Glatfelter Introduces Xcelerator Carbonless

Glatfelter announced the introduction of Xcelerator Digital Carbonless Paper. This sheet is specially coated for today's demanding digital presses. Glatfelter offers a 100% satisfaction guarantee to our customers. Paper.com will be shipping
this product as soon as it becomes available.

Printers Hint of Future Sales Growth

Heidelberg Press released a survey that indicated printers feel, on average, sales will increase 4.75% over the next 12 months.
Many continue to be concerned over cost pressures from raw materials such as Ink, Paper, energy, and Transporation.

Overall Paper Prices up

A recent report outlined the following for commonities, including paper
Since 2000 Since 2003
CPI 18% 10%
All Commodities 29% 18%
Petroleum 187% 132%
Paper 14% 14%
Truck Transportion 14% 14%

New York Times Reduces Paper to Save Money

The New York Times newspaper will reduce from 54" to 48" in width. This was done in an effort to save on paper costs and thus saving millions. This will will be complete in early 2008.

Former American Tissue Executives handed Sentences

The former chief executive of American Tissue, Mehdi Gabayzadeh, was sentenced to 15 years in prison and a fine of $65million. He was convicted of 8 criminal charges which cost banks and investors over $300million. He inflated accounts receivable and net income.

Price Increases Finally Slowing Down

We think the uncoated paper grade price increases have finally slowed down. Uncoated Woodfree commodity grades for white paper pricing appear to be static. The industry announced a price increase for September, but International Paper did not support it and therefore, the increase never went through. If the economy slows down, future price increases will also be in jeopardy.

International Paper Divests of Coated Division

International Paper completed the divesture of their coated operations to a private investment fund. The new name
is Verso with an annual capacity of 1.7million tons of magazine, Catalogue, and retail insert papers.

Recent Newsprint Price Increase in Jeopardy

Abitibi recently rolled back the announced newsprint increase of $40/ton to $20/ton. This is not a good sign for the newsprint market. Having said this, current pricing levels are nearly 50% more today than the lowest price point in 2002. North American demand for newspapers, and thus newsprint have declined. Demand was over 13million tons - is now approximately 10million tons.

Equipment Curtailment has effected Supply and Demand in Paper Industry

We have reported on the numerous pulp and paper mill and machine closures over the past several years. Although demand has not increased dramatically, fewer manufactures have allowed for higher operating rates for equipment still producing and
increased market pricing. In 2005, North American producers of pulp, paper, and board announced permanent closure of
almost 7million tons. During the first half of 2006, almost 1.2million tons were announced of which, 780,000 tons are in USA.
I outline some select mill / machine shutdowns
Badger Peshtigo, Wis 70,000TPA
Cascades Thunder Bay, Ont 165,000TPA
Domtar New Westminister,BC 120,000TPA
Domtar Cornwall, Ont 265,000TPA
Domtar Ottawa, Ont 65,000TPA
Glatfelter Neenah, Wis 125,000TPA
International Paper Pensacola, Fla 150,000TPA
International Paper Jay, Me 100,000TPA
International Paper Bastrop, LA 480,000TPA
Pasadena Pasadena, TX 190,000TPA
Riverside Appleton, Wisc 72,000TPA
SAPPI Muskegon, Mich 116,000TPA
SMART Park Falls, Wisc 120,000
Tembec St Francisville, LA 80,000TPA
Weyerhaeuser Price Albert, Sask. 280,000TPA
Weyerhaeuser Dryden, Ont 155,000TPA
Contact Paper.com for the complete list of nearly 8million tons of equipment curtailed since 2005 .

Many Mills now acquired by Private Investors

Most paper manufactures have not even earned its cost of capital and have been out of favor with 'Wall Street' for many years. In recent years, the industry has witnessed consolidation, globalization, mergers, restructuring, reduced capital spending, and curtailment of production. New buyers are surprisingly private investors. Why we ask at Paper.com ????? RISI, an independent consultant, summarized a rationale as
-These buyers have negotiated discounted purchase prices for the assets
-Cheaper, more creative, financing and private investors can carry more debt than public companies - debt is less expensive than equity.
-Fewer short term pressures vs. public companies - they can be more flexible than meeting short term expectations
-No formal costly outside auditing - No expensive requirement of reporting to the public - this eliminates expensive shareholder reports and board expenses.
-Better operators - Private investors tend to be very good, focused operators.
-Many of these new operators believe they can improve operations and market the mill at a later date for a multiple of purchase price.

We at, Paper.com, prefer to sit on the side lines and distribute paper versus produce the product.

Recent examples of New Owners include-
-Madison Dearborn -- Packaging Corp of America; Boise Cascade
-CMP Holding -- International Paper Coated Division
-Cerberus -- MeadWestvaco coated Div.
-Kohlberg -- International Paper Specialty Div
-Koch -- Georgia-Pacific
-Texas Pacific -- Smurfit-Stone

Market Pulp hits 5 Year High

Market Pulp grades have witnessed numerous price increases. Worldwide shipments in 2005 totaled nearly 40million tons - growing for the 4th consecutive year. 2006, so far, has illustrated continued growth in shipments. Despite significant capacity reductions in the printing and writing sectors of the fine paper market - the primary consumers of pulp - and reduction of pulp capacity of nearly 2.5million tons of market pulp production - worldwide shipments of pulp have increased. Global shipments to China and South Korea have grown dynamically to more than make up for these decreases .
Benchmark NBSK (Northern Bleached Softwood Kraft) has reached a 10-year high in price given the solid demand from Asia. The USA price for NBSK was $750 in July - up 19% from the same time last year. Prices are expected to continue to increase.

Prices up, Profits Still Down

Prices on literally all pulp and paper items continue to experience price increases and, sadly, profits continue to lag. Many mills and paper machines have closed down - allowing for tight supply and reduced inventories, this has yielded better productivity and allowed for price increases. However, the cost increases of chemicals, fiber, energy, labor, and transportation have exceeded paper prices for finished product.

Printers Voice Concerns for 2006

A recent report confirmed that the #1 concern USA printers face for 2006 was raising paper costs. The cost of paper now seats at 22% as a percent of total sales and once all material are factored in, this equates to 35% of sales. Paper has increased over 5% so far this year, while prepress consumables, plates and ink have all gone up 4%. Other concerns cited include competition & pricing; labor & staffing; energy costs; and health insurance.
Paper.com has over 15,000 paper items for commercial printers, available for immediate shipment.

SC market remains Firm

Supercalendar Paper (SC) – the type used in Newspaper advertising supplements and several low-end magazines and catalogues, remains snug. The industry was successful in introducing a price increase – increasing the bell weather grade from $700 to $780 per ton. Although demand is off, supply has been curtained – Port Hawkesbury, Nova Scotia – StoraEnso had labor shutdown – resulting in over 380,000 tons and cost pressure coupled with low advertising demand have forced publishers to substitute coated paper for the more economical SC grade.
Total 2006YTD North America demand is 2,200,000 tons.

International Paper Sells another Division

International Paper has signed a definitive agreement to sell its Brazilian coated papers business to Stora Enso for approximately $415 million, subject to certain post-closing adjustments. The business includes a coated paper mill and lumber mill in Arapoti, Parana State, Brazil

More Paper price Increases

Weyerhaeuser and Boise have recently confirmed a price increase for September shipments. Most uncoated paper producers will follow. This increase will affect printing and office papers as well as opaque grades. While demand has been relatively steady, 1.7million tons of North American capacity has been shut down and therefore, supply has become tight. Imports are rising, but are less than 3% of our demands.

Weyerhaeuser Paper to Merge with Domtar Paper

Weyerhaeuser Paper agreed to merge with Domtar in a $3.3billion transaction. Weyerhaeuser shareholders will enjoy a 55% stake in the new company and Weyerhaeuser will also receive $1.35billion cash payment as part of the deal. Weyerhaeuser will transfer all 10 pulp and paper mills. Domtar’s Raymond Royer will act as CEO.
Paper.com has both Weyerhaeuser and Domtar grades readily available. Please visit www.paper.com

SMART Papers finally Obtains Financing

SMART Papers, located in Hamilton, Ohio, was successful in confirming a new round of financing. The mill has been under bankruptcy protection, citing poor cash flow due to
high energy, fiber, and chemical costs. Plainfield Asset Management will take control
of SMART Papers and assume the $40million of debt. The VC will provide an additional $10million for interim financing.
Paper.com has all the SMART Paper grades, including Kromekote, in stock and ready for immediate shipment.

Brighter, Whiter Trend for White Papers

All the leading companies are now marketing their white papers as ‘brighter and whiter’. If fact nearly all office papers are now boosting a brightness level of 92 -- up from 84.
The addition of fluorescent whitener greatly assisted (much like what laundry detergents do to make cloths ‘look’ whiter). Brightness has been measured on a scale of 1-100 – the higher the number the brighter the sheet. However, there are two units of measurement – in USA – The TAPPI system is used while in Europe the ISO system is reported AND these two systems are NOT interchangeable because of different instruments used.
Whiteness (as apposed to Brightness) is now the specification of choice. Both USA and Europe use the CIE whiteness scale. The results are often expressed with 3 results – L; a; and b - and reflect the color or whiteness scale from red to blue to green (which matches what the human perceives).
Although consumers will nearly always pick the brighter, whiter sheet – it comes with a cost – both economically and ecologically. Clearly, it costs more to produce a whiter, brighter sheet and many of these added chemicals degrade both strength of the sheet and cost more.
Paper.com has a complete line of bright-white sheets and ecologically friendly grades. www.paper.com has nearly 20,000 items of paper.

RR Donnelly May be in Buy Out Discussions

RR Donnelly, North America’s largest printer, has been offered buy out proposals from two different suitors. This, according to Bloomberg News.