design and internet marketing teamed up to form Paper.com three years ago. The company has been growing and recently moved into newly renovated corporate headquarters located in New Canaan, Connecticut. To support this growth, they have hired Mr. Edward F. Lane Jr. to Market Manager. Mr. Lane has a deep history in internet marketing, having recently been with Colangelo and Suresource.com.

Weyerhaeuser Improves Cougar Opaque grade

Cougar's brilliant 98 brightness and 10 percent recycled content in a stunning blue-white shade makes the Cougar grade one of the finest opaques on the market.
The mill has now offers this grade with a smoother surface for better ink holdout and cleaner print uniformity, Cougar's high opacity and steadfast print quality is an excellent alternative to the higher priced Text and Cover sheets.

THE FUTURE OF LUNA - Domtar Mill in BC

Domtar has signed a non-binding letter of intent to sell their New Westminster, BC, coated paper mill to Belgravia Paper Company, which is associated with West Linn Paper Company.
The agreement has not been finalized yet, but under the terms of the letter of intent, the transaction would close in mid-June. As a result, Domtar will continue its plan to shut down the Vancouver mill
completely by June 16; coated paper production was discontinued on May 12th. Domtar Luna will continue to be sold until inventory is depleted.
Paper.com carries many of the popular Domtar paper items.