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The official newsprint price fell an additional $20/ton, after falling $15/mton over the last few months. Without more capacity
rationalization, prices could fall further. The market is sloppy and needs a fix; it may come by a "merger of equals" between Bowater and Abitibi. However, an even better catalyst would be consolidation among 2nd & 3rd tier players.

Paperboard prices may increase

Several mills want to boost prices in North America for uncoated recycled paperboard, the lightweight recycled material used for cereal and other cardboard boxes, which typically improves in sales in the spring. However, this year, inventories are still at a high 3.5 weeks of supply, making a seasonal buying pickup uncertain.

Still, Sonoco, Port Townsend, and Caraustar have proposed an increase of $40 to $50 per ton, depending on grades, effective with shipments in March. This increase is necessitated by recent and projected increases in raw material costs, led by recovered paper, as well as chemicals and starch.

Abitibi and Bowater Announce Merger

North America's two largest newsprint producers, Abitibi and Bowater, announced an agreement to combine in a merger of
equals. The combined company would control roughly 50% of North American newsprint capacity.

Newsprint Market Update

The official newsprint price fell an additional $20/ton, after falling $15/ton over the last few months. Without more capacity
rationalization, prices will probably fall even further. The market is weak and the proposed merger of producers such as Bowater and Abitibi will assist with adding discipline to the market and thus pricing. Consumption is down 7.9% YTD and Stora Enso has restarted its 195,000tpy newsprint mill in Port Hawkesbury (and has to "buy" a home for the tonnage). There is not much evidence of Chinese tonnage in US, but the threat alone will pressure prices.

Shipments Were Mixed for Printing Grades

The Printing and Writing paper shipments were somewhat sluggish in December, falling 1.0%. Uncoated free sheet, coated free sheet, and uncoated groundwood volumes all showed declines, while light-weight coated paper (magazine and catalogue) shipments grew modestly. For the full year 2006, the entire Printing and Writingcategory was roughly flat, rising 0.2% over 2005 volumes.
However, we expect further closures across USA in 1H07. International Paper (IP) will soon close a 350,000 tpy uncoated machine conversion to Containerboard, and Domtar is expected to move quickly after its pending merger with Weyerhaeuser’s white paper operations to shutter capacity. Together, the IP and Domtar moves should remove 5% of the North American supply base in Uncoated Freesheet papers.

Uncoated Freesheet Market

Offset prices reportedly fell $20/ton in January, and copy paper prices fell $15/ton. January is a seasonally weak period for
printing and writing demand. Still, one can be reasonably encouraged by producer's efforts to take downtime and preserve
pricing power. Paper analyst such as Mark Wilde think the industry needs to cut supply by 400-500K/tons.
Come to Paper.com for all your Uncoated Paper demands. With over 20,000 items, they are sure to have all your paper requirements.

Market pulp Update

Producers and customers increasingly believe January's planned $20/ton will be successful. Robust global demand, up 4.4% YTD, and tight supply is supporting higher pulp prices. Global inventories remain low at 29 days of supply. New supply is gradually ramping up in Chile. Arauco's Nueva Aldea started up last month and CMPC has reportedly started up its Santa Fe # 2 line; both lines however are running slowly with limited production. Terrace Bay Pulp restarted its 350,000/tpy NBSK line in Ontario.

Container Board Market update

A recent increase in shipments of Container Board Grades could put new life into an attempted price increase. Box volumes jumped a robust 5.5% last month. Combined, mill and box plant, inventories fell 82K tons in December. While the $40/ton January price hike initiative is dormant for now, these strong numbers could revive the initiative and help boost prices in March or April. Combine broad support, supply discipline, modestly improving demand, rising fiber costs yields a fairly decent market. The key is keeping supply and demand in balance.

What's New with Newsprint?

The paper market rumor is reporting 'official' newsprint price has dropped another $20/ton, after falling $15/ton over the last few months. The market appears headed for another shake-out. The demand for newsprint has become
very soft, as consumption is down nearly 8% YTD, and Stora Enso restarted its 195,000 tons per year of newsprint at Port Hawkesbury mill in November. Also, overcapacity in Asia and publishers' desire for pricing leverage is likely to bring some Chinese tonnage to the USA - the publishers don't need to bring in much paper to create a big pricing lever.
Paper.com has many sources for newsprint. Please call 888/papergreat for availability.

Today's Market Pulp

Producers successfully pushed through January's announced $20/ton price hike initiative on NBSK. In the last year, prices have risen $150/ton. Robust global demand, up 4.4% YTD, and tight supply is supporting
higher pulp prices. Global inventories remain low at 29 days of supply. New supply is gradually ramping up in Chile. Arauco's Nueva Aldea started up last month and CMPC has reportedly started up its
Santa Fe # 2 line; both lines however are running slowly with limited production. Terrace Bay Pulp restarted its 350k/mtpy NBSK
line in Ontario.

Domtar - Weyerhaeuser deal becoming closer

The Domtar-Weyerhaeuser deal was approved by Canada's Competition Bureau. The new Domtar will announce more capacity
closures once the deal closes. Combined with the conversion of International Paper's Pensacola mill (to start April/May), this could significantly tighten the Uncoated Freesheet Market.
Paper.com has all the Domtar and Weyerhaeuser grades in stock and ready for immediate shipment.

International Paper to Convert a Paper Machine

International Paper reported they will stop the manufacture of uncoated paper production at its Florida pulp and paper mill in May to begin conversion to lightweight linerboard machine. The equipment currently produces 350,000 tons of paper and after the conversion it will make 500,000 tons per year of light weight linerboard.

Quick look back on Uncoated Woodfree market

Uncoated free sheet prices have remained relatively stable through 2006 year end. While a bit of erosion had occurred at back end of year on the margin, merchants suggesting that price is holding better than we expected. All eyes
are on Domtar. How quickly will the new global #1 rationalize supply?

Digital Printing Continues to Grow

In 2010, a recent report forecasted Digital Printing market will account for 921 billion impressions which will generate annual revenues of $73billion. The POD (print on demand) market currently enjoys growing attention in the printing industry because it yields less overhead, faster turn around, and allows for shorter runs. A personalized marketing piece can be printed in one process. While digital presses and short run printing may offer higher unit pricing compare to web printing, the benefit is zero waste, fast turn around, low cost on repeat jobs, and a higher marketing response.
Paper.com has many Digital papers available and ready for immediate shipment. The company has grades for all the major print engines such as Oce, Hewlett Packard, AGFA, Xerox, Canon, Hiedelberg.

New Owner and more Money for SMART Papers

As previously reported, With a new owner in the investment advisory firm, Plainfield Asset Management, and the resulting influx of capital, SMART Papers has exited Chapter 11 reorganization. SMART Paper produces writing and commercial paper. This became official on Thursday, january 4, 2006

Plainfield recently assumed $40million of SMART’S debt and just invested another $500,000 into operations. The company sold its distribution center in Illinois and the mill in Wisconsin. The mill employees 520 people and has a capacity for 120,000 tons per year of production.

SMART is now expanding production on all three of the papermaking machines at its manufacturing center in Ohio. SMART Papers is now producing its full line of cast-coated, matte-coated and uncoated text, cover and writing papers.

Competition Deepens in Retail for Cut Size (copy) Paper

InfoTrends’ new forecast on U.S. cut size paper distribution channels indicates that while paper merchants, office superstores, and contract stationer divisions will remain power houses for moving paper, the Internet, computer superstores, and mass merchandisers are expected to gain more presence as a source for paper.
General merchandise stores and mass merchandisers will increase the amount of paper that they sell due to the sheer number of stores and the convenience of being able to purchase paper along with other goods. The Internet, however, is the only channel expected to show double-digit growth in terms of cut size tons distribution between 2005 and 2010.
Quick printers have also emerged as a source of cut size paper. As a complement to their traditional business, quick printers including FedEx/Kinkos are emphasizing their ability to capture supplies business at retail and on-line due to their number of store locations and access to product. Staples is also opening stand-alone quick printer locations that stock a limited number of office products SKUs including paper.
“Cut size paper is a low margin, high volume market which is very competitive and price sensitive,” commented Cathy Martin, a consultant at InfoTrends. “Heavy cartons of paper can be expensive to move efficiently, and this has forced channels such as office machine dealers, forms distributors and manufacturers, and small storefronts to reconsider their roles in selling paper.”
Paper.com carries all the major mill’s copy paper lines. They have these products in stock and ready for immediate delivery.

First Look Back at 2006 in Paper?

Looking for the forest products “story” on 2006? How about “supply matters”? While much of the industry saw modest
volume gains in the 2006, the real driver behind industry recovery was “supply”. As the Canadian dollar rose and pulp mills stopped production across Canada, the global rebound in market pulp prices went further and faster than
expected. Many USA mills also curtailed paper production of less efficient equipment . Uncoated white paper producers saw only modest improvement in demand (+0.4% thru November), but capacity shutdowns tightened the market and helped raise prices by roughly $150/ton in the past year. The biggest surprise of 2006 was in recycled boxboard where Cascades almost single-handedly put the market back into balance by acquiring & rationalizing marginal mills.

With the economy now slowing, managing supply should prove to be even a bigger issue in 2007. For the moment, much of the attention is focused on 2 areas: wood products and uncoated white paper. A dramatic drop in the housing market along with new supply has tanked most lumber and panel prices over the past 7-8 months. How quickly will producers move to permanently rationalize supply? In uncoated paper, all eyes are on Domtar. How quickly and how dramatically will Domtar rationalize capacity once its acquisition of Weyerhaeuser's fine paper business is complete? In addition, newsprint producers are almost certainly headed for more consolidation and rationalization in 2007. Supply discipline will also be critical if containerboard producers hope to maintain prices in the face of slowing box demand. Based on late December “channel checks” around the industry, news on both containerboard and uncoated white paper pricing appears a bit better than we expected.
What to look for in 2007 for the industry?
- More rationalization in white paper,
- More consolidation in containerboard,
- More pain in building materials,
-Weyerhaeuser restructuring story,
- MeadWestvaco's land plan.

Smart Paper’s Reorganization Plan Approved

The U.S. Bankruptcy Court for the District of Delaware has approved Smart Papers LLC’s reorganization plan which will allow the specialty papers company to emerge from Chapter 11 by the end of December. Under the plan, 92.5% of the company’s shares will be issued to an affiliate of Plainfield Asset Management LLC, which assumed as much as $40 million of Smart Papers’ debt in August. The remaining shares will be used to pay off unsecured claim holders. Smart Papers was created in 2001 when investment group Sun Capital Partners bought Champion’s former Hamilton mill from International Paper.

Uncoated Freesheet Market

The market pricing for uncoated offset fell approximately $10/ton early this month while copy paper prices have remained stable. This suggests that the downtime taken by produces have assisted during this traditional weak holiday period. The industry agrees that a tentative supply curtailment of 4-500,000 tons for 2007 is required to correct the market.
Paper.com markets paper for all the major mills.

Top Printers Announced by Printing Impressions Magazine

Printing Impressions Magazine ranked the top printers
1 RRDonnelly
2 Quebecor World
3 FedEx-Kinko
4 Quad Graphics
5 Transcontinental
Top Book Printers
1 Visant
2 Quebecor World
3 Banta
4 Bertelsmann
5 Courier
Top Publication Printers
1 Quebecor World
2 QuadGraphics
3 Brown Printing
4 Cadmus
5 Banta
Top Catalog Printers
1 QuadGraphics
2 Quebecor World
3 Arandell
4 Banta
5 Perry Judd
Top Direct mail
1 Quebecor World
2 Banta
3 Visant
4 IWCO Direct
5 Japs-Olson