Coy Paper Company offers a wide selection of paper grades as well as industry expert, P. Scott Vallely, also keeps you up to date on what is happening in the paper industry.
Please visit our section of recent news, industry links, and trends by clicking PAPER NEWS. This is a popular gathering of updated news on all paper markets and visited by major mills, analysts, and end users. Please visit entire section for PAPER NEWS by clicking on links.
We offer a sample as follows -
Please, also, visit PAPER NEWS for all the news on paper
The USA Government Printing Office (GPO) awarded bids to more than 1800
printers in 2009 for $425Million (down from $421Million in 2008). Top
five include
NPC (News Printing) $29.3Million
RRDonnelly $27.0Million
Monarch $19.5Million
Gateway Press $17.5Million
SourceLink $16Million
Time Warner reported that its publishing unit, Time Inc., generated
$3.7 million in revenue in 2009, down 19% from 2008. Those losses were
fueled largely by a 22% or $541 million decline in advertising revenue.
Meanwhile, subscription revenues declined 13% for the year and other
revenues fell 24%.
?S&P recently generated a
report that outlined a slow recovery for companies involved with USA
forest products. ?The document reviews a slight improvement in outlooks
for 60% of forest sector companies. This report is titled “The US
Forest Products Sector is Entering a Slow Recovery” and says that the
positive trend reflects significant debt reduction that these companies
achieved, despite poor economic conditions. They believe that the
economy and housing markets have hit bottom and that the sector’s
credit profile will improve over the next few quarters.
I,
on the other hand, am not as bullish, especially if one is focused on
the pulp and paper segment of the forest products industry. There will
be some improvement, assuming the economy picks up, but debt reduction
will be a challenge.
The International Paper Company,
the world's largest pulp and paper producer, reported a loss for the
forth quarter of $101million due to a decline in sales. The Industrial
Packaging unit dragged down the balance of the corporation, posting a
loss of $391Million.
Meanwhile,
Domtar experienced strong pulp sales and benefited from recent pulp
price increases. The company announced a profit of $124Million for the
forth quarter (compare to a loss of $676Million 4Q2008).
As announced by AF&PA Report
In
December, paper output in the USA was 2.9Million tons, up 3.3%, yet for
the year, paper output was down 13%. Coated paper improved 12.8% for
the month, but was down 18.7% for the year. Uncoated mechanical grades
increased 1.4% in December, but dropped 20.5% for the year. Uncoated
freesheet was up 1.9% for the month and down 11.1% for the year. This
is the second consecutive month of increased output vs. 2008.
R.H. Donnelley changed their name
to Dex One and also announced it will emerge from Chapter 11. The
124-year-old local business directory publisher and marketing company
also provides business search engines and pay-per-click networks. The
new name will tie into their search website dexknows.com. The company
is attempting to rebrand itself as a search engine company.
The paper industry continues to produce fewer tons each year. Not a healthy trend!
The
last decade has not been friendly for the North American packaging
paper producers, considering the demand peaked in 1999 at nearly
56Million tons. Several believe the market will have fallen below
46Million tons in 2009, when the final numbers come out. Meanwhile, the
producers for graphic papers last witnessed very good growth in 1970
and the 80s and than 90s- but the market topped out at 50Million tons
in 2000. In 2001, the demand fell to about 46Million tons – and managed
to stay at this level until 2007. Between 2007 and 2008, demand fell
15% to 39Million tons and most forecast 2009 will end up at slightly
under 32Millions tons (19% down).
The biggest element in this
decline was lack of advertising (especially for Auto, Financial, and
Real Estate). It is predicted that the next few years will generate a
flat demand, and than decline, beyond 2011. One study indicated that
this segment might be down to 25Million tons by 2024. Newsprint could
well be the largest component of this decline.
RockTenn, Graphic Packaging
International, and Sonoco have all announced an increase for corrugated
box prices by 10 percent and corrugated sheets by 12 percent, effective
with shipments on or after February 22. The industry had previously
increased the price for uncoated recycled paperboard by $50/ton and
bleached board products by $40/ton.
The converters have all absorbed a 40% increase in the cost of recovered paper.
Another cost pressure is the price announcements for Old Corrugated Containers (OCC)increasing in January from $80 to $110/ton.
Consistent with our previous releases, as of today, Domtar and NewPage
announced $40/ton price hike on its offset grades, effective Feb 22.
Others,
including International Paper, Glatfelter, Finch, Flambeau, and Grays
Harbor have already announced similar price hikes on offset grades.
Georgia Pacific, Boise, Suzano, Soporcel have limited their efforts to
cut-size office grades. The continued rally in pulp prices is
pressuring margins at nonintegrated mills.
Verso Digital recently presented
their findings on a survey based on millions of Internet users and
found that avid readers forecast they will split purchases between
print and electronic. Most of the 'avid' reader group is over 45 years
of age (66%). Only 28% of those in the 18+-age bracket are avid
readers. 27% of avid readers are not willing to pay more than $10 and
37% not sure how much they would pay.
Apple
just announced the IPAD device. I note Apple has revolutionised
computers, cel phones, MP3 players - and could now create lure to grow
the audience for EReaders.
In any event - more EReaders mean less paper consumed, in an already depressed market for demand.
These are difficult and challenging environments in the paper and
printing markets, it is important to review your printing platform to
assure you are still as cost competitive as possible
-Does the printer’s equipment still fit your publication?
-Do you still invite competitive printers to quote your publication?
-Is your printer still financially stable?
-Where has the printer downsized? Has this area effected your publication?
-Slower response from CSR, no new ideas on distribution, the paper buyer has not recommended any alternative papers, etc.
-Is your printer taking the correct steps to be environmentally friendly?
-Has your printer invested in new technologies?
ALSO,
-Have you considered more cost effective alternative papers?
-Lower brightness; Uncoated Supercalender instead of coated, lighter
basis weight, self-cover, Groundwood containing /LWC in stead of a
'free; sheet.
-Have you reviewed reducing the size of your publication or fewer pages?
-Are you still distributing to nonrevenue producing subscribers?
It's
January, start the year by reviewing all your vendors to confirm they
are still competitive and partner up with your vendors to mutually
create ways to save money.
Posted by
P. Scott Vallely
Please, Click on PAPER NEWS for all the news on paper
Total Uncoated Free shipments were down -11% for 2009 to 9.7Million
tons. USA imported 855,600 tons for 11 months - 16% lower than last
year and exports declined 6% at 779,300.
Graphic Packaging International
announced a price increase of $50 per ton on all grades of
PaceSetter(R) uncoated recycled board (URB), effective with shipments
after Feb. 18.
The
company is one of the largest producers of folding cartons and holds a
leading market position in coated-recycled boxboard and specialty bag
packaging.
The recession of 2009 saw
consumers begin to use more coupons than in recent years, in fact, it
was the first increase in 17 years. Shoppers turned to both the
newspaper as well as online and cell phone applications to find
coupons. Of particular note was online coupon access increased 92% and
redemption shot up 360%, although the Internet still accounts for only
1.5% of coupons redeemed, according to a report from Inmar. Despite the
rapid rise of online coupons, newspaper inserts still account for 89%
of coupons distributed to consumers and more than half of coupon
redemption. Web sites accounted for 0.3% of coupons distributed to
consumers and 1.5% of redemption. 19.6% of online coupons are redeemed
and it is estimated that consumers redeemed a total of 3.3 billion
coupons in 2009, a 27% increase from 2.6 billion in 2008.
From Company release.
Quad/Graphics
Inc., the largest privately held printer in the US, will acquire
Montreal based, World Color Press Inc. for an estimated $1.4 billion.
The deal will close in the summer when the expanded Quad/Graphics will
become the 2nd largest commercial printer in the US behind RR Donnelley
& Sons Co. Worldcolor shareholders will own 40% and Quad/Graphics
shareholders 60%. Quad/Graphics CEO Joel Quadracci, age 41, will lead
the combined entity as chairman, president and CEO. Worldcolor’s CEO,
Mark Angelson will be named to the board and oversee the integration.
Worldcolor prints magazines like Sports Illustrated, Rolling Stone, The
Crate & Barrel catalog and Yellow Book Directories. Quad/Graphics’
clients include Newsweek, GQ and the LL Bean Catalog. In the 12 months
through Sept, their combined revenue was $5.1 billion.
The
official report from AF&PA outlined USA shipments of Printing and
Writing Paper increased 6% in December versus December 2008, the 2nd
consecutive increase, with all 4 grades reporting an increase for the
month. YTD shipments were down 15%. USA purchases (shipments + imports
less exports) also increased in December, up 3% vs. 2008, but still
down 17% YTD. Printing and writing inventory levels decreased 2% or
41,000 in Dec09 vs. Nov09.
In 2009, China imported a record
high 13.7Million tons of market pulp, increasing 44% over the 2008
deliveries. The extra demand was consumed by the new machines starting
up without domestic fiber. Most exerts in the industry believe the
Chinese will continue to grow their purchases of market pulp, despite
less worldwide supply and increased prices. There has also been an
increase in pulp consumption in India with solid demand in Bangladesh,
Pakistan and Vietnam. Suppliers in Brazil and Indonesia had pulp
availability decrease due to flooding, while Russian suppliers had
unusually frigid temperatures, slowing production.
Three new pulp & paper
investments in China announced by Guangxi Yongkai Sugar and one by
Guangxhi Huacheng Paper adding almost 1Million TPA of uncoated paper.
China, now the largest producer of uncoated papers, also continues to
witness increases in consumption.
Last week we announced Domtar
increased their price and, as assumed, most of the uncoated white paper
mills joined Domtar in reporting a price increase for late February or
early March. Most increases were $40/ton, the exception is Wausau which
we reported as $60 for text and cover grades. Domtar and Boise told
customers they would only increase cut-size business papers; however,
International Paper, Glatfelter and Finch extended the increase to
offset rolls, tag/index/file folder stock and other converting grades.
The year 2009 was not kind to many
paper markets, and Newsprint was hit especially hard. After a reduction
of 14% in 2008, demand continued to erode another 24% in 2009.
Electronic communication has truly hurt this industry. Capacity
continues to outstrip demand, despite reduced pricing and plant
closings. AbitibiBowater continues to operate under chapter 11 -
commanding 43% of the market, White Birch is #2 at 22% - failed to pay
an interest debt due last Fall, and Port Huron - filed for bankruptcy
protection. Even if the economy improves, will end users go back to
newspapers for news, classified advertisements, and coupons?
The NAPL reported that US
commercial printing sales were down -16% in 2009 to $72Billion. The
rate of decline slowed significantly since last summer, with a forecast
for 2010 of rising +2 to 3% to $73-74 billion. NAPL forecasts a slow
recovery, not hitting its stride until later in the year.
The New York Times announced they
will soon charge non subscribers for heavy use for attaining news on
their website. The company will continue to provide free content for a
limiting number of articles and print subscribers will continue to have
free access to the site. Under the new metered model, a viewer can read
a certain number of articles per month free before being charged a flat
fee. This is a similar model to The Financial Times. The exact cost was
not confirmed. Note, the NYTimes is one of the most popular newspaper
site in the country (over 17 million readers) . The Times will begin
charging in January 2011.
The Catalyst Paper Company
reported that the 1PM at its Crofton mill in British Columbia will be
curtailed indefinitely due to weak newsprint and directory paper demand.
The
machine has a capacity of 140,000TPA of commodity grades and was
temporarily idled on December 23, 2009 for the holiday period.
The
mill has an annual production capacity of 200,00TPA of newsprint and
210,000TPA of directory paper, along with the capacity to produce
343,000TPA of NBSK pulp.
Throughout the last several years, Coy Paper
has reported on shuttered newsprint equipment. Today, we confirm
AbitibiBowater’s Fort Frances mill in Ontario will now be shut down
indefinitely due to an effluent problem. They will remain down until
they are in compliance with all laws and regulations. ?
Stora Enso
will restart the #2 paper machine at Varkaus Plant in Finland after
having been down for 6 weeks. The stop was due to market related down
time. The Varkaus, facility has a capacity of 290,000TPA of directory
paper and newsprint, while PM #3, which has remained running, has
310,000TPA capacity.
Monday, March 1, 2010 Wausau Paper will increase the base price of the following grades by $2.00/cwt:
Exact Index; Exact Vellum Bristol; Exact Tag; Exact Opaque Colors; Exact Multipurpose
Domtar just announced a $40/ton price increase on their business paper
cut size grades, effective February 15. So far, this is the only grade
line to be increased. We can only assume that all Domtar’s competitors
will follow; especially in that demand is improving including December
2009 vs 08 shows shipments +1.2% ( this is the first positive
comparable since April of 2007).
Certainly
raw material costs including pulp prices and energy continue to surge.
Also,inventories at both the mills and the merchants are down 20% down
from this time last year. Lastly, recall International Paper and Domtar
will close 800,000TPA of capacity by mid-2010, representing 7% of North
America’s Uncoated Free Sheet capacity; furthermore, the artificial
support from the black liquor credits are gone (that was $8Billion in
2009!!). All indicators that the price increase will most likely stick.
A price increase for both the East and the West Coast was announced in December for January shipments. We
think these price increases might actually happen, or at least
$25-30/ton of the announced increase; the balance will most likely be
absorbed in the February / March time period. Although demand has not
appreciably picked up, raw material costs certainly have increased,
thus, creating this 'forced' increase.
Reader’s Digest just reported that
their restructuring plan was approved and the company could exit
bankruptcy by January 31. The company’s debt would be reduced from
$2.2Billion to $550Million and the retirement for past employees would
be modified. They will reduce headcount and move headquarters to a more
efficient faculty.
From NewPage News Release
NewPage
Corporatio announced that Richard D. Willett, Jr., President and Chief
Executive Officer, has resigned from NewPage effective immediately.
Mark A. Suwyn, former Chief Executive Officer and currently Executive
Chairman, has been elected to serve as Chief Executive Officer until a
new Chief Executive Officer is named.
NewPage is headquartered
in Miamisburg , Ohio ,and is the largest coated paper manufacturer in
North America , based on production capacity, with sales of $4.4
billion. The company's product portfolio is the broadest in North
America and includes coated freesheet, coated groundwood,
supercalendered, newsprint and specialty papers.
NewPage owns paper
mills in Kentucky , Maine , Maryland , Michigan , Minnesota , Wisconsin
and Nova Scotia , Canada . These mills have a total annual production
capacity of approximately 4.4 million tons of paper, including
approximately 3.2 million tons of coated paper, approximately 1.0
million tons of uncoated paper and approximately 200,000 tons of
specialty paper.
Printing and writing paper
shipments improved in the USA for the month of December. Total
shipments yielded 1.478Million tons, up 2.8% vs. November and 5% higher
than last year. Full year shipments decreased 15.6% to 17,000 tons.
Coated mechanical rose 15.5% to 306,300 tons and coated freesheet rose
12.1% to 256,500 tons vs. 2008, with both increasing vs. November YTD,
both were down almost 20% with coated mechanical at 3.2Million tons and
coated freesheet down to 3.25Million tons. Uncoated freesheet rose 1.2%
vs. December 2008 to 752,399 tons, with YTD volumes down 11.6% to
9Million tons. Uncoated mechanical remained stable vs. December last
year, at 131,800 tons, but dropped 21.8% YTD to 1.6Million tons.
Canon, the Japanese maker of cameras, copy machines and other electronics and
Oce,
which sells printers and copiers and has relied heavily on sales to
banks and architecture firms are on target for Canon’s $1.1Billion
purchase. The over riding objective is to be the #1 presence in the
printing industry. The combination will yield a huge sales network in
Asia, Europe and the USA.
The combined Canon-Océ will be up
against competition from Fuji and Ricoh to dominate the European, USA
and Asian markets. Canon’s acquisition comes just a year after Ricoh
bought Ikon Office Solutions, based in Pennsylvania, for $1.62 billion.
In addition to Cenveo closing its
Charlottesville, VA printing plant, which they obtained through the
purchase of Cadmus Communications they will also close the Baltimore
commercial printing plant in February.
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The Magazine Publishers of
America’s Publishers Information Bureau (PIB) reported on advertising
pages for 2009. Pages were down 25.6% and revenues closed at
$20Billion, which means a decline of 18.1%. The New York Times reported
total magazine advertising pages were down over 58,500 pages when they
compared 2008 page count to ad pages in magazines that were still
published in 2009. Only 18 magazines enjoyed an increase of advertising
pages.
The
biggest decliners were financial, insurance and real estate ( down
41.4%) and automotive (down 40.5%). Estimated revenues were down in all
categories except for food and food products, which posted a slight
1.4% gain.
PIB also noted that the advertising page reduction
experienced in 2009 was so severe that many of the surviving publishers
lost focus on their dependence for advertising revenues and, instead,
began to concentrate on digital editions.
Fewer advertising pages
translate into a decline in overall page count and thus less paper is
consumed. If advertising in publications do not improve, difficult to
forecast much advancement for publication paper demands.
The year, 2009, certainly created several challenges for the paper
industry. Paper producers did a remarkable job of limiting price
erosion despite sharply lower shipment volumes and variable (usually
up) raw material costs. The industry responded with massive amounts of
market downtime, as well as a significant amount of closures, in many
cases even driving down inventories despite weak demand.
Although
the last few months of 2009 illustrated some improvement; sustained
improvement will only arrive once the economy improves. Keep in mind,
2009 paper demand continued to be lower than 2007 and the beginning of
2008.
The paper manufacturers continue to operate along a
slippery rope – recently most grades experienced an announced price
increase; meanwhile, demand continues to be below expectations, supply
was controlled by down time (this is not sustainable ), input costs
such as chemical, energy, and transportation are forecast to increase,
and the infamous black liquor credit (worth billions of dollars) is
gone.
I think we all agree that for the industry to be healthy,
long term, a price increase is needed; however, most buyers are
aggressively pushing back due to the inability to pass it on to their
customers.
Of particular note is the containerboard price
increase – without consumers buying 'stuff' – nothing to go into the
box – therefore demand is forecast to be depressed. The other two
markets sharing concern are the price increase for publication and
newspaper papers. Both are hurting from lack of subscribers and
depressed advertising.
Anyone of our Coy Paper Company News on the Pulp and Paper readers care to comment on forecasting 2010 prices, demand, and supply; also, venture an opinion on next mills to close?
Two of America's largest magazine publishers, Time Inc. and Meredith,
have reportedly joined forces to buy paper. The two companies issued
joint requests for proposals to potential paper suppliers late last
year, according to several sources.
Together, the two consume several hundred thousand tons of paper, annually.
Time
is a major buyer of lightweight coated (LWC - 29lbs to 32lbs ) for
offset printing. Meredith's is more geared to rotogravure papers and
higher basis weights. This will introduce added pressure for pricing on
an already depressed market.
Department of Commerce announced
it will delay the decision on the countervailing duties against Chinese
and Indonesian paper producers until February 22nd. The Department must
determine if the imports from the two countries caused injury to USA
paper producers and originally reported the decision would be made by
mid December.
-Penton Media has ceased publication of the print editions of American Machinist and Welding Design & Fabrication
-Consumer
business and finance magazines had a rough go in 2009. Collectively,
the titles tracked by PIB saw advertising pages fall nearly 30 percent.
-Reed
Business Information has ceased publication of three trade titles:
Video Business, Manufacturing Business Technology, and Industrial
Distribution.
Following up on the Coy Paper
earlier releases, in August, Yueyang started up #10PM and in October #9
PM started up. Both continue to run trials and reports outline the
paper looks fine. Both have a capacity of 200,000TPA each of uncoated
paper. #10PM will focus on recycled business and offset papers while #9
will supply the same papers from virgin fiber. The plan is for #10PM to
eventually produce papers from 100% deinked pulp (most of the raw stock
coming from USA).
In 2008 China produced 79.8Million tons of paper
and paperboard – an increase of nearly 13% annually since 2000. Of this
production, China consumed 13.85Million uncoated printing and writing
tons in 2008 and produced 14Million tons.
At 400,000TPA of new capacity, the Chinese must have America in their scope for exporting paper.
Forrester Research has just revised up its May 2009 forecast of this
year’s U.S. eReader sales to 3 million units from 2 million, due to
strong sales in November and December. Moreover, it now expects sales
of another 6 million units in 2010.
2009 Top 10 plants in USA by revenue include
US Government
Allstate Insurance
State of California
State of Washington
CVS/Caremark
Ohio State University
Spartan Stores
University of Oklahoma
Louisiana State University
University of Washington
Glatfelter agreed to acquire the
nonwoven producer Concert Industries Corporation from Brookfield Asset
Management Inc. for $235Million, expanding the specialty paper
company's markets, especially in developing markets beyond the USA.
Concert is one of the world's leading producers of highly absorbent and
customized airlaid. The airlaid line is one of the best options in the
marketplace in terms of high absorbency. The company's unique
production process allows products to absorb more moisture than common
cellulose, yet it is lighter, more durable and cost competitive,
especially when compared to similar weight non-wovens.
Concert Industries has operations in Canada and Germany with a total
capacity of 84K tons.
Dr Webb recently published a report on the printing industry. A few highlights-
"The
third quarter of 2009 continued a positive turnaround from a disastrous
Q1,” said Dr. Webb. “The industry has had significant declines in
volume for the last year, and has cut back staffing levels at a
slightly faster rate than those sales declines. It may now be finding
the right balance of productive capabilities, declining shipments, and
price pressures of electronic media.”
In the report, Dr. Webb
reviews the latest trends in shipments, profits, and capacity measures
for the industry. He also discusses how it is likely that in the next
six months the recession will probably be declared as over. “It is
likely that the fourth quarter of 2009 will be identified as the
recession's end."
Coy Paper has reported on all
the challenges last year for the paper markets. 2009 certainly proved
to be a challenge for anyone associated with the publishing world. The
year outlined economic fallout, bankruptcies, dwindling advertising
dollars, shuttered magazines, layoffs, pay cuts to name a few. Folio
reports on the industry as 2009 unwinded 2009 profile on the magazine industry world link Click on link
Excepts from recent RISI research paper.
Prime
View International (PVI) is the leader (66% market share) in supplying
displays used in e-readers such as Amazon.com’s Kindle, Sony’s Reader
and Barnes & Noble’s Nook. PVI is owned by Taiwan’s largest paper
manufacturer, Yuen Foong Yu, which launched this technology division 17
years ago, as they became worried about digital replacing print. After
facing tough competition in the LCD market, they’ve spent over a
$1Billion on e-screen development and acquisitions, purchasing screen
technology from Philips Electronics in 2005 and E Ink Corp. of MA last
June. Worldwide sales of e-readers are expected to soar to 12 million
units in 2010, up from 5 million in 2009. Many of these will be made by
competitors, able to show video with full color screens such as Apple’s
Tablet and Qualcomm’s new screen technology called Mirasol.
The American Forest & Paper
Association (AF&PA) and the NPTA are joining forces to host a
combined conference March 21-23, 2010 in New York City, called
PAPER2010.
Also know as 'paper week'.
The
AF&PA is the national trade association of the forest products
industry, representing pulp, paper, and wood products manufacturers,
and forest landowners. The NPTA Alliance (formerly the National Paper
Trade Association, Inc.) is the association for the $60Billion paper,
packaging and supplies distribution industry.
Reader’s Digest plans to launch
three new magazines called Reverse Diabetes, Walk it Off, and No Fail
Weight Loss All three will be sold as part of a single-sponsored
package in the health sector. The magazines will be published 4 times a
year.
As Coy Paper
recently announced, International Paper just closed its uncoated
freesheet (business papers) paper machine #1 in Franklin, VA. This past
Fall, the company announced that they would close the mill to reduce
production capacity. In November, company stopped production on its # 6
paper machine.
Finally, some good news for the
ailing magazine industry. Recall, we reported on Conde Nast having to
close six consumer magazines, including Gourmet; reduced costs 25%; and
making several reductions in their workforce – have announced they are
working on a trade magazine for the men's' fashion market. This new
title may be marketed as a trade publication and not a consumer
magazine.
Reed Business Information has been
marketing the sale of the USA magazine group and has yet to confirm a
buyer for the complete division. The current decisions are to close
several publications, or sell them individually – or begin to lay staff
off.
From International Paper Release
International
Paper announced plans to close its paper mill operations in Franklin,
VA, and its containerboard mills in Pineville, LA, and Albany, OR. The
company also announced it would permanently shut down the previously
idled No. 3 machine at its Valliant, OK, containerboard mill. The
Valliant Mill's other two machines will continue to operate. These
permanent shutdowns will reduce the company's North American paper and
board capacity by 2.1 million tons.
The company concluded that we
have excess capacity in our North American paper and packaging
businesses, and these decisions will better match our supply with our
expected customer demand.
Since the onset of the global recession,
the decline in demand for International Paper's uncoated freesheet in
North America has accelerated, and consequently the company has decided
to further reduce its uncoated freesheet capacity.
In its
containerboard and coated paperboard businesses, International Paper
expects demand to resume growth as the economy rebounds. However, the
company's demand is not expected to return to 2008 levels in the near
future. Therefore, permanent International Paper capacity closures are
necessary.
The closures will impact about 1,600 employees and will result in permanent North American capacity reductions.
Following
these permanent shutdowns, International Paper will have approximately
10 million tons of North American containerboard capacity, 2.6 million
tons of North American uncoated freesheet production capacity, and 1.7
million tons of North American coated paperboard capacity. These
capacity shutdowns will not impact the company's ability to serve its
customers.
MeadWestvaco reported they will
restructure fourteen facilities in their global packaging markets
group. ??These actions include further reducing corporate and business
unit overhead expenses and closing or restructuring 12 to 14
manufacturing locations. This will result in the elimination of
approximately 2,000 positions, or 10 percent of MeadWestvaco’s global
workforce in 2010.
The
company also announced they will not provide 2009 pay increases for
salaried employees. The manufacturing-related reductions will include
savings from facility restructurings and closures. The company feels
that rationalizing assets as outlined will accommodate reduced demand
and corporate financial objectives.
This week's big announcement was
Caraustar Industries, Inc. has emerged from Chapter 11 as a newly
reorganized private company eliminating approximately $135 million in
debt.
The
company’s Plan of Reorganization had minimal business disruption and
was completed in record time. Caraustar also reported to have closed on
a new $75 million revolving credit facility to provide adequate
liquidity to meet all of its working capital needs, including any
future capital investments.
The year 2009 was certainly a
challenge for the pulp and paper industry – slow demand and constant
pricing pressure. Paper prices experienced a steady fall for most of
the year and now appear to be leveling off. Several producers, and Coy Paper Company,
are forecasting a gradual price increase for most grades for 2010.
Demand might only slightly rebound, but raw material costs such as
pulp, chemicals, transportation and energy will increase. Inventory
levels, both at the mill and the end user, are down and manufacturers
continue to curtail supply and imports are down. Lastly, support such
as the ‘black liquor’ credit is gone. Therefore, even if demand does
not increase, there are plenty of other reasons for paper prices to
rise.
The AF&PA recently reported
that recycled fiber consumption in the USA was 2.5Million tons in
November, an increase of 0.9% vs. last month and an increase of 0.8%
vs. 2008. This trend is expected to continue.
Release liner is the material that
many labels (pressure sensitive) include as a backer sheet. This is the
component of the label, which is used as a carrier and discarded once
the label is consumed.
-World consumption – all release liners – 31Billion sq. meters
-Growth is less than 1%/year
-Super Calendar Kraft #1 material (44% of the market)
-Films increased to 20% of the liner market
-Clay coated now 13% of the market
-Linerless labels have failed to be successful
-Total label growth 2.1%
-Glue applied + 2%
-Pressure Sensitive +1.8%
In our past releases we reported the USPS lost $3.8Billion for
2009Fiscal, which was $1Billion more than 2008. Total mail volume was
177.1Billion pieces – down 25Billion (12.7%) from the 202.7Billion
pieces in 2008. Concern for 2010 is people learned to order product on
line, accept digital communication as well as business invoices,
correspond on email, and think greener – no longer accepting catalogues
and direct mail promotions. The USPS needs to revise its model for
fewer pieces mailed and accept this as a trend.
Posted by
P. Scott Vallely
Please, also, click PAPER NEWS for all the news on paper
North American Rail freight volume of pulp and paper decreased and YTD carloads were down 20% through November. Last
week, the Senate Commerce Committee passed comprehensive freight
railroad reform legislation designed to increase competition and
improve federal regulation of railroads. It is estimated that 30% of US
paper, packaging and wood product manufacturing sites have access to
only a single rail carrier. This monopoly status has led to high costs
with poor customer service.
Pressure
continues to mount for producers of container board after all the major
North American manufactures announced the $50/ton price hike in the East and most producers are pushing for $70/ton in the West.
Demand continues to be weak – slow economy means less goods purchased and therefore, box volumes fell 12% year to date through November. Most buyers are trying to push back on price increases.
However, given the large supply reductions (recall our earlier blog that International Paper, Smurfit, and West Fraser will shut off 2.7Million tons) perhaps the price increase has a chance.
Recently, Deutsche Bank hosted a conference on the pulp marketand declared that after pricing had held flat for the month of December, the major softwood and hardwood producers once again announced price hikes of $20-30/mton in the US, Europe, and Asia, effective January 1.
Producers set NBSK price at $850/mton (+$20/mton) in the US, $830/mton (+$30/mton) in Europe, and +$20-30/mton in Asia, with China at $720-730/mton.
China had been heading up the robust demand for pulp because of low
inventories and tight supplies, but suddenly there are reports of
slowing demand in China – perhaps the pipe line is finally full. Also, China started up 6
new pulp machines during the 2H2009 and 3 more will come on line
1H2010. China's new production will increase to 2.6Million tons of pulp
by the end of 2010.Most North American buyers report that pulp remains fairly tight in supply due to equipment curtailments, especially Hard Wood.These same buyers predict this tightness will not last and a price correction will occur 2Q10.
Joe Connelly of the Wall Street Journal interviewed Mr. Vallely about the Paper.com site, one of the largest web marketing sites that focuses exclusively on selling paper. He commented on the success of the site to date and the recent initative to now market Paper.com for sale. Any interested buyers should email the management team at admin@paper.com . The interview was aired on WCBS radio 880.
Sun Paper will build a $228 million, 300,000 TPA, uncoated mechanical
(groundwood) paper machine at the Yanzhou City mill. This machine
(PM24) will make publication papers in a basis weight range of 60-150
g/m2, in 2011. This will follow the installation of PM23, a 350,000TPA
uncoated fine paper machine being installed in April 2010.
Sun
currently produces 450,000 TPA of uncoated woodfree and mechanical
paper, 100,000TPA of coated woodfree paper, and 300,000 TPA of
cartonboard from this facility.
AbitibiBowater reconfirmed that
they plan to restart paper machine #5 in Thunder Bay, ON in early
February. The 250,000 TPA newsprint machine was shut down indefinitely
in August, along with PM #4, 160,000 TPA.
It’s no secret, like the USA paper
producers, Canada has also struggling with overcapacity and decreasing
demand. The forecast is for the Canadian industry will lose an
aggregate C$1.2 billion this year and the industry will not return to
profitability until 2011. American Forest & Paper Association data
show that the volume of shipments to the U.S. from Canada fell from 18%
to 75% in various key paper categories during the first three quarters
of 2009, versus the same period of 2008.
Canada
has always been a world leader in Newsprint production with a capacity
of over 10Million tons; however, newsprint makers estimate they will
have only shipped closer to 7.2 million tons by year end. The future is
not predicted to be much better with consumption at between 6.8 million
and 6.9 million metric tons next year, and somewhat lower still in
2011.
The Fitch Rating Organization recently forecast a modest recovery for
paper in 2010. The rating service reported that short term demand for
uncoated freesheet (UFS) and coated mechanical paper (LWC – Publication
paper) are stabilizing and expected to rise later in year.
Unfortunately, coated freesheet and uncoated mechanical (groundwood) is
projected to experience slow demand Paper margins will continue to be
squeezed by the rising cost of pulp, possible transportation and
chemical price increases, and lack of black liquor credits.
MediaFinder.com reports fewer
magazine closures in 2009, 428 vs. 613 in 2008 and 643 in 2007. The
number of launches also decreased to 275 in 2009 from 335 in 2008.
Regional magazines had both the highest number of start ups, 21, and
shutdowns at 34. Business-to-business magazines saw 120 closings in
2009, less than 147 in 2008 and 158 in 2007. There were 85 b-to-b
launches in 2009.
To compliment our report earlier this week on our Coy Paper news
releases, we offer 'heard on the streets' comments that US
Printing/Writing Paper demand and shipments were up 2.5% in November
primarily driven by strong coated paper shipments.
November
shipments of 1.435Million tons was the first monthly 2009 vs 2008
increase since February 2008 (vs. 2007). Total shipments YTD were
15.612 million tons, down 17% vs. 2008.
-Coated freesheet was up 10.4% to 293,600 tons in November
-Coated mechanical (LWC - publication paper) up 14.7% to 285,100 tons.
-Uncoated
freesheet was stable at 714,800 tons, down 0.5% vs. last year. November
shipments were down vs. October, due to seasonality.
Smurfit-Stone has announced 900,000 tons of permanent linerboard capacity closures at two locations.
-Ontonogan, MI corrugating medium mill (280,000 tons)
-Missoula, MT mill (620,000 tons)
Smurfit
news follows the recent announcement that International Paper will
shutter 1,400,000TPA of containerboard capacity and West Fraser's
announcement of 450,000 tons
of capacity.
The producers will most likely continue to adjust supply to demand which will assist the recent price increase.
Revenue generated from advertising pages is forecast to continue to be
depressed. Accordingly, several publications look to survive by
increasing the cover price for the magazine.
A few examples include-
-Condé Nast - The New Yorker, Golf Digest and Teen Vogue in 2010,
-Hearst - Good Housekeeping, Esquire and Veranda and is considering the same for Country Living
-Wenner - Men’s Journal and Rolling Stone
-Meredith - Better Homes and Gardens and Ladies’ Home Journal, Family Circle and Traditional Home
-Rodale is looking at doing the same at its health/fitness titles
Publishers are also reviewing decreasing the frequency they print magazines in an effort to save money.
The producers of Solid Bleached Sulfate (SBS) board grades are
beginning to tell end users about increasing the price by $40/ton.
Although these grades have not had an increase since October 2008
(transaction price $1000-1050/ton), they also have not had to discount
pricing like so many other paper grades during 2009. So far Georgia
Pacific and MeadWestvaco have formally announced.
Recall
MeadWestvaco shuttered a 200,000TPA paper machine in Texas and
International Paper will close a 140,000TPA machine in Virgina.
The
printing and writing paper shipments for November look dramatically
improved versus at this time last year. The American Forest & Paper
Association released market data. Deutsche Bank cautions that a good
portion of the improvement owes to a "lapping" of weak numbers
from
4Q2008. Nonetheless, the numbers are striking and could signal the
beginning of an inflection point in white paper markets. The best year
over year comparables were in light-weight coated paper (LWC), where
preliminary data suggests shipments were up 14.7% (-22.4% YTD). Spot
discount pricing for LWC are slowly increasing.
Heavier-weight
coated free sheet shipments were up 10.4% (-20.7% YTD). Uncoated free
sheet shipments were down -0.5% (-12.6% YTD). The smallest category,
uncoated groundwood, had the weakest performance with shipments down
15.0% (-23.4% YTD). Sequentially,
shipments in all markets were down
from October levels. Much of that month to month easing would appear to
be seasonal as the holiday printing season begins to ebb.
As
noted industry shipments are now lapping 2008 shipments. Thus,
enthusiasm should be tempered. Moreover, we think coated and uncoated
free sheet markets remain vulnerable to
ripple effects from pending
capacity start-ups of some 4.5MM tons in China as well as capacity
overhangs in other markets. Quick note on pulp, looks like price
increases have slowed, and demand has stabilized – China buying less
and global inventories in balance.
In the next two years, China plans to add 4.6Million TPA of paper capacity,
-2,600TPA being coated woodfree
-2,000TPA uncoated.
The 4 manufacturers of coated paper
- Jinhai Pulp & Paper (APP China) 900,000 tons
- -Shandong Chenming 800,000TPA
- -Shandong Huatai 500,000TPA
- -Oji Paper 400,000TPA
Uncoated
paper will be in balance with demand, because many smaller
manufacturers are being consolidated into the larger ones, and there is
growth enough in China to absorb the rest.
The coated market,
however, is all new capacity. The high growth Chinese market will
eventually absorb the excess by the end of 2014. In the meantime, they
will be forced to find external markets for excess capacity and/or
suffer low operating rates.
In 2009, Japan was the fastest
growing market for Chinese exports, increasing 400% or 145,000 tons vs.
last year. Japan’s paper producers have had difficulty competing on
price, however; recently they have become competitive, resulting in
October Chinese imports to Japan dropping 21% vs. Sept. The extent to
which Chinese coated exports will be affected by the US anti-dumping
investigation or fears over Dubai, will determine where the excess
tonnage is sold in the next 2 years.
Paper.com LLC operations, arguably the largest web based paper
marketing company, recently commissioned Moniker to secure buyers for
the site. Paper.com has over 40,000 paper items and thousands of
visitors each day; the site has nearly 2000 affiliate marketers and a
category 'killer' URL address is now for sale. Contact admin@paper.com
Nielsen Business Media has agreed
to sell eight of its media brands, including a number of its trade
magazines, to e5 Global Media, a new company formed by Pluribus Capital
Management and Guggenheim Partners.
The
sale agreement includes The Hollywood Reporter, Billboard, Adweek,
Brandweek, Mediaweek and Back Stage magazines, as well as Nielsen’s
Clio Awards and Film Journal International. Also being sold is the Film
Expo Business, which includes the ShoWest, ShowEast, Cinema Expo
International and CineAsia trade shows.
Financial terms of the deal were not disclosed, although it was rumored to be priced at approximately $70 million
This week, beyond the Paperlinx machine shut downs just reported, two
more companies officially announced downtime. Note, most paper
producers are constantly curtailing manufacturing due to poor backlogs
- just not formally announcing it.
-Sappi Fine Paper to close Kangas Mill in Finland by 1Q 2010,.
-Nippon Paper Mill Down for 2 Weeks in Port Angeles, WA, this is the third shutdown this year.
St.
Mary’s Paper in Sault Ste. Marie, Ontario will idle paper machines #3
and #4 during the 1Q2010. PM #5 will remain operational. Management
sited poor demand as the reason for this market related downtime.
The
mill produces 240,000TPA of SCA premium, SCA and SCB paper grades under
the trade names Sequence, Sequel and Synpress
Australia's PaperlinX has decided to close its Wesley Vale pulp and
paper mill and one of the two paper machines at its Burnie mill and
therefore reduce production at Tasmanian paper manufacturing
operations, The closures mark Paperlinx's exit from paper
manufacturing. Upon completion of this exit, PaperlinX said that it
will be solely a distribution company, distributing paper, signs,
display and graphics materials, and industrial packaging.
The
Wesley Vale Mill produces 40,000 TPA of pulp and 145,000TPA of coated
and uncoated papers for publishing, business forms and printing
The Burnie Mill has a capacity of 140,000TPA of uncoated business papers.
Although transportation companies, many of which ship paper products,
experienced a challenging 2009, the forecast appears to favor the
truckers; allowing them to charge more for full loads. Unfortunately,
for the truckers, the less-than-truckload market looks like it will
remain a buyers' market for the short term. Most clients have limited
inventory and are requesting trucks to replenish stock to their floor.
Transportation, both inbound and outbound, are important cost
components when quoting a delivered price for paper.
As Coy Paper reported
in past, Time, Conde Nast, Hearst, Meredith and News Corp. will create
an industry standard platform for magazines, newspapers, etc… for full
color, touch-screen digital format that is attractive and interactive
for the the Internet, smart phones and e-readers.
These publishers
collectively represent nearly 145Million consumers. This will be a
subscription fee based initiative for full access and the objective is
to establish a revenue stream from advertisers.
The USA largest pulp, forest, and
paper companies posted earnings of $1.2Billion in the third quarter of
2009, versus $733Million in, 2008 for increase of $500Million. All but
two companies posted positive or improved earnings. Note, this
improvement was primarily a result of an estimated $1.1Billion of tax
credits for the use of black liquor as a bio fuel to generate energy.
As of today, the newsprint producers AbitibiBowater, White Birch,
Kruger, and Tembec have all announced price increases for the coming
months.
These
major producers have announced a $25/mton price for both January and
for February. Meanwhile Norpac announced a single $50/mton for January
and Catalyst Paper also announced a $50/mton price hike for February.
Although demand remains low, with USA Dailies suffering a decline of
over 23.5% in October, the paper supply has been reduced. Given the
equipment closures for the last few years, most buyers are forecasting
that these increases will be paid. Coy Paper forecasts that additional newsprint price increases will be announced during 2010.
As Coy Paper has previously reported, all the major containerboard
producers have announced a $50/ton price hike in the East and $70/ton
in the West. This is a difficult increase for most converters to
absorb, given the poor economy and lack of orders for packaging. This
recent price movement is a result of large supply reductions. Coy Paper has reported on closures such as International Paper and West Fraser shuttering 1.8Million
tons, a better demand for exports, and the expiration of black liquor
credits - all placing pressure on mills for this increase.
A recent report outlined the black liquor credit could have assisted mills cost by as much as $180/ton.
Eleven publicly traded Canadian companies reported combined third
quarter loss of negative C$487 million. This was slightly better than
second quarter of 2009 at negative $535.8 million and the first quarter
of negative C$642.6 million. AbitibiBowater’s loss of –C$411.4 million
contributed the most to the Canadian industry’s lack of profit. Only
three companies were profitable in 3Q; Domtar C$62.5 million; Cascades
C$35 million; and, Canfor Pulp C$11.4 million. All companies declined
in sales, generating combined C$6.2 billion, down over 20% versus 2008
but up 1% vs. 2Q. AbitibiBowater (-34%), Catalyst Paper (-48%), Tembec
(-28%) and Fraser Papers (-24%) had the worst sales declines in 3Q vs.
2008.
Sometime in early 2010, Hearst
plans to start a digital e-reading service called Skiff, formerly known
as FirstPaper. Skiff will sell digital versions of newspapers and
magazines on electronic readers and other devices that have better
graphics and look more like the print magazine, than Amazon’s Kindle.
Hearst would be the first publisher with its own end-to-end digital
publishing system including reading hardware.
Fraser Papers is reviewing the
option of buying its core specialty paper business and renaming the new
entity to Newco This will allow the company to exit creditor
protection. The plan is to sell the assets of the core business in
Edmundston, NB, Madawaska, ME and two New Brunswick lumber mills to the
new entity, Newco. Than, the new company would dispose of remaining
assets, owned by Fraser, including Gorham Paper Mill in NH, two lumber
mills in Maine, and Thurso pulp mill in Quebec.
Recycled fiber costs continue to increase and prices for old corrugated containers (OCC) have recently risen over $10/ton.
The continuous higher fiber costs could put pressure on many mills with a concentration of recycled grades.
Smurfit-Stone announced a price
increase which mirrors the new price levels made by International
Paper, Georgia-Pacific and Temple-Inland which Coy Paper reported on earlier. These four producers represent nearly 75% of the domestic containerboard market.
Time Magazine’s Sports Illustrated publication is talking about
transitioning the print magazine to a digital magazine-friendly
e-reader.
Time
Inc. has been working with Web site design firm Wonderfactory for
Sports Illustrated and several of their other publications.
Time is
also working on an application that would translate all of Time Inc.’s
magazines to the iPhone. A pay model for the tablet versions have not
been determined.
The American Forest & Paper
Association (AF&PA) announced that ArborGen, Grays Harbor Paper,
Marcal Paper Products, and Thilmany Papers are the newest members of
the Association. The forest products industry employs approximately 1
million workers and generates 6 percent of the total U.S. manufacturing
GDP.
After 1o years, National
Geographic has decided to close National Geographic Adventure because
of the weak environment for print advertising. The circulation has
decreased to 636,750 and the advertising pages declined 25 percent.
Management has not ruled out e-magazines, mobile apps, awards and a Web
site going forward.
Temple-Inland joined the others with a $50/ton and $70/ton price
increase on containerboard . Smurfit, with 7.1Million tons of capacity,
is expected to also announce an increase.
We have heard that Smurfit is to shutter containerboard & corrugated packaging equipment.
China, with 1.33billion people, has a growing appetite for consumer
products and boxes to ship them in – but with India’s 1.18billion
population growing more and more sophisticated – will they be the next
country to build paper mills? India continues to be one of the poorest
countries in Asia and has focused on the service industry, but data
illustrates containerboard demand has only grown to 2.6million tons
(versus China’s demand of 30.5million tons). India certainly is a
country to watch for as the population becomes more industries and
wealthy.
Coy Paper has
been awarded the distribution rights for New Star Chemical's Hardindo
Anti Fire Products. These include AF11, AF21, and AF31. Currently, the
company is focusing on the AF21 product which is a colorless water
based solution. Once applied, the sub straight is fire and flame proof
and the original functionalities and properties of the item remain in
tact.
Yes, this even creates a fire proof paper or card board grade!
The chemical is non-toxic, non-corrosive, biodegradable, and completely environmentally friendly.
The
chemical offers permanent protection from fire once applied, Harindo
AF21 will protect your home and family, hotels, night clubs, schools,
libraries and museums, etc. from the ever present danger of fire,
giving you peace of mind 24 hours a day. Contact Coy Paper at info@coypaper.com for more information.
International Paper joined Georgia Pacific, Pratt, and Longview by
announcing a $50/ton (East Coast) and $70/ton (West Coast)
containerboard price hike for January. Coy Paper
now assumes the other major producers Temple-Inland, Packaging Corp of
America , Rock-Tenn, and Greif will follow. The price of containerboard
had decreased $70-80/ton since last November 2008.
Time, Conde Nast, Hearst and
Meredith are in discussions to partner and form a new company to create
online access to magazines. The new entity will create the digital
formats and develop an iTunes-like storefront, controlling
distribution, pricing and profits.
Papierfabrik August Koehler AG of
Germany is looking to expand through an acquisition of a new facility
in the USA. The company currently exports Thermal Papers, Carbonless,
and décor papers from its 3 mills producing 483,000 MTPA and would like
to grow the North America market.
A summary of Mark Wilde of Deutsche Banks recent comments-
The
prices for uncoated freesheet remained flat in North America in
November, with the exception of envelope papers, which rose $25-30/ton,
catching up with the $35-40/ton hike on offset rolls last month. These
hikes were driven by increased pulp prices, small increase in demand
demand (October shipments -9.3% y/y, YTD -13.1% y/y), and slightly
lower October mill inventories (-0.8% vs. October of 2008).
International
Paper and Domtar recently announced 800,000TPAof permanent capacity
closures by mid-2010, representing 7% of North American uncoated
fresheet capacity.A recent example was International Paper just closed
PM 6 — a 223,000TPA paper machine at its Franklin, Virginia mill.
Mark
Wilde, senior analyst at Deutsche Bank covering the Paper & Forest
Products sector, said that IP reported pick-up in demand in the direct
mail and envelope converters segments.
"Outside the U.S., we
understand that European producers have begun to announce price hikes
for January 1. Additionally, we are becoming less concerned about the
impact of tonnage from Europe, as we think the level of imports to the
US will be smaller than we had anticipated."
Containerboard
shipments for November as well as prices ($525/ton for linerboard and
$500/ton for corrugating medium) remained flat. Two suppliers announced
a price increase for January orders.
"When coupled with large
supply reductions, expiration of black liquor credits, and a falling
U.S. dollar, we expect similar domestic price hike initiatives from
International Paper and Smurfit-Stone," Wilde said.
"We continue to
believe Smurfit will announce 1.0-1.5 million of closures around
year-end. If that occurs, it would push operating rates back into the
mid-90's," he added
Market Pulp
Pulp prices rose $30/ton in
November, the sixth month in a row in the U.S.A. and seventh in a row
in Europe and Asia. NBSK (northern bleached softwood kraft ) rose to
$830/MT. The increase was driven by a sharp rise in U.S. spot prices,
low mill inventories in the U.S. and Europe, strong Chinese demand, and
a weaker US Dollar.
Reports suggest that an additional hike is looming for December, Wilde said.
For
China, NBSK rose to $675/ton (from $645/ton). However, anecdotal
reports suggest demand in China may slow down in the coming months from
inventory overhang — estimated to be around 400-500,000 m/tons.
Further,
higher prices are drawing high-cost Chinese pulp mills back into
production — as market prices are now well above cash-cost.
Meanwhile,
other supply is also creeping back, pointed out Wilde. North American
mills considering restarts include: Buchanan Forest Products' 475,000
tpy NBSK mill at Terrace Bay, Ontario; Mackenzie Pulp's 220,000 tpy
NBSK mill at Mackenzie, British Columbia; and Fraser Papers' 250,000
tpy NBHK (northern bleached hardwood kraft) mill at Thurso, Quebec
From a Report by Tom Stundza
Fewer customers' demanding paper have continued to cause pricing to deteriorate.
The
Pulp and Paper Products Council has reported that North American
printing and writing paper shipments have dropped by almost 19% through
October, while year-to-date market prices tracked by Purchasing.com
have dropped by about 6%.
The RISI reports that the demand slide may
be over in early 2010 since overall October shipments of 2,069,000
metric tons were only 9% below the industry's shipments level in
September. However, coated free-sheet shipments have dropped 25% so far
this year from 2008 levels while coated mechanical paper shipments are
down 24%.
The RISI review of industry data shows that overall mill
inventories slipped 1,592,000 metric tons at the end of October, which
is 95,000 metric tons lower than at the end of September and 198,000
metric tons lower than a year ago.
Posted by
P. Scott Vallely
Please, also, visit PAPER NEWS for all the news on paper
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Georgia Pacific just joined Longview with a $50/ton (East Coast) and $70/ton
(West Coast) containerboard price hike for January. This gives the hike announcement more
credibility, as Georgia Pacific is large producer. The company, owned by privately-
held Koch Industries, is similar in size to Temple-Inland and trails
only International Paper and Smurfit-Stone in the North American
containerboard market.
In the third quarter of 2009, 26
USA pulp and paper companies reported sales of slightly over
$21billion, up 4.5% sequentially vs. 2Q, but down 16% vs. last year.
They reported a collective $1.4 billion in net income, including $1.3
billion of alternative fuel credits, up 2% vs. 2Q. Fuel credits were
received by 19 companies, lifting their incomes. Excluding fuel credits
and other gains, more than half showed a drop in earnings or a marginal
increase year over year. Also, production increased in third quater, up
4.6% to 6.7 million tons in September vs. May.
The NAPL forecasts US commercial
print volume to increase 2-4% to $76 billion in 2010, after declining
14% in 2009 to $73.5 billion and declining 4% in the previous two
years. Commercial printing reported slightly higher volume in September
with fewer printers reporting business as slowing, but the NAPL
Printing Business Index still remains low at 36.4 in October. One third
of total US printing and writing paper shipments will go to commercial
printers, totaling 6.3 million tons, evenly split between coated and
uncoated grades
The postmaster general, John
Potter, has remarked the USPS will not increase prices for 2010 on
First Class, Standard Mail, Periodicals, and single piece parcel post.
This is indeed good news for magazines and cataloguers, and ,
therefore, paper producers.
A quick review of the past 10 years illustrates nearly a 40% increase.
1/2001 +10%
6/2002 +3%
1/2006 +5%
7/2007 + 12%
5/2008 +3%
5/2009 +3.98%
1/2010 -0-
UPS will raise its rates in 2010. The new rates will take effect Jan. 4, 2010.
Ground
packages, air express and U.S. origin international shipment rate will
jump by an average of 4.9%, according to the company. This is slightly
less than the 5.9% announced for 2009 shipments.
The rate increase
for air express and international shipments is based on a 6.9 percent
increase in the base rate, less a 2 percent reduction in the air and
international fuel surcharge index, the company said. The company’s
management is concerned with this rate increase in that volume of
shipments is down.
With the depressed state of the overall economy, newspaper advertising sales fell 28 percent in the third quarter.
Ad
revenue totaled $6.4 billion, according to figures from Newspaper
Association of America. It was a narrower decline than the previous
period.
Advertising revenue has declined year-over-year for 13
straight quarters killing some newspapers and wiping out thousands of
jobs at publications across the country. In the third quarter, print
advertising sales fell to $5.82 billion from $8.19 billion a year
earlier. Sales of online ads dropped 17 percent from the year-earlier
period to $623 million
JCPenney announced that they will
discontinue the biannual "Big Book" catalog and instead will
concentrate efforts on creating smaller, more targeted catalogs, online
selling, and social media exposure. The current issue is JCPenney's
last one.
Reasons
for its demise range from the increasing costs of paper and mailing and
environmental concerns about wasting paper and success on Internet
sales as well as the ability to illustrate products more dramatically.
Big
book catalogs have become less relevant as customers have embraced
shopping online, (Note Sears stopped producing their big book in 1993 –
after 106 years)
Mediamark Research &
Intelligence’s fall magazine audience report shows that six business
titles—Forbes, Fortune, Inc., Smart Money, The Wall Street Journal and
The Economist—all enjoyed an increases in total audience and readership
when compared to 2008. The thought is consumers are seeking help to
navigate the current recession and are turning to business titles.
The
Journal reported its audience grow 11.6%, to 3.4 million; Forbes’ grew
11.5% to more than 6 million; Fortune’s rose by 9%, to 4.1 million; and
The Economist’s audience grew 6%, to 2.8 million.
However, the bad
news for these publications was that although readership was up,
advertising pages were down as are total pages!
Another reason for coated papers to remain depressed with respect to demand.
The accumulated effect is all paper volume continues to be depressed,
although month over month shipments and comparative figures versus 2008
appear to be declining at a decreasing rate - maybe the 'bleeding' has
slowed? End user demand for coated papers appears to be stable for
November and estimates for December appear stable as well. Coated Free
Sheet was down 7% in October (vs October 2008) and down 23.1% for the
year through October; Publication coated was down 4.2% in October
(24.9% for 2009) and Uncoated WoodFree down 10.3% for October (13.6%
for 2009).
Pulp inventories are at the lowest
levels in over 10 years throughout Europe, estimated to be 750,000
tons, down 8.5% in October vs. September, and down 51% vs. 2008. As a
result, price increases are happening worldwide, with NBSK pulp at
$800/MT in Europe and SBSK at $760/MT. China’s increased in demand for
pulp is effecting all markets.
Posted by
P. Scott Vallely
Please, also, Click PAPER NEWS for all the news on paper
Pulp prices are up, inventory is down, much equipment is still
ideal,and Chinese demand continues to be strong .... all components
yielding a seller's market and causing most buyers to forecast
continued pricing pressure. The USA level for NBSK is $830/MT. Coy Paper continues to monitor for shuttered equipment to come back on line - once this occurs, pulp should prove to be more available.
New
research from Forrester has found that while a minority of consumers is
willing to pay for online content, not all pay models are considered
equal.
The findings are relevant today when just about every
print publisher is hunting for ways to offset declines in ad revenue by
shifting their revenue burden to readers who are used to a world of
free online content.
While 80 percent of consumers said they
would not pay for access to online content if the publisher erects a
pay wall, equal amounts—8 percent—said they preferred an online
subscription and multichannel subscription. Only 3 percent said they’d
prefer micro payments.
That suggests publishers should keep
offering free, ad-supported products to the vast majority who won’t
pay, while giving those who will pay a choice of payment methods for
access to premium products, says the Nov. 10 report entitled
"Publishers Need Multichannel Subscription Models."
Favorites were outlined as follows
37% Web site
14% portable devices like mobile phones
11%, laptops and netbooks
10 % print publication via an emailed PDF.
3 % e-readers like the Kindle
Notably, fully 44 percent said they preferred none of those options.
Who
will pay for online content? The study found that people who are
college-educated, technology optimists and higher earners are more
likely to pay for online newspapers. Age was barely a factor in
willingness to pay.
Age was a bigger factor among those who are
willing to pay for online magazines. That group also is more likely to
be college-educated and favoring technology. Income is barely a factor
among this group, though.
Another paper producer,
AbitibiBowater, has joined International Paper and others in a request
to allow the Federal Government to allow larger trucks on USA highways.
The bill being reviewed is called the Safe and Efficient Transportation
Act, a bill that would allow trucks outfitted with an extra axle to
carry more weight on interstates.
In
AbitibiBowater's case, just for its one mill in Calhoun, TN, it would
eliminate 58 trucks per week and save $3 to $3.5million each year. The
bill would also reduce the amount of trucks and, therefore, pollutants
emitted.
Longivew Fiber, a smaller producer
(#12 at 600,000TPA), just announced a $50/ton price increase for
shipments after January 1 on kraft linerboard and corrugating medium.
The industry requires International Paper and Smurfit-Stone to follow
for this new price level to occur. The mills have been disparate for a
price increase because fiber costs are up and the black liquor credit
will be gone. The challenge is soft demand - October box data show
continued weak volumes.
Shipments were down 5.8%, although inventory down as well.
A recent American Press Institute survey found that 58% of newspaper
respondents are considering initiating paid access for currently
open/free news and information online, and nearly 25% expect to
implement a paid strategy in the next six months. This is a big change,
considering that 90 % of the responding newspapers currently do not
charge for content, and only 3% currently have a paid-only site.
But
in Publishers Need Multichannel Subscription Models Forrester finds
that “most consumers (80%) say they wouldn’t bother to access newspaper
and magazine content online if it were no longer free (no surprise),
and the rest are split about how they’d like to pay for content.
AbitibiBowater will delay
curtailment of newsprint and uncoated mechanical paper production in
three facilities, adding 60,000TPA through year-end. Management
reported on improved demand.
-Clermont, QC, the 125,000TPA newsprint PM #4 will operate through December, instead of being idled Oct. 31st.
-Fort Frances, ON, the 70,000TPA uncoated mechanical (SC-B paper)PM #6 will run an added 4-6 weeks.
-Liverpool, NS, the 250,000TPA Bowater Mersey newsprint mill will run at full capacity through 2009, instead of at 50% capacity.
Over 17billion catalogs were mailed to American households last year,
56 for every American. This means the average catalog retailer sent 21
million copies, one every 26 days. Although the percentage of resulting
sales keeps declining, currently 1.3%, catalogs are still the largest
revenue generator for direct marketers, and the catalogue is beginning
to drive significant traffic and sales to the website. Most catalogues
are printed on 'glossy' paper with full color photographs of products
and plenty of text.
Although most of the paper for these holiday catalogues has already shipped, the paper market is still depressed. Unfortunately, the first quarter has never been a good period for coated shipments - so not much hope in sight for a near term turn around!
The Catalyst Paper Mill on the Campbell River in Elk Falls, Canada may
never reopen as a result of the current economic challenges and a trend
to fewer people reading newspapers. The Western Canada plant had
employed over 1000 workers and produced 700 tons of newsprint every day
for newspapers. The mill management sited online news had severely
eroded print media’s readership and cheap paper now being imported from
China. The demand for newsprint is down and many mills have become
shuttered.
China imported almost 12million
metric tons of pulp so far this year, up 42% vs. last year. Paper and
paperboard imports decreased 11% to 2.72 million tons. In October, pulp
imports dropped 21% to 1.07 million metric tons, and paper imports were
down 13% to 270,000 tons. (Source: General Administration of Customs of
the People’s Republic of China)
In an effort to boost subscriptions (especially when 1H2009 newsstand
sales are down nearly 12.5%) Hearst Magazines is looking to the web.
They forecast that as much as half the subscriptions in 2010 might come
from the web.
The publisher’s digital group reported that advertising revenue from their sites is estimated to grow 20% for 2009.
Conde Nast has made several cost cutting initiatives during 2009,
including shedding staff and publications. This was mainly a result of
advertising revenue declining by nearly a third since last year -
losing a total of 8,359 pages across all publications.
Recall, Coy Paper
reported the closure of Gourmet, Modern Bridge, Elegant Bridge, and
Cookie. The worst hit of the surviving magazines includes Architectural
Digest – down almost 50%; “W” down 46%; Traveler down 41%. On the
brighter side, Glamour increased over 6.5%.
Meredith Publishing
appears to be doing the best because of its mass-market advertisers.
Note, Conde Nast appeals mainly to luxury advertisers.
As reported in an earlier Coy Paper release, 3Q2009 advertising pages fell an average of 27.3%.
Given the massive downtime in all paper markets with nearly every mill
participating in machine closures, demand might just be matching supply
in the very near term. Paper has been readily available; prices are
depressed, and, suffice it to say, it has truly been a ‘buyers market’.
However, if the federal stimulus package takes hold and curtailed
supply allow operating rates to go back into the mid 90s, the producers
of paper could once again control pricing. Clearly, raw materials such
as pulp and energy have increased in price; most likely the ‘black
liquor ‘ credit will end December 31, 2009…. a current ‘life support’.
We think 2010 could be snug – and suppliers will advance pricing
throughout the year. The Coy Paper team strongly endorses buyers should begin to negotiate 2010 programs now.
Hachette Filipacchi Media reported the closure of Metropolitan Home
after the December issue. Elle Décor will now be the only shelter
publication for this publisher. Many similar magazines have been closed
because of the housing market collapse and economic downturn including
Meredith’s Country Home, Time Inc.’s Cottage Living and Condé Nast’s
Domino.
Metropolitan
Home is the second shelter title Hachette has folded in the current
downturn after Home, which closed in October 2008.
The preliminary determination from
the Department of Commerce should be out during this month, November
2009. Recall, we reported on New Page and other coated paper producers
requesting that the US Government review the possibility that China and
Indonesia governments were subsidizing paper mills and allowed for
‘dumping’ paper into the USA at below cash cost to produce. This
includes coated paper over 80GE brightness.
The
total imports of coated papers had increased from 131,687 tons in the
first 6 months of 2008, 185,422 in the first six months of 2009 – an
increase of 40%. During this same period USA domestic producers
estimated their shipments were down 38%.
China and Indonesia combined are estimated to have a 30% market share here in the USA.
Although paper produced from post consumer recycled fibers may cost
more than virgin paper, there are still many green initiatives that can
save money if you can not afford this grade. Note, the paper industry’s
objective by 2012 is to provide 60% of paper produced from recycled
fiber (compare to Glass – 24% recycled; Plastics 7% paper is among the
best at recycling).
-While
it is true, paper manufactured from ‘post consumer waste’ is more
expensive,; however, in many cases paper with recycled pulp
(pre-consumer) may cost the same.
-Work with your printer to reduce paper wasted on make ready, bindery, and trials
-Reduce the amount of ‘free office copies’
-Confirm
you have the correct roll or sheet size that allows for the least
amount of waste; also, review your print layout for maximum coverage of
sheet
-Reduce the basis weight of both the cover and body stock
(switching from 80lb to 70lb yields 12.5% less paper – save even more
if you mail)
-Ship by rail instead of truck
-If you are
purchasing a recycled paper, now is the time to negotiate long term
pricing. Paper is at an all time low today and therefore is a good time
to establish benchmark pricing. (Note: Insisting on firm pricing with
no increase most likely is not prudent !)
Myllykoski has agreed to sell its
Alsip Mill in Illinois to the Watermill Group. The Alsip mill will be
renamed FutureMark Paper Company, claiming to be the only US facility
able to produce 100% recycled coated paper for magazines and catalogs.
The mill can also produce a premium #4 grade and food label product
that is recycled. Total production of coated publication paper is
135,000TPA.
The San Francisco Chronicle will become the first
daily newspaper to switch from newsprint to a glossy publication paper.
The glossy paper will be used on the front page and on the first page
of most sections, along with select inside pages. The objective is to
secure more high end advertisers (and their scarce dollars).
Paper shipments in Finland are down 17% versus the 3Q08 at 2.8million
tons. Magazine papers were down 25% and printing and writing grades
declined 10%.
Due to poor new construction in both the USA and Canada, residual wood chips historically allocated to the paper industry for pulp have also declined. Lumber production in Canada is down 50% over thelast 3 years, thus creating a true lack of chips and forcing pulp mills to consume more expensive 'round wood'. The Wood Resources Group estimates that fiber costs in Canada for pulp is currently 70% higher than for the USA producers.
Please, also, visit PAPER NEWS for all the news on paper
The new owner of BusinessWeek,
Bloomberg, continues to be confident that printed magazines will
survive and accordingly, announced they produce a BusinessWeek that is
bigger, glossier and more international. At the same time, the new
owner reported they are exploring a strategy to charge for content on
their own Web site.
Bloomberg
plans to keep most of its content free while on its web site, and in
time, create deep, vertical content areas that paying users could
access for roughly $100 a year.
U.S. House of Representatives are
trying to raise more money for the nation's health care by keeping
Weyerhaeuser, Temple-Inland. and other manufacturers of pulp and paper
from claiming up to $24 billion in tax credits.
The
proposal would bar the companies from using an Internal Revenue Service
ruling made public last month to claim a $1.01/gallon tax credit for
producing biofuel from so-called black liquor, a wood byproduct from
pulp making.
I am sure the paper industry will fight this. In many
cases, it is the tax credit that creates the difference between some
producers surviving or closing their doors and letting employees go.
Market Pulp producers have started to announce yet another price
increase. The new pricing is slated for November shipments, but will
most likely not be implemented until December. The $30/mt pop will
bring NBSK to $830/mt in North America ($700/mt for BEK).
Transaction
prices continue to climb for Uncoated Free sheet, although cut size /
business papers remains somewhat flat at $1010-1060/t; 50lb rolls are
now $845-865/ton. Envelope papers also up $40/ton
Containerboard
pricing remains flat, but with pulp and other raw material costs
increases, the producers must do something. There has been equipment
curtailment, which will assist the mill's efforts to increase pricing.
Verso Paper Corp. was awarded $9.3
million in federal funding through the Department of Energy from the
American Recovery and Reinvestment Act for infrastructure improvements
at its plants in Maine and Minnesota. The company will install waste
energy recovery equipment at its plants in Jay and Bucksport, Maine,
and one in Sartell, Minn., as part of 12 waste energy recovery
projects.
September is generally the first of commercial printing’s three
biggest months; however, printing shipments dropped 11% to $7.5 billion
vs. last year, the lowest level in Sept. since 1994.
Notes for a Robert Half Survey-
New
survey of most USA businesses indicate few are planning to introduce
new eco-friendly programs - especially if it costs money. The majority
of companies are quick to add that they have already included many
'green initiatives' and feel they are doing their part. The survey
concluded by stating that end users are not willing to pay more for an
environmentally friendly product (although in many cases it DOES cost
more to produce).
Revenue from advertisements in
magazines has been a real challenge in 2009, but several publishers are
reporting good numbers for December issues.
-Time Inc.’s titles, Real Simple, Cooking Light, and Southern Living will run significantly more ad pages vs. last year.
-Conde Nast’s Glamour is up 5%, with Wired posting much smaller declines and many advertisers returning.
-Martha
Stewart Living Omnimedia’s November issue was down less than 5%, and
their December issue has a triple cover with inside cover ads.
-Hearst’s
Cosmopolitan, Country Living, Good Housekeeping, Marie Claire and O are
all posting bigger Dec. issues. Smaller declines are an improvement
this year, when advertising pages fell 27% Jan-Sept 2009.
Like so many other paper
producers, Longview Fiber Paper and Packaging Inc.had to let employees
go due to poor sales. But recently, the company introduced FibreGreen,
which is made entirely with recycled paper and is used for grocery bags
and fast-food sacks. The company’s sales are now doing fine!
Longview
Fiber obtains 40 percent of the material used to make FibreGreen from
paper recycled by consumers. The mill’s challenge initially was 100%
recycled paper is often relatively thin and weak, but Longview
developed technology to maintain quality. Most of the 60% balance comes
from paper products rejected by the mill.
A 100% recycled product
such as FibreGreen is the type of product that customers are demanding.
A couple of success stories so far include Whole Foods Market becaming
the first grocery retailer nationwide to switch to 100 percent recycled
bags. Starbucks is pushing to increase its recycled packaging, and so
is the nation's largest retailer, Wal-Mart..
FibreGreen is
manufactured on the company's No. 12 paper machine, which produces
about 400 tons of paper per day. The 100 percent recycled paper was
about one-fifth of the machine's September output.
As quoted in the October 9, 2009 BusinessWeek article called Kill a Newspaper, Save a Tree? Not Quite
The
article reported on the challenges that the paper industry is
experiencing – equipment shutdowns might save a tree or two – but its
killing employment.
Many of AbitibiBowater's rivals "are losing
money or breaking even," and have had to shutter operations
temporarily, if not permanently, says P. Scott Vallely, CEO of Coy
Paper, a specialty-paper distributor in New Canaan, Conn. "They're
surviving by issuing more bonds and taking on more debt, which isn't
sustainable."
In an attempt to gain share of
limited pockets for the consumer, Kohl’s will launch their holiday
campaigns right after Halloween, earlier than usual. They will increase
spending on digital ads by 25% and will increase customized mailings,
i.e. jewelry, general gift guide, men’s holiday gift guide based on
past purchase behavior. If competitors follow, the stronger media
presence will assist the paper industry with increased paper demanded
as a result of the additional mailings.
Maggwire.com has confirmed a model that allows magazine publishers to
monetize online content. Maggwire will let readers browse magazine
articles—currently almost 10,000 per week, including Time, PCWorld,
Vogue and Yachting, among others—free of charge. But , the new model
will use the Apple iTunes system which proved people will pay for
reliable music downloads, now they people will pay for a personalized
magazine experience.
Current
thought for the economics include subscriptions priced at $1.99 to
including one magazine title and one channel; each additional title or
channel $0.99. Single articles outside of reader-selected titles or
channels will be $0.15 per basic article, and $0.25 per cover article
(determined by the publisher).
Worldcolor announced it signed one
of the largest book printing agreements in North America with a
multi-year agreement with Macmillan. The agreement is for Woldrcolor to
print approximately 800 million major trade bestsellers, textbooks and
mass market (paperback) books. Also included in the agreement are
related warehousing and distribution services. Some of the Macmillan
names in book publishing include St. Martin's Press, Farrar Straus
& Giroux, Henry Holt, Tor, Forge, Bedford/St. Martin's, and W.H.
Freeman and Worth Publishers
Excerpts from Meredith release-
Meredith’s
national media group reported $39 million in operating profit, a 14
percent increase of the prior-year period, the company said. Revenues
dropped, though, from $294 million during the fiscal 2009 first quarter
compared to $272 this year. The group’s operating expenses declined 10
percent to $233 million, including a 9 percent drop in paper prices.
According
to Meredith president and CEO Stephen M. Lacy, national media
advertising revenues are “trending in the right direction, and we
continue to outperform our major peers and gain share.” Meredith said
its share of overall magazine industry ad revenues increased to 12.2
percent during the fiscal first quarter, compared to 8.7 percent this
time last year.
Eleven of Meredith's 14 PIB-tracked titles increased share of advertising revenues during the third quarter, the company said.
Stora Enso’s Kvarnsveden paper mill in Sweden houses PM #12, which is
the largest paper machine producing supercalendered paper like
newsprint and uncoated magazine paper, with capacity of 420,000 tons.
PM #12 set speed records, reaching 1,929 meters/min increasing
productivity and capacity.
Coy Paper
recently heard that Newsweek has decided start to charge a fee for
access to the news on their website. This new model will make the paper
the biggest general-interest daily to charge for access to its digital
information. The service will be free to those who currently subscribe
to the printed edition - or pay $5.00 per week.
Freshwater Tissue, California's
last pulp mill and the only chlorine-free/dioxin-free mill in the USA,
plans to permanently close. The mill has struggled since the mid 1990's
to compete with foreign competition. The owners were planning on
building a tissue mill as well. This west coast mill was a model of
responsible and environmentally sound American manufacturing, but
failed to attract both federal assistance nor private investors.
Like so many other national
newspapers, the New York Times continues to reduce costs (estimate 2009
reduction of $475Million) due to declining revenue (down 16.9% from
last year).
Advertising continues to struggle
-Classified down 38.3% (automotive,-32.1%; real estate, -44.1%; and help wanted,-52.5%)
-Retail advertising down 25.1%
-Circulation revenue actually increased 6.7% last quarter (but, both the NYT and Globe introduced price increases)
Meanwhile Gannett Company posted a revenue decrease of 53% in the third quarter. A few comments-
-Print newspaper advertising down 31.2%; revenue fell 28.4%
-Online advertising declined 18.5%
-Classified down (automotive, -35% ;real estate, -37% ; employment, -56%)
The San Jose, California City Council joined several other city in
their fight against plastic bags. The group voted to make the city the
largest in the nation to ban most plastic and non recycled paper
shopping bags. This will take effect until 2011, war on plastic bags
continues! The council reported that it would allow paper bags made
with a minimum of 40 percent recycled materials.
International Paper announced 1.4Million tons (4% of the market ) to be
removed from their capacity (still no word from Smurfit). This will
boost operating rates into the mid 90s and the producers are hopeful
that pricing will improve. The real improvement will come when the
economy improves and end users begin to buy things that go into boxes!
Current pricing (although there are discounts available)-
-42lbs Linerboard $525-535
-42lbs Unbleached kraft linerboard $440-460/ton
The current curtailment of 800,000 tons by International Paper and
Domtar, higher pulp prices, and lower inventories, as well as a 'very'
slight increase in demand have all assisted the producers in achieving
a price increase. While business papers (cutsize) pricing remains at
approximately $1010-$1060/ton; the uncoated offset - 50lbs witnessed an
increase of $35-40/to to $845-865.
Shipments
through September are still down 13.5% from 9/08. Envelope producers
just announced a price increase for November of $40/ton.
One area
of concern is the new Portucel uncoated freesheet machine in Portugal.
The 500,000TPA machine has started and 30% of the production might hit
the USA.
As Coy Paper
has reported in recent past releases that the big daily newspapers are
losing circulation and advertising revenue. The New York Times, today,
published an article outlining decreases in circulation for the
countries national and large metropolitan papers; confirming over a 10%
drop this year. However, the story is not so grim for community and
small town newspapers. Many of the small papers actually grew. Although
the internet has cannibalized much of this media, the small town papers
are very focused on local issues, local events, nearby movies and
restaurants, etc. These writers live, eat, and ‘play’ in the community.
Total North American packaging industry shipped $79.7Billion worth of products in 2008
Folding Carton $10.9Billin
Tag and Label $15.0Billion
Corrugated $25.8Billion
Flexible Packaging 28.0Billion
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International Paper will curtail
2.1Million tons of capacity. The company, the world's biggest supplier
of containerboard, will shutter 1.4Million tons of containerboard
(note, this is 12% of the mill's capacity and 4% of the USA capacity).
Regarding the uncoated shutdown, International Paper will close 600,000
tons of capacity which is 19% of the mill's capacity. They are the
second largest producer of uncoated paper. IP also reported to curtail
140,000 tons of bleached coated board which is 7% of their capacity.
Until
the markets improve, the mills effected by this announcement include,
plants in Albany, Ore., Pineville, La., Franklin, Va., and the
Valliant, Okla., mill.
Following these permanent shutdowns, IP
will have about 10 million tons of North American containerboard
capacity, 2.6 million tons of North American uncoated freesheet
production capacity and 1.7 million tons of North American coated
paperboard capacity.
This should significantly assist the mill in correct the excess supply and poor demand.
Fortune Magazine recently announced it will publish 25% fewer issues,
which translates into 18 issues versus the current 25. Fortune lost 35%
of their advertising pages this year. The publisher will restructure
the organization, 'beef up' and perhaps charge for content on the
website, and add editorial pages to the magazine in an effort to
generate additional revenue.
World pulp inventories were
reported to be 26 days in September - down substantially from 44 days
in September of 2008. As released in earlier Coy Paper articles, pulp
producers curtailed production in the first half of this year because
of limited demand, but, today, China continues to purchase large
shipments. Therefore, the second half of 2009 appears to witness strong
shipments. Worldwide shipments increased nearly 11% in September (vs
September of 2008) to 3.5Million metric tons; meanwhile, North American
market pulp producers shipped 628,000 market pulp tons, down 3% (vs
September 2008). Note, shipments to China doubled to 638,000 metric
tons.
In 1960, Congress, in an effort to recognize the forest products
industry, announced October 18-24 as National Forest Products week. Our
industry makes up 6% of of the GNP manufacturing sector. The paper
industry is included in the top 10 manufacturing employers. The
industry now estimates that 57% of all the paper consumed is recycled.
The DMA just reported that direct
mail advertising is enjoying a larger share of total advertising
dollars. The forecast for 2009YE is for Direct Mail to grow to 54% of
total (although the total pie is down). DMA estimates total advertising
will be down 11% to $150Billion for 2009. They forecast a steady spend
for the end of 2009 and a slight rise of 2% for 2010.
Playboy, like the majority of
other magazines, has suffered with depressed advertising demand and
revenue. The publisher just announced they will reduce its advertising
rate base by 38% in an effort to stimulate demand. Will other magazines
follow?
Domtar will shut down its
Plymonth, NC paper making operations and transition the equipment to
Fluff Pulp. The company will invest almost $75million to accomplish
this and effectively increase capacity of their Fluff Pulp by three
times current output to 444,000TPA. This project will be completed by
4Q2010.
After Domtar ceases to produce paper in Plymonth, they will have reduced capacity of uncoated business papers by 200,000TPA.
Coy Paper continues
to be surprised at the current strength for market pulp. The price
increases all seem to be accepted, and the deep discounts are drying
up. The strong demand from China along with low mill inventories and
curtailed capacity have all assisted with the tightening of supply.
NBSK will soon be up another $30/MT to $800/MT; SBSK also up $30 to
$750/mt; BEK to $700/mt; HBSK to $690/mt; and SBHK to $670/mt.
With new list prices at this level, one might assume some of the curtailed pulp producing equipment might be re engaged!
Postmaster General Jack Potter recently confirmed that the USPost
Office would not increase postal rates for market dominant products in
2010. This includes First-Class Mail, Standard Mail, periodicals and
single-piece Parcel Post. Changes in pricing for other products such as
Priority Mail, Express Mail, Parcel Select and most international
products, These USPS products are still under consideration.
This should assist the magazine, Catalogue, and direct mail vendors.
Consistent with our earlier Coy Paper release,
NewPage will take 160,000 tons of market related downtime in the forth
quarter. The #63 coated paper machine in Whiting, WI will be shuttered
'indefinitely' and #10 in Rumford. ME will be curtailed until market
demand and production can be better balanced. NewPage, along with other
USA coated paper producers have combined efforts with United
Steelworkers to file an anti dumping duty case against China and
Indonesia in violation of international trade rules.
Conte Nast’s two golf publications were the most recent causalities for
the company and the publication industry. Golf Digest’s advertising
pages are down 21% and Golf World is down 24% causing the company to
reduce staff for both magazines to cut costs.
AbitibiBowater restarted its #6
paper machine in Fort Frances, Ontario and will keep it operational
through mid November to meet orders. As reported in earlier Coy Paper releases, it has been down since early March.
Yueyang started trial runs on the new #9 uncoated paper machine in Yueyang City, Hunan Province. Coy Paper has reported on this expansion with a forecast to have a capacity of 200,000 TPA.
By: Vanessa Voltolina
Once
again, the number of magazine closings has outpaced the number of
titles being launched, according to the latest report from MediaFinder.
But when comparing the number of titles (383) folded through the third
quarter of 2009 to the same time period in 2008 and 2007, the pace is
significantly less.
According to MediaFinder's most up-to-date
numbers, 643 magazines ceased publication in 2007, and a total of 613
magazines closed in 2008. Right now, that means we’re 230 titles off
from last year’s total. So unless there’s a dramatic push in closings
through the fourth quarter, it looks like the industry may be looking
at fewer magazine closings from the past two years.
Of the 259
titles to launch so far in 2009, the report showed that publishers have
pulled the plug on 104 more magazines since the first half this year,
when 279 folded publications were counted. During the third quarter, 72
titles launched while 104 magazines closed, including the high-profile
closings of publishing giant Condé Nast's four titles—Gourmet, Cookie,
Modern Bride and Elegant Bride. Other titles to vanish in ’09 included
Meredith’s Country Home, Hallmark, American Express Publishing’s Travel
& Leisure Golf, Time Inc.’s Southern Accents and Rodale’s Best Life.
Of
the launches in 2009, the regional category topped the list with 15,
but also experienced the most folded titles (31), including Tampa Bay
Living. Both business and lifestyle categories also declined, folding
14 and 13 titles each, respectively.
The food (14), health & fitness (13), and home (13) categories proved to be popular for launches this year.
B-to-b
publications accounted for 75 of the new title launches, 130 of the
shuttered magazines, and 24 of the magazines that ceased print editions
over the past nine months, the report said.
Most of the paper companies have attempted (some successfully) announcing and successfully implementing
price increases or at least transaction prices (that is reduction of
deep discounts). Although pulp prices continue to increase, many of the
other raw materials have been steady such as labor costs, transportation and energy.
Creating demand continues to be the biggest challenge and Coy Papersafety predicts more capacity rationalization - both shuttering equipment and short term production curtailment. Beyond stimulating demand, prices will remain under pressure and the end to the infamous 'black liquor ' credit are large concerns.
The New York Times Company has decided not to sell The Boston Globe
indicating that it did not think the bids it received were high enough
to merit a sale.
The
NY Times management had been considering shuttering The Globe because
of heavy losses ($85 million estimated for 2009). But after deep cost
cuts, some achieved in a bitter showdown with labor, the paper’s
finances improved.
Two bidding groups reportedly had made preliminary offers of about $35 million cash and the assumption of pension obligations
The magazine publishers are finding that special issues are attracting
the advertising dollars. This follows the same logic as to why
advertisers pay premiums for the Oscars or Super Bowl, special issues
are seen by more people who are more engaged and it creates a lot more
buzz than regular issues. Publishers such as ESPN’s Body Issue was up
35%; Time’s ‘Man of the Year’ and People Magazine run several special
issues a year, they report 20% more advertising dollars.
NewPage will shutter #63 paper
machine in Whiting, WI. The machine produced 160,000 tons of coated
paper. Customers will be supplied for coated groundwood publication
papers from Biron, WI and Rumford, ME, where capabilities have been
expanded.
Onyx Specialty Papers agreed to
the purchase of MeadWestvaco's South Lee, MA complex. The facility
produced laminates and many other special industrial papers. Onyx was
formed by the plant’s current general manager, Patricia Begrowicz, and
vice president of Sales and Business Development, Chris Mathews. The
deal is expected to be completed this year.
Corner Brook Pulp and Paper in western Newfoundland will take the mill down for two weeks.
The
company has been effected by the poor demand resulting from unfavorable
market conditions, the loss of some orders, the high Canadian dollar,
and the low price of newsprint.
The major producers of
containerboard grades continued to offer an additional discount price
of $10-20/ ton for September shipments in an effort to stimulate
demand. Prices have been sliding steadily since May. Short of the
economy improving, allowing for folks to start buying products that 'go
into boxes', - many look for the two market leaders, International
Paper and Smurfit, to shutter capacity to balance the excessive supply.
MediaWeek recently published an
article on the depressed advertising revenue for magazines. They stated
the obvious, that is, no one needs reminding that 2009 was a horrible
year for print. Overall, the industry was headed to shed nearly twenty
percent of its advertising pages, although some are seeing their pages
plummet by as much as 50 percent. MediaWeek, like many others, believe
pages are unlikely to return to levels titles enjoyed in the past. To
stay afloat, magazines are aggressively seeking new initiatives of
growing revenue outside the traditional ad-based model. Fewer
advertising pages generally lead to fewer editorial pages which yields
less paper demanded; this is especially bad for coated groundwood
publication grades.
Coy Paper had
reported that Kruger was to shutter two coated publication paper
machines; however, management just announced they will continue one of
two coated paper lines at Trois-Rivieres. Annual production will shrink
from 130,000 to 75,000 metric tons. The remaining paper machine and the
pulp plant will shut down indefinitely later this month.
As an update to an earlier Coy Paper release on current news of the Pulp and Paper Industry,
The Association of European Fine Paper Manufacturers, CEPIFINE,
reported on August uncoated and coated woodfree papers and the news
reflected a decline in shipments. The coated woodfree shipments in
August fell nearly 21% to 576,000 metric tons. On the uncoated woodfree
grades, these deliveries declined 20% to 411,000 metric tons.
As Coy Paper
reported earlier, the price of pulp continues to increase and all the
majors are standing firm on their price increases and capacity
slowdowns. Also, discounts are slowly being reduced.
Recently, the
producers of groundwood containing coated publication papers are
working with end users toward a reduction in discounts by as much as
$60-$80/ton (must feel good after witnessing a decreased price level
nearly every month so far in 2009). Demand increased better than 15% in
September (vs. August) and the paper market for these grades are ‘only’
down 8% vs. this time last year.
Meanwhile, containerboard demand
still remains somewhat weak and pricing remains under pressure. The
real key in near term is will the big producers (International Paper
and Smurfit) reduce capacity to control supply.
Commercial printers reported on their August shipments and commented
they continue to trend downward. The August shipments dropped to
$7.3Billion, down 11.5% or $950 million, the steepest dollar decline so
far in 2009 (vs. last year).
Conde Nast announced that they
would close four magazines: Gourmet, Cookie, Elegant Bride and Modern
Bride because the advertising pages dropped significantly, The company
reported that Gourmet was down 46%, Cookie’s down 19.5%, Elegant Bride
down 32.5% and Modern Bride down 21.5%. Remaining Brides magazine will
increase frequency to monthly and Bon Appétit will continue. Condé Nast
is keeping alive Bon Appétit, an in-house rival of Gourmet.
Gourmet's circulation is 950,000 and Bon Appétit's is 1,300,000.
Pulp inventories continue to be low, China's appetite for pulp is on
the increase, and supply is in balance (with several producers
shuttering equipment) - the October pulp increase of $30/MT for HBSK
and SBSK is being being paid.
Worldcolor (previously called
Quebecor World) will stop production at their Olive Branch, MS printing
facility by end of this year , 2009. Two other divisions will take over
the production upon closure.
Excerpts from Converting Magazine
World
demand for converted flexible packaging is forecast to increase 3.5 %
annually to over 19 million metric tons in 2013. Factors contributing
to this rising demand will include growth in food and beverage
production, which represents the largest market by far. In addition,
cost, performance and source reduction advantages, will continue to
favor flexible packaging products over their rigid counterparts.
Gains
will be limited by the mature state of the packaging industry in
developed areas such as the US, Western Europe and Japan, where the
main markets for flexible packaging but are well-established.
The
fastest increases will occur in the world's developing regions. Asia,
Latin America, Eastern Europe and the Africa/Mideast region will all
outpace the global average.
Some of the best gains are expected in
China, which has surpassed Japan to become the world's second largest
converted flexible packaging market (behind the US); and India, which
will benefit from strong growth in domestic output and consumer product
markets. The fastest world growth (5.2%/year) is forecast for the Asia
- Pacific region. Rapid gains are also expected in Russia and
Indonesia, which will benefit from greater investment in
state-of-the-art manufacturing equipment, resulting in improved product
quality.
Plastic films, which account for almost three-quarters of
global converted flexible packaging material demand, will continue to
make inroads at the expense of paper and aluminum foil.
Ahlstrom is beginning to inform
customers about price increases on all of its specialty paper grades, a
result of rising costs for raw material and energy.
Ahlstrom's
Specialty Papers segment has production sites in Brazil (Jacarei),
France (Bousbecque, La Gere, Pont-Audemer, Rottersac, Saint-Severin and
Stenay), Germany (Osnabrück and Altenkirchen), Finland (Kauttua), Italy
(Turin) and USA (West Carrollton).
Apple is aiming to redefine print
using the Apple Tablet – just as they did with the computer, cel phone
and MP3. The Apple Computer device is expected to be ready for sale in
January. If the Tablet becomes popular for digital magazines,
publishers will be correct in fearing a faster decline in printed
material.
Posted by
P. Scott Vallely
Please, also, visit PAPER NEWS for all the news on paper
From a AF&PA Report -
A
new report by the American Forest & Paper Association presents
final data for the U.S. paper and paperboard industry for 2008 and
shows total production of these products declined 4.9% to 88.4 million
tons, the lowest production amount in 15 years.
“These results
follow a modest 0.8% decline in 2007, and reflect the severity of the
recession in 2008 on the paper and paperboard industry in the United
States,” said AF&PA Chief Economist Dr. Stanley Lancey.
The
report shows the peak year for paper and paperboard production in the
United States was 1999 when production totaled 98.6 million tons.
Ironically,
worldwide economic forces suppressed imports to and boosted exports
from the U.S. during 2008, according to Dr. Lancey. The report shows
imports of paper and paperboard declined 9.5% in 2008 while exports
increased 6.1% to an all-time high of 15.5 million tons.
Report from CEPIPRINT
(tonnage figures are in metric)
The
Association of European Publication Paper Products, reported a decline
across all European paper in demand and shipments in August.
•
Coated Mechanical demand dropped 16.5% to 527,000 tons, shipments down
18% to 635,000 tons. Volume to US/Australia down, with growth to Japan.
•
SC-Magazine demand dropped 10% to 300,000 tons, shipments down 16.5% to
346,000 tons. Exports down 43% to 46,000 tons, due to
US/Australia/Brazil.
• Uncoated mechanical demand fell 18% to 150,000 tons, shipments down by 22% to 183,000 tons.
Spending on advertising across 27 countries dropped nearly 6% in the second quarter, (note; less than 1Q09 drop of 8%).
Some highlights-
Asia spending +2.2%
North America down 15.9%
Europe down 9.1%.
Marketers
in automobile and financial services cut back most, while retailers,
consumer product and health care increased slightly.
Each month Nielson reports on the
top sites, by unique visitors, for learning about current events. Note,
only three newspaper websites hit the top ten list – NY Times, Tribune,
and Gannett.
August results-
Yahoo! News -- 43,469,000 -- 7%
CNN Digital Network -- 38,024,000 -- (-2%)
MSNBC Digital Network -- 36,450,000 -- (-30%)
AOL News -- 26,309,000 -- 14%
NYTimes.com -- 17,183,000 -- (-13%)
Fox News Digital Network -- 16,999,000 --- 22%
Tribune Newspapers -- 15,801,000 -- (-10%)
ABCNEWS Digital Network -- 13,873,000 -- 4%
Google News -- 13,442,000 -- 11%
Gannett Newspapers/Newspaper Division -- 12,981,000 -- (-10%)
Most of the successful catalogers now compliment their respective
printed publications with an on line e-ecommerce website. In today’s
challenging economy, with distribution and printing on the rise, many
are now focusing on the electronic editions. Websites allow for
efficient speed, accessibility and overall ease over the printed
catalog. Biggest benefit with online catalog is the large audience
capability to expose potential end users. The web allows for timely
data and updates on both current product offerings and new items. The
online catalog also provides side-by-side comparisons and 24/7
satisfaction.
Pulp and Paper International just reported on the top producers for
2008. The list illustrates some changes in that several mills merged or
shuttered equipment. International Paper remains at #1, but two Chinese
names entered the list, ShandongChenming and Nine Dragons. Also companies such as Koch (GP), Kruger, White Birch, Asia Pulp and Paper, and APRIL did not make this list. Check Coy Paper's web site on Industry Resources Tab for more details.
Top Producing Areas tons per year (% world)
North America – 70,020,000tons paper (35%) / 13,921,000 mkt pulp (37.4%)
Europe – 70,480,000tons paper (35.4%) / 8,679,000 mkt pulp (23.3%)
Asia – 48,175tons paper (24.2%) / 1,884,000 mkt pulp (5.1%)
Top 10 Producers /2008 sales for paper and pulp
International Paper $24,782,000
Procter and Gamble $13,898,000 StoraEnso $13,450,000 SvenskaCellulosa (SCA) $13,427,000 UPM $13,043,000 Oji $11,084,100 Smurfit $10.335,500
Kimberly-Clark $9,992,000
Nippon $9,983,400 Mondi $9,284,300
Top 5 Tonnage producers (000's)
International Paper 17,128 tons StoraEnso 11,746 UPM 10,641 AbitibiBowater 7,589,000 Oji 7,381
John Maine of RISI advised that the decrease in shipments of 15 million
tons of fine paper between 2007 and 2009 may never return because of
all the major changes in electronic substitution and imports to North
America and Western Europe. Worldwide there was a 3% drop in 2008 and
11% decline in 2009. A mild recovery is expected over the next year,
but not to pre 2007 levels. Coy Paper
news releases continue to report on China and India demand maintaining
a growth of 3-4% with 4 million tons of new capacity coming on-line in
China, mostly coated freesheet.
AbitibiBowater is reviewing the
possible sale of its Lufkin, TX mill to CIT for $20.5 million. The
plant has been closed since Dec. 2007 and consists of 895.5 acres of
land, suitable for industrial development. The sale would save
AbitibiBowater $3 million a year and would protect them from any
environmental liability, which would be assumed by CIT.
Although the majors (incl Domtar,
IP, Glatfelter, GP and Boise ) all announced a $40/ton price increase
for uncoated freesheet grades (all except business papers) the reality
is the price is just being implemented. A quick check of the market,
50-lb offset roll prices range from $805-835/ton and cutsize grades
range from $1010-1060/ton.
The
market is in an interesting position, pulp prices are up, demand is OK
at best, inventories are low (due to curtailments), BUT, Portical has a
monster of a paper machine with tons to sell. See more on the Coy Paper site under the tab for Industry Resources and news.
Several of the the major producers of publication grades, NewPage,
Myllykoski and Verso Paper, are working hard with end users to increase
the price of their products by reducing discounts. However, Coated
Groundwood list prices in September remained flat at $770/ton. Buyers
continue to report overall demand remains weak and producers continue
to take downtime.
A
recent survey of manufacturers of coated Groundwood publication papers
revealed shipments were down 8% for 315,000 tons (vs. 2008) for the
month of August. Meanwhile, the producers of Coated Freesheet reported
shipments were 300,000 tons or down 17% (vs. 2008) during August.
The Containerboard producers saw a
slight decline in September and prices also fell by $10-20/ton. This is
consistent with declines in recent months. We have reported on box
shipments falling most of the year; August shipments continued the
decline with 9.5% decrease from 2008 (Nearly 10%YTD so far 2009).
Spot
prices on 42-lb unbleached kraftliner for Midwestern converters is in
$450-470/ton range, and Northeast as well as West Coat is in the
$420-440/ton range.
Some buyers report the small recycled mills as low as mid-$300/ton levels.
Deutsche Bank just reported August and year to date paper shipments for
printing & writing papers from North American producers.:
Uncoated Free Sheet, -10.8%YTD / -14.1%(August),
Light Weight Coated groundwood publication -8.2%YTD / -28.0% (August)
Coated Free Sheet -14.4%YTD / 25.1%(August)
Hamadan Baiyun Paper announced they will build a 280,000 TPA uncoated
printing/writing Paper machine in China, slated to start up in March
2011. They also plan a new 100,000 TPA pulp line. This mill has current
production of 7 small with uncoated machines that produce capacity of
100,000 TPA and a 37,000TPA pulp line.
The pulp market enjoyed shipments
of 3.6Million tons for August, which is a 13% gain (vs. August 2008).
Inventory levels at the producing pulp mills were down to 27 days
supply, versus 41 days in August of 2008. Of particular note was
Chinese shipments increased 23% from July to 830,000 tons – up 132%
from 2008!
The USA producers of coated paper,
NewPage, Appleton, and SAPPI, continued to charge China and Indonesia
on specific printing and writing coated papers. Recall we reported on
similar charges against these countries in 2007 and the International
Trade Commission ruled against the charges.
Cascades announced the purchase of
Sonoco Recycling and Yorkshire Paper Corp. Both of these companies
provide on-site collection for retailers recyclable materials such as
corrugated containers, paper and plastics. Yorkshire collects nearly
24,000 tons from retailers in New York and New England and Sononco
collects 190,000 tons across Canada.
Cascades
now has 19 recovery facilities supplying the company with half of the
2.2Million tons Cascades processes in their paper making process.
Production for the USA
containerbroad producers fell nearly 10% in August (vs. August of 2008)
and July shipments appeared flat (vs July 2008). The AF&PA reported
containerbroad production this year is down over 12% (vs 2008 YTD).
Components of this market were also down - Linerbaord down 12% and
Medium fell 13% (vs 2008 YTD).
As of today, I know of no USA
producers in discussions for building a new uncoated paper machine and
increasing capacity. Meanwhile, Portucel is ramping up production in
Portugal and eyeing the North American market. Also, South America is
introducing new capacity and surely the USA will be in their marketing
plans. Unless demand in North America increases, this new supply could
yield a sloppy uncoated freesheet market for years to come.
Paper ‘cents off’ coupons have
been around for 100 years, and although redemption peaked in 1992 at
7.9Billion coupons, by 2006 through 2008 the redemption fell to
2.6Billion a year. However, with the current recession, marketers
believe coupons are growing again. Initial reports indicate redemption
is up 10% during the fourth quarter of 2008 and they increased nearly
25% so far in 2009. In the past, newspapers served as the primary
source for coupons, now websites such as coupons.com offer printable
versions and several sites allow the end user to customize exactly
which stores or items to alert end users as to what is on sale. The
next frontier is thought to be mobile coupons, forwarded to the smart
phone. The New York Times reported the bulk of coupons are still
clipped from weekend newspapers and digital coupons accounted for less
than half of one percent. Let’s hope the newspapers can hold on to
this... declining coupons from newspapers means decreased newsprint
consumption and one more reason for the end user to not buy a
newspaper!
Posted by
P. Scott Vallely
Please, also, visit PAPER NEWS for all the news on paper
Snap Report from Paper Association -
Pulp
price increases announced throughout the world, effective with October
shipments: Arauco of Chile to increase prices in China on 3 grades of
pulp, Donghae Pulp of S. Korea to raise BHK in China, Canfor Pulp to
raise NBSK in NA and Asia, Domtar to raise NBSK in NA, Sodra and Fibria
to raise NBSK in Europe
Chinese paper production was over
50 million tons (up 6.2%) for the first half of 2009. Several closed
mills re-opened with a reviving economy yielding increased demand, and
low cost raw materials. Note, China imports approximately 60% of their
pulp (8.25 million tons) up 40% vs. last year.
All the news releases P. Scott Vallely reports on in the Current News on the Pulp and Paper Industry can be found with daily updates on Twitter. Click onto https://twitter.com/CoyPaper.
Many of the releases are documented before they become public
information. The twitter updates are convenience 140 character summers
of each release and come right to your computer. The releases can also
be found on the Coy Paper Web site at http://coypaper.com and click onto the industry resources tab. Also, an RSS feed is available. Happy reading. Would enjoy hearing some feedback.
Catalyst is in the middle of presenting a plan to restart production at
the Elk Falls paper mill in British Columbia. The proposal is to start
up at least 2 paper machines and begin a profit sharing system based on
earnings in return for changes to wages and benefits. Elk Falls was
shut in early February.
Scary thought surrounding the pulp
and paper industry is whether the production will return to normal
times. Most think that manufacturing will see signs of life before
2012, but the industry will see more automation and more globalization
of supply- good for companies – bad for employees. As the economy
crawls out of recession and workers return to various factories and
offices and homes begin to be brought – the forecast is for more paper
(copies, invoices, acknowledgements, etc.) and more containers (more
consumer units requiring corrugated container for packaging) demand.
But, will China, India, Brazil and Russia fill the demand for paper?
The Coy Paper Company Blog continues to report on poor advertising and declining publication circulation because of the current recession.,
Like
many forestry companies, AbitibiBowater has been hit hard by the slump
in the North American advertising industry during the recession. Most
publishers have cut the size of newspapers and magazines, reduced basis
weight, switched to more economical papers, and decrease print runs in
an effort to survive - all leading to less paper.
AbitibBowater
just announced they will indefinitely close three Canadian mills and
several paper machines involving four other mills, including one in the
USA.
The company is slowly releasing details, but we
understand mills effected include one of two newsprint machines in
Clermont, Que.; the company will idle one of the machines at its Coosa
Pines, AL paper mill indefinitely. The digital printing paper mill in
Beaupre, near Quebec City, will be shut down completely; and,
commercial printing operation at Fort Frances, Ont., will be closed.
The industry has witnessed a 30 percent drop in demand in newsprint
since the beginning of the year.
Most advertisers on "Madison
Avenue" still believe the advertising community has not seen bottom
yet, but see some relief starting in Early 2010. The forecast for the
third quarter of 2009 is for newspaper advertising to be down 25% from
2008, and estimates are for a poor forth quarter, but something better
than the 3Q2009 decline.
The
Newspaper Association of America recently reported a drop in both print
and digital ad revenue of 16.6% for 2008, and 2009 will be worse.
Beyond the challenges print media has for advertising dollars,
retailer's sluggish sales have also hurt spending budgets. Let's hope
for strong Holiday promotions!
InPlant Graphics just published a survey conducted with nearly 400 InPlant printers.
-Most common paper orders, Colored at #1, Cover Stock, Bond, Copier, Carbonless (near the bottom of the list was Inkjet Paper)
-Generally it is the Inplant Manager or Plant Supervisor that is responsible for ordering paper
-Note: most buying is by function NOT by brand name
-When asked about 'going green', most would go green BUT not if paper is more expensive
-Most inPlants ordered LESS paper so far in 2009 vs this time in 2008
-Most Inplants purchase paper through a local merchant and spent $75,000-$200,000/year on average.
The newest pulp increase of
$40/MTon from all North American NBSK producers went into effect
without resistance for buyers in North America, Asia, and Europe. The
industry has witnessed lower inventories, higher than expected demand,
weaker dollar, and return of a strong Chinese demand. Once fully
implemented, the new market list price will be $770/MTon for NBSK (a 10
month high). Note, the major buyers and large spot buyers use the list
price as a bench mark for discounted levels. Spot pricing is estimated
to be around $620-640/MTon.
As reported in past releases, Catalyst Paper, Domtar, Fraser Paper, Terrace Bay
and Nanaimo Forest Products have announced starting up curtailed equipment in an effort to supply the increased demand.
Mediamark Research & Intelligence (MRI) continues to penetrate the
magazine industry and their advertisers to increase advertisers'
confidence in the effectiveness of printed advertisements. The MRI
system (called AdMeasure) assists in confirming and measuring the reach
for magazines' audience.
MRI will measure consumer recall and response to an advertisement.
MRI says AdMeasure will raise print ad measurement to the level of TV and Internet ratings.
Posted by
P. Scott Vallely
Please, also, visit PAPER NEWS for all the news on paper
The major paper producers are busy introducing and marketing new paper
grades. Along with the Ideal and Octane product introductions we
reported earlier, the NewPage mill has also offered Arbor Plus which is
a #2 quality sheetfed paper containing 30% recycled fiber and many
certifications. Xerox recently marketing a coat one side digital paper
for direct marketing applications.
Meanwhile,
Verso is now aggressively selling their Clarity Supercalendered grades
to compete against the more expensive coated groundwood products. Verso
is producing both Clarity A and Clarity B out of the Sartell, MN
facility. The product is targeted for catalogues and offers an economic
benefit to the traditional #5 groundwood coated grade.
Note, Veros earlier started to produce light weight uncoated Versobook, Versotext, and Versoblend out of the Bucksport, ME mill.
The USA pulp & paper mills earned over $3billion in “black liquor”
credits for the 1st half of 2009 and are expected to earn even more in
2nd half. The program is scheduled to expire at the end of the year.
A
few examples include International Paper has earned $1billion, Domtar,
Verso, NewPage and AbitibiBowater have each recording $100million.
In an effort to generate additional revenue in this challenging market, several magazines are making many changes in management. Reader's Digest will be announcing their top management changes this week and Hearst announced several executive positions changing for both O (the Oprah Magazine) and Country Living.
Chairman Ben Bernanke reported
that the economy has started to grow once again in the current quarter.
Also, many analysts predict the economy is growing in the current
July-September quarter at anywhere between 3 and 4 percent.
Most
of that growth should come from more spending from businesses, which
had slashed investments -- often by double-digits -- during the
recession.
Consumers are also beginning to spend money, as witnessed by the success from the 'cash for Clunkers' program.
Manufacturing,
meanwhile, reported "modest" improvements. Residential real-estate
markets, which were hurt during the downturn, also illustrating signs
of improvements. But the commercial real-estate market continued to be
a drag in most markets.
NewPage announced they will shut a
coated groundwood (publication) paper machine in Rumford, Maine for the
last 2 weeks in September. The mill’s output will be reduced by 6,000
tons.
Wells Fargo researchers recently commented on a potential advertising recovery in third quarter.
The Wells Fargo team said ad revenue has stalled in August while
September appears to be starting off weak. Specific focus was on the
Gannett Group, a bell weather for the Newspaper industry.
Wells
Fargo reduced its Q3 newspaper advertising revenue estimate for Gannett
from a decline of 25.5 percent to a decline of 28.8 percent. Local is
forecast to fall 22.5 percent, national is anticipated to drop 21
percent and classified is estimated to decrease 40 percent (versus a
previous -19 percent, -18 percent and -37 percent respectively).
Overall advertising revenue is expected to fall 20.2 percent in Q4, revised down from a decline of 16.9 percent.
As noted in our past releases, the entire pulp market has increased the
price of pulp - both softwood and hardwood. If this $40/ton price goes
through, and we think it will, the new NBSK 'list' price will rise to
$770/mton in USA and $740/mton in Europe, and $650/mton in China.
Reports outline the spot transaction price in USA for NBSK will go to
$585-615/mton. Producers such as : Catalyst Paper, Domtar, and Fraser
Paper, have all announced pulp mill restarts.
The Kraft Paper producers in North
America have announced a $40-50/ton price increase. The manufacturers
report recent strength in order backlogs, a pop in raw materials costs,
capacity curtailments, and the recent weakening of the dollar have all strengthen the market. .
Georgia Pacific and International Paper jointly purchased the old
Curtis Mill in Milford, NJ and will clean up the site. The mill
produced 175TPD of waxed cereal bag liners.
Brazilian pulp industry is
starting to recover from the weak global demand for pulp and paper
products, according to Wood Resources International (WRI).
In
April, pulp exports equalled 766,000 tons, up 43 percent from the
previous month and 140 percent higher than shipments a year earlier,
WRI said in its Wood Resource Quarterly report.
The Brazilian pulp
companies have benefited from closures of pulp mills resulting in
reduced production capacity in the Northern Hemisphere and an increase
in demand for pulp in China
Production reached 12.8 million tons, which was up from 11.8 million tons in 2007.
Most of the major producers of both coated free sheet and coated
groundwood publication papers state the rate of decline in demand has
slowed over the past few months. As reported earlier, Verso and NewPage
have taken this opportunity to introduce price increases of $40/ton on
Coated Free grades and an attempt to reduce discounts and increase
transaction prices of $20/ton is solidly in the market for the
publication grades.
The
mills have experienced increases in input costs such as pulp and
energy, also inventories levels have declined. Our read is the industry
has a good chance of increasing transaction prices for coated papers -
but may require market related curtailment of capacity to control
supply.
As a follow up to our earlier
report, all of the major North American producers of Newsprint have now
joined in announcing a price increase of $70/metric ton. The industry
has really been licking its wounds, with a low market price in August
of $470/metric ton - now mills such as Kruger, White Birch, Catalyst,
Norpac, and Tembec have joined AbitibiBowater with the increase.
These mills make up 9.6 million metric tons of capacity.
All are introducing the price in two increments (September / October in East; October/November in West)
Georgia Pacific and International Paper jointly purchased the old
Curtis Mill in Milford, NJ and will clean up the site. The mill
produced 175TPD of waxed cereal bag liners.
Verso announced $40/ton Coated
Free Sheet price increase for shipments after September 15. NewPage
followed this announcement and added a $20/ton hike on their coated
publication grades. Many buyers were surprised. The market is still
experiencing overcapacity. Perhaps, the shuttered equipment has created
a shortage of supply to yield a tightening availability?
Although we generally report on
the poor health of the magazine industry, a few recent magazine
launches include: Afar, 944 Media Atlanta and Detroit, Port City Life
as Maine, Bi-monthly UFC, Energy Efficiency & Technology, Healing
Lifestyles & Spas , Vitamin Shoppe’s publications Amazing Health
and Muscle & Performance. We wish them good luck in this
challenging climate.
NewPage Corporation, once 100% coated papers, will expand it's uncoated offering with two new products, Octane and High Octane.
Octane
is an 80 bright, uncoated mechanical paper produced in Whiting,
Wisconsin and is engineered for both heatset and coldset printing
applications and has a standard offering in 35 lb., 38 lb., 40 lb. and
45 lb.
High Octane, an 84 bright, uncoated freesheet paper produced
in Rumford, Maine is manufactured for heatset presses in a range of
basis weights from 35 lb. to 45 lb.
UPM signed a multi-year agreement
with Xpedx on distributing selected coated paper to commercial printers
in the US and Canada. The paper will be available through all Xpedx
distribution outlets and is ensured with PEFC or FSC standards.
Freedom Communications, who owns The
Orange County Register of California and 30 other dailies, filed for
bankruptcy. Under reorganization, 26 secured lenders will take over.
Owners: the Hoiles family, Blackstone and Providence Equity will have equity stakes reduced to 2%.
The Kraft industry is witnessing increased demand in Kraft Paper and
therefore the $40-50/ton price advance announced by major USA producers
is gaining traction. Back logs have expanded from a few days to weeks.
We continue to report on the
strength of the pulp markets, and this week is no different. All the
major NBSK and hardwood producers announced $40/ton price increase for
September. This will be the fourth consecutive price hike in North
America and the fifth in Europe, and sixth in
Asia.
Reports in the USA for spot transactions reveal NBSK price rose to
$585-615/mton. The increases are a result of reduced inventories,
continued strong demand in China, and increase in USA demand.
We also note, manufacturers such as Catalyst Paper, Domtar, and Fraser Paper have announced mill
restarts.
It appears the recent announcement by the major North American
producers for uncoated woodfree papers ( offset and commercial printing
grades) for $40/ton is taking hold. This increase, effective with
September shipments, excludes cutsize paper and converting grades. The
primary factors supporting the higher paper prices include higher pulp
prices, increased demand, and lower mill inventories from extensive
curtailments and reduced imports.
According to the Newspaper
Association of America, print ad sales plunged by more than 30% in the
second quarter from a year ago, the worst decline on record. It's also
steeper than the 29.7% drop registered in the first quarter -- which
had been the worst decline on record.
A
recent survey by MORI Research indicated "newspaper advertising remains
the leading advertising medium cited by consumers in planning, shopping
and making purchasing decisions." The research concludes that when the
economy eventually begins its recovery, advertisers will return to
spending, and newspapers will find themselves extremely well positioned
to harness the strength of their print and digital platforms to build a
brighter future. Let's hope this survey is right, for the sake the
paper industry and the future of newspapers.
The newest marketing initiative is
mobile coupons. Several new companies have emerged that are forwarding
relevant coupons to folks that opt in to programs to electronically
(via Smart Phone) receive coupons. This is becoming a growing feature
and advertisers such as Kmart, Thyrsus, and Zales confirm the
redemption rate is 15-20% (versus 1% for printed/ paper coupons).
Another nail in the coffin for Free Standing Inserts and Paper.......
The United States Postal Service
is forecasting that once the recession ends marketers will be back
mailing promotions and corporations’ will be mailing invoices. The
service has been in trouble, current 2009 estimate is for deficit for
USPS of $7Billion and mail has been trending down – 2006 – 213billion
pieces, 2008-202billion pieces and 2009 estimate is 175billion pieces.
The Postal Service believes the biggest culprits include 70% of
households with computers now pay bills on line; electronic mailing of
tax returns; and a big campaign for ‘less paper is greener for
America’. Also, recently, marketing for direct mail including credit
card offers and bulk advertising is way down. Another challenge is the
increase of communication through smart phones and not mail.
With
knowledge of all these challenges, USPS feels printed advertising is
more powerful than electronic communication and marketers will return
once the economy improves. Less mail means a lot less paper!
AbitibiBowater is beginning to
inform end users that they will implement a $70/ton newspaper price
increase in two stages. The first is a $35/ton hike on Sept. 1;
followed by another on Oct. 1.
2009 has yielded many challenges
for the Paper producers; summarized by limited success in holding, much
less increasing prices. Newsprint producers have seen their prices drop
to cash costs -mainly due to pressure from poor demand. While demand
has not been stellar, the uncoated freesheet and packaging producers
have maintained significantly better margins and are now looking at
price increases for the Fall.
Pulp
pricing, the basic raw material for all paper, has recently witnessed
price increases and extended backlogs. The Chinese market has really
assisted improved pulp demand.
In a recent survey by PFFC,
distributors for unprinted rolls and sheets reduced their workforce as
well as converters of Tags, labels, and tapes as well as paperboard
packaging and will not rehire until several months on increased orders
are actually on the books.
IP and Glatfelter announced a
$40/ton ($2/cwt) price increase on uncoated freesheet offset and
commercial printing papers, effective with September shipments.
Wausau will increase the transaction price by $2.00/cwt. on the following products:
Exact® Index
Vellum® Bristol
Exact® Tag
Exact® Opaque Colors
This is effective with late September shipments.
Neenah Paper Company and Crane
& Co. Inc. announced they have signed an exclusive partnership
agreement for Neenah to manufacture, market and distribute Crane's fine
business paper brands: CRANE'S CREST®, CRANE'S BOND®, CRANE'S LETTRA®,
CRANE'S PALETTE(TM) and CRANE'S® Choice Papers.
We reported on Doubledown (a
publisher of magazines aimed at the Wall Street elite) going out of
business in February and filing for Chapter 7 bankruptcy. Updating that
release,
an auction was recently held for Doubledown Media assets and most minimum bids were not met.
Examples
include; the minimum bid for Doubledown’s Dealmaker was $100,000. For
Corporate Leader and Trader magazines the lowest acceptable bid was
$50,000. The minimum bid for Cigar Report was $25,000.
The minimum bid for all five titles was $300,000.
None of the auctions were successful – all bids too low!
Posted by
P. Scott Vallely
Please, also, visit PAPER NEWS for all the news on paper
It appears the Pulp, Containerboard, and Uncoated Wood Free papers may
see some relief and gradual improvement. In the past few weeks all
three markets have stabilized, and in fact, Pulp and uncoated papers
has actually witnessed price increases.
Although
Containerboard has not enjoyed increased demand, the price levels
appears to have stabilized. This has been largest assisted by massive
curtailment of supply (see my past reports on Smirfit and International
Paper downtime).
Pricing for uncoated papers are enjoying modest
increases in transaction prices. In fact, the major producers have
formally announced a September price increase of $40/ton for Offset,
Opaque and Bristol grades. Many in the industry are forecasting the
deep discounts will go away and the true effect of the September
increase will really be $60/ton.
One of the largest producers of
paper for magazines, books and high-end advertising, Sappi, North
America, will permanently close the Muskegon, Mich., paper mill. I
reported in March that this mill will be idled for an undetermined
amount of time. This coated fine paper mill had an annual production
capacity of 170,000 TPA.
The
global economic downturn and reduction in demand of 32% this year has
resulted in very weak demand for coated fine paper worldwide.
Products
previously made at Muskegon have been and will continue to be produced
at the other Sappi mills in Skowhegan, Maine, and Cloquet, Minn.
Portugal’s largest pulp and paper
company, Portucelis, is considering expanding in the paper market at a
time when larger rivals are cutting production.
The
machine will have a capacity of 500,000 tons a year, making it the
world’s biggest for the production of office and graphic paper. It will
increase the company’s total paper production capacity to 1.5 million
tons a year.
From Reuters Wire Service
At
Reuters Paper & Packaging Summit, Chief Executives from UPM, M-Real
and Norske Skog spoke about the need for consolidation in the paper
industry. UPM stated that they would be an active player, focusing on
costs and balancing demand-supply.
As we reported in May/June, Vibe
Media Group closed their doors, blaming the poor economy and a decline
in ad spending. Vibe and Vibe.com recently announced that InterMedia
Partners, a private equity firm founded by Leo Hindery, Jr., purchased
the publication.
InterMedia is combining Vibe with the operations of another urban lifestyle magazine it owns, Uptown.
Catalyst will restart pulp production at its Crofton NBSK kraft mill on
Vancouver Island, BC in October if market conditions continue to
improve. The line will add 210,000 TPA.
The industry’s newest paper
machine started up three weeks ahead of schedule. Palm Paper’s
facility, on the River Great Ouse in the UK, will produce up to 400,000
tons of newsprint paper each year.
As we reported late last week,
Reader's Digest was evaluating a move to file for bankruptcy. This just
became official. The filing will assist in reducing the $2.2billion in
debt to $550million.
Just reading a piece from Jeff
Jarvis (past editor of NY Daily News) and he outlines the fact that
coupons are now available on line for free and listings for movies are
now easily attainable online - this has hurt newspaper demand. He
believes there was a large population that purchased newspapers for
only the coupons. Many would also purchase a newspaper for the local
movie listings – all now available online – for free. Certainly, two
more factors leading to fewer newspapers is less disposable income for
purchases such as a newspaper and electronic news seems to be picking
up readers.
Perhaps the only shinning star in the industry is market pulp; whereby,
reports for July shipments confirm an increase of nearly 4% from July
of 2008. China continues to buy pulp and is certainly assisting the
demand.
Worldwide
inventories have decreased and we hear pulp is now under 30 days
(versus 36 days at this time in 2008). Pulp prices are witnessing
increases as a result from companies such as Canfor Pulp, Domtar,
Aracruz, Suzano, Arauco, Botnia, Donghae Pulp, Mercer Intl, Tembec,
VCP, Sodra, West Fraser and Winstone (price inceases ranging from
$30-50/ton).
I just saw an interesting report
on the International Paper website comparing the ‘green’ factor of
digital / electronic media and traditional paper. The document confirms
paper being more environmentally friendly.
A few highlights
-Sustainability
– Paper industry plants 3 trees for every one forested – trees are
renewable. Computers are made from environmentally unfriendly materials
that cannot be recycled.
Energy – Most paper producers today have
power supplied from carbon neutral resources. Powering up a PC comes
from electricity, which is produced from nonrenewal fossil fuel.
Recyclability
– Paper is completely biodegradable and the paper industry recycles and
reuses nearly 60% of paper that has been returned from the market.
Computers, servers, cables, and monitors continue to end up in
landfill......and are not recyclable.
Difficult for me to report an optimistic future for the Newsprint
Market. I suppose one glimmer of bright light is that the balance of
the world has not experienced as deep nor as fast a decline in
Newsprint demand. Newspaper advertising in the USA continues to fall,
and the trend does not appear to be stopping (FYI, advertising down 30%
in the first quarter alone!).
USA
newsprint demand for 2009 is forecast to be 5.3million tons. Production
for North American producers was 10.4million tons in 2008 - the
forecast 2009 is 7.6million tons.
Individual companies are
particularly hurt; AbitibiBowater (world's largest producer of
newsprint) lost $100/ton on its current shipments. Mr. Mark Wilde
reported average selling price was $581/mton, while AbitibiBowater's
average cost of manufacture was $688/mton. Note, larger buyers are
reported to actually be purchasing paper at less than $400/mton. Again,
not a rosy picture!
Pulp prices in North America
continue to increase with the latest announcements for NBSK list price
in August heading north for the third month in a row, up $30/ton to
$730/ton.
Currently,
this market is witnessing reduced inventories - given strong demand
from China and shuttered equipment reducing over all capacity.
Note, SBSK list price also increased $30/ton to $680/ton
Notes from a report by Jim Milliot of Publishers Weekly
Many
anticipate that 40,000 college students at over 400 colleges will use
open source digital textbooks from Flat World Knowledge this fall. Flat
World went live in spring 2009 with 1,000 students from 30 colleges
using its offering.
The Flat World’s pricing/business model
students allows access entire textbooks for free online; pay $19.95 for
a PDF download; pay $29.95 for a black and white printed version or
$59.95 for a color version, or pay $39.95 for an audio version. Books
are available by the book or by the chapter. Study aids or also
available for purchase.
Eric Frank, a cofounder of Flat World
believes a quantum leap will occur for fall 2010 when he thinks the
number of students could be between 120,000 to 200,000.
If more books are read digitally, this means less text paper sold ..... another challenge for the paper industry.
Hewlett Packard just reported a significant decline in ink cartridge
sales. The challenging economy has resulted in massive layoffs and
therefore fewer office workers producing printed copies. HP is
evaluating a new environment upon which corporations are reducing costs
and asking workers not to print unnecessary documents. This could be
long lasting as the world is becoming increasingly more comfortable
with digital documents.
Note, HP printing group accounts for nearly 25% of the total corporate revenue.
Recall that Reed Business Information closed 13 publications in April
and this week, John White announced his company will acquire these
titles White will re-launch all by September, published under
Associated Construction Publications Group (ACP), expecting collective
revenue of $5 million in 2010.
The industry just announced price
increases for September shipments of $40/ton for all grades of coated
and uncoated recycled paperboard by nearly all major North American
producers to offset raw material cost increases. These producers
include Strathcona Paper, Graphic Packaging, RockTenn, Sonoco,
PaperWorks Industries, Caraustar, Newark Group and Ox Paperboard.
Challenge is two fold - demand remains poor and most end users can not
pass an increase through to their respective end users. Lots of
resistence here .......
Moorim announced a new Voith Paper
paper machine to their DongHae site to manufacture woodfree coated,
woodfree uncoated and machine finished coated paper with an annual
capacity of 450,000 tons. This will be the 1st integrated pulp &
paper mill in South Korea and is scheduled for start-up in spring 2011.
It will be environmentally friendly, using the steam incurred during
pulp production instead of fossil fuels.
In past releases, we had reported
that Nordic paper companies experienced losses at the end of last year
given slow demand from customers for newspapers and magazines. This
year has not proven to yield any improvement and total production in
the forest sector has slumped by some 30 percent.
On
Finnish company, Stora Enso, will now lay off off up to 1,100 workers,
cut production and close mills in Finland as the paper maker continues
to struggle with dwindling revenue.
Stora Enso is one of the world's
largest forest product companies making magazine paper, newsprint, fine
paper, pulp and packaging boards.
The Pulp & Paper Week publication just reported most US pulp and
paper companies had higher earnings in the second quarter vs. first 3
months of this year. Lower input costs certainly assisted, but a major
factor was from alternative energy black liquor credits (+$1.6
billion), which offset losses.
Household publication, Reader’s
Digest, will restructure to reduce it's debt under a voluntary Chapter
11 filing. This will only affect their US businesses. The senior
lenders will exchange much of their debt for equity.
Financial Times, which has charged
a fee for online news since 2002, announces model to accept
'micropayments' for individual articles. Many of the major newspapers
are now reviewing models to generate revenue beyond online advertising
as reported in past releases. Currently, most newspapers do not charge
for online news.
The American Forest & Paper
Assn.just published the preliminary report for printing and writing
paper shipments in July. The report outlined 1.464 million tons, down
15% vs. July of 2008, but up 5% vs. June 2009.
Results as follows-
Coated mechanical: 258,939 tons, down 19.1% vs. 7/08 and down 3.7% vs. last month.
Coated freesheet: 281.964 tons, down 16.2% vs. 7/08 and up 13.6% vs. last month.
Uncoated mechanical: 142.418 tons, down 25.1% vs. 7/08 and up 15.5% vs. last month.
Uncoated freesheet: 780.238 tons, down 11.2% vs. 7/08 and up 3.2% vs. last month.
Like printed advertising spending, online retail spending is starting
to decrease. On line spending totaled $30.2 billion in the second
quarter, a 1% decrease from $30.5 billion in the prior year. All
advertising dollars are effected by the nearly 10% unemployment rate,
rising gas prices, and consumers attempt to increase savings, - all
contribute to reducing consumers’ discretionary spending.
The Boston Globe and Herald as
well as News Corporations’ New York Post and Times of London has
announced it will start to charge end users to access their websites
for news. All newspapers are aggressively seeking additional revenue.
It is said the paper industry
still follows the economic indicators, so it was good news to hear the
Federal Reserve stated that the US recession was ending, due to
consumer spending, financial markets and corporate inventory building
stabilizing. The Fed cautioned that it would be a slow recovery and
that they will keep short-term interest rates at virtually zero. Many
economists believe we will not see any continuous signs until beginning
of 2010.
Reversing a news release we published earlier, Fraser and their union
forged an agreement, which will allow Fraser to reopen the pulp mill in
Edmundston, New Brunswick, Canada by the end of August.
The MindFireInc just reported on
results from a survey which included many of the In-Plant printers.
During these difficult economic times, survey results reported-
-Two biggest challenges for the printers included reduced budgets and difficultly attracting new business.
-Most believe that ‘things will get worse before they improve’
-All agreed that to grow revenue requires new services, self promotional marketing, adding new equipment and visiting end users.
-When
asked about reducing costs, all reported they would renegociate prices
with suppliers, cut internal staff, and change suppliers
The USA paper producers are beginning to report results for the second half of 2009, and most are announcing losses.
-Cenveo
reported quarterly net sales of $397.6 million, down from $524.5
million for the same period last year. Cenveo recorded a net loss of
$18.3 million
-NewPage, USA largest producer of coated papers, net
loss of $6 million in 2Q was an improvement over the $21 million loss
in 2008,
-AbitibiBowater reported a net loss of $510 million in 2Q, double 2008. Sales only $1.04billion.
-Domtar Inc. turned a net profit in its second quarter
-UPM-Kymmene Corp. , the world's largest magazine paper maker, reported a second-quarter net loss of euro8 million
The Southern Accents magazine issue will print the final issue with the
September/October edition. Time Inc., publisher of the magazine,
announced advertising pages had declined by 37.4% in the first half of
2009. This magazine was a bimonthly with a circulation of 400,000.
AbitibiBowater will shut down 2
more machines, both at the Thunder Bay, Ontario mill. Paper machine #4,
which produces 146,000TPA of uncoated mechanical paper (publication),
and #5Paper Machine , a 250,000TPA newsprint machine. Both will remain
down until the markets improve.
Notes from report by Deutsche Bank
North
American NBSK list price rose for the second month in a row by $40/ton
to $700/ton. This increase resulting from worldwide inventories for
market pulp having declined, producer downtime and closures, as well as
strong demand in China .
Local producers that have announced increases so far include
Canfor, Domtar, Northern Pulp, Tembec, and West Fraser slated domestic NBSK prices at $730/ton.
Other
North American producers that have announced a $20-25/mton price hike
on key hardwood grades include Alberta-Pacific, CENIBRA, Sappi NA, and
VCP.
Meanwhile, in Europe, Botnia, Mercer Intl., Stora Enso, and
Sodra have announced a $30/mton price hike on NBSK and hardwood grades.
Note, even spot price levels are expected to increase from the $560-590/ton net delivered from the July prices.
Containerboard prices, assisted with good demand, remain steady after falling $70/ton since its peak, last fall.
Note,
it has been reported that spot prices for 42-lb linerboard range from
$450-470/ton in Central US, and $410-440/ton in the Northeast region.
Recycled spot prices are below $400/ton. US kraftliner export prices
are still around the $320/ton FAS level.
I think these spot prices have remained constant for last 60 days, as well. (I welcome comments here)
Additional comments
-June box shipments down 6.5% from 2008
-Producers continue to streamline inventories and operating rates
-International Paper took 580,000 tons (21% of capacity) containerboard out during second quarter.
-Renew will restart 500TPD linerboard in St Francisville, LA
AbibitiBowater, North America's largest newsprint supplier and
operating under chapter 11, reported it will eliminate 25% of its
employees in its headquarters as well as sell $25.7million worth of
timberland These are part of the $100million cost reduction plan we
announced in previous release on this blog.
Meanwhile, Smurfit - Stone Container - another bankrupt company, will sell 1million acres of timberland.
Kruger will reduce production at both its Trois-Rivières and Wayagamack
mills for balance of this summer. Trois-Rivières will reduce coated
paper production by approximately 7,500 tons and Supercalender Paper
will be reduced 4,500 tons. Directory paper will be cut 2,000 tons at
Wayagamack; note, coated manufacture at Wayagamack will not be
affected.
Single copy sales for magazines
sold at newsstands are predicted to be down for first half of 2009 (ABC
audit not confirmed until late August). While some of this decline is a
result of our poor economy, the majority resulted from publishers’
refusal to pay the increase for ‘per copy’ fees the distributors’
demanded. Statistics on specific magazines will be announced in coming
weeks.
Buyers and mills alike wonder when
the decrease in coated paper prices will stop. For the mills, the black
liquor credit, reallocating production to uncoated grades, and taking
equipment out of production are all assisting; BUT, demand continues to
shrink and buyers continue to deplete inventory already on floor.
Unless magazine advertising increases, postal fees stabilize, and
retailers boost catalogs – not much short term hope remains. One would
assume the manufacturers are close to cash cost and, therefore, for
survival ‘ have found the floor’.
NewPage is negotiating for a loan
of $575million from StoraEnso. Note, StoraEnso already owns nearly 20%
of NewPage (Cerberus Capital Management owns the balance). Recall, in
2007, NewPage purchased StoraEnso’s facilities in Wisconsin Rapids,
Biron, Whiting and Stevens Point.
The black liquor tax credit (a
result of the Obama administration energy package) is driving down
paper prices, according to NewPage, North America’s largest maker of
coated paper. They claim the average selling price for coated paper
probably declined by $40 to $50 per ton.
Jeff Dutton, Fraser Papers's
president and COO has appointed Jim Gehrman to the position of vice
president, Sales with responsibility for all of the company's paper
product sales.
from RISI report
Beyond
announced shuttered machines, John Maine of RISI forecasts additional
3.6M tons of closures are likely around the world. John Maine, VP -
Pulp and Paper at RISI, Inc and Project Team Leader, noted, "The market
for uncoated freesheet in North America has been in decline since 1999,
falling 5% and 8% for the past two years, and the drop is certain to
accelerate in 2009.
If you enjoy reading these current
releases, Coy Paper Company LLC in now updating the company's Twitter
account daily with all the current trends on the Pulp and Paper
Industry. You may wish to follow the very latest at
http://twitter.com/CoyPaper.
As we reported in past, the USPS forecasts mailing approximately 175
billion less pieces and will loose as much as $7billion for 2009. USPS
continues to review cost cutting measures such as only delivering mail
5 days/week; closing offices; and future payments for retirees.
In order to cut costs and become
more efficient delivering more goods in fewer trips, International
Paper Company is pushing to allow bigger trucks on U.S. highways over
the objections of road-safety groups. This would keep shipping costs
down for all companies that ship full truck loads, such as Coy Paper Company.
Gould Paper (Canada), Ltd., a subsidiary of privately held Gould Paper
Corporation, headquartered in New York City was sold to xpedx, a
business of International Paper. Gould Paper (Canada) is distributor
serving western Canada .
The last edition of The Ann Arbor
News will be printed this week, ending its 174-year history of
delivering the news to Michigan's fifth-largest city.
The Ann Arbor News will be replaced with a website, AnnArbor.com, which will also produce a print edition twice a week.
Gannett Media is closing a printing and production plant by September
in Wisconsin. The plant currently prints the Fond du Lac Reporter.
Production of that paper will be shifted to Gannett's Appleton, WI,
facility.
After all the depressed news we
report on the newspaper market, the New York Times reported a profit of
$39.1million for the quarter (up from $21.1 million last year - and up
from a loss of nearly $75million 1Q09). Although advertising revenue
continues to trend down, the company has been successful in aggressive
cost cutting. The company reported a 31.9% decline in ad dollars last
quarter, while circulation rose 1.5% (due to increase in price). One
important note, even the NYT internet ad dollars fell last quarter
(down 4.3%).
Stora Enso, largest papermaker in
Europe, will stop production at unprofitable mills as demand and
pricing for paper remains weak. In a related announcement, UPM-Kymmene
Europe’s second- largest papermaker, is also reducing capacity in
Finland for the same reasons.
September issue magazine ad pages totals are beginning to be revealed. Most numbers are down versus September of 2008.
Conde
Nast ad pages in W declined 53% Allure fell by 52%, Self by 51%,
Glamour by 42%, Vogue by 37%, Details by 35%, GQ by 32% and Teen Vogue
by 32%.
Hachette Filipacchi announced Elle’s ad pages down 21%.
Hearst reported Harper’s Bazaar advertising pages fell 23-26% and Cosmopolitan 18%.
Time Inc.’s Essence ad pages decreased by 16%.
Moorim Paper in Ulsan, South Korea ordered a 430,000-450,000 ton per
year coated woodfree paper machine. The unit will be supplied by Voith
Paper and is scheduled to start in June of 2011. Half of the production
will be sold domestically and half exported to the U.S., Europe and to
other countries in Asia.
Just
last week, Shandong Huatai ordered a 500,000TPA coated and uncoated
woodfree machine, which the company plans to install in Shandong, China
and start in the first quarter of 2011.
Tembec announced to all its customers that they will be paying an
additional $30/ton ($730/ton) for its Northern Bleached Softwood pulp.
This is effective immediately. The increase includes exports. Many of
Tembec's competitors are forecast to follow this increase.
After one year operating under
Chapter 11, Quebecor World announced it will exit bankruptcy
protection. The company secured $800million in financing. The new name
of the printer will be World Color Press.
notes from a report by Jack Kenny
Label
& Narrow Width Association staff conducted a survey, converters
reported a mixed bag of results. While most commented on sales declines
as deep as 30 percent a few boosted increases as high as 50 percent.
Profits were down for most, but up for others. Printers vented strongly
against price increases by material's suppliers. The majority of them
said they were unable to pass along those increases to customers,
instead focusing on internal changes to reduce operating costs.
Yet
the companies that buy labels still must buy labels, and they have been
keeping the industry pumping along. Competition, by all accounts, is
more fierce than ever. Clearly, converters directly tied to industries
such as the automobile market continue to be hurt the most.
Deutsche Bank reported stabilized pricing and recovering volume trends
prices
have dropped $70-80/ton off last autumn's cyclical peak. However,
prices were reported stable in June and appear stable again in July.
Moreover, most industry players remain reasonably profitable at current
price levels, despite a sharp drop in volumes. Industry consolidation,
a proactive approach in managing supply & avoiding inventory
overhang, and a weak US Dollar have all played a role in this
performance. Additionally, domestic and export volume trends are
recovering. June box numbers represented a first real sign of domestic
volumes starting to improve.
There were only 129 media
transactions reported for the first quarter of 2009, down 36 percent
from the first quarter of 2008; values, meanwhile, plummeted 91 percent
to a combined $1.3 billion.
The
second quarter did not fare much better and most transactions were a
result of distressed situations. Market valuations have been under
pressure due to the lack of debt capital and a general perception of
the M&A market as being a ‘buyer’s market’. The largest issue
facing magazine M&A is the lack of senior bank financing.
Cox Enterprises has sold three of its papers in Texas and Colorado. The
Waco Tribune-Herald went to the Robinson Media Co. The Daily Sentinel
and The Nickel went to Grand Junction Media (owned by Seaton
Publishing). Cox is still seeking buyers for its newspapers in North
Carolina and Texas including the Austin American-Statesman. Review
other releases by Coy Paper for additional market information on the News Paper industry.
Fraser will close its pulp mill in Edmundston, New Brunswick. The
company must now buy pulp for its 475,0000 ton per year uncoated
freesheet and mechanical specialty paper mill in Madawaska, Maine.
Fraser filed for bankruptcy on June 18 as reported by Coy Paper earlier..
The forecast is for print advertising to fall 22.8 percent to $9.8
billion between 2008 and 2010 but will rise 14.3 percent to $11.2
billion by 2013, according to PricewaterhouseCoopers. However,
circulation spending will continue to fall to $8.4 billion in 2013,
down from $9.7 billion in 2008.
But
a number of individual segments, including b-to-b publishing (-3.3
percent) and consumer magazine publishing (-1.7 percent) are expected
to decline.
The current economic slowdown has acceleration digital
migration. The report went on to comment on digital spending continuing
to be the industry’s main source of growth, with revenues accounting
for 25 percent of total sales in 2013—up from 17 percent in 2008.
The Obama administration continues to review the enormous tax credits
the pulp and paper industry is enjoying. The new found money (which is
badly needed) was discovered when executives in the industry learned
that by adding diesel fuel to the black liquor already recovered and
reused in the paper making process – the industry is entitled to the
alternative fuel tax credit.
The annual RISI ‘power’ list of paper executives was recently published. Many from Asia make the list.
Top 10 include
1 Jose Luciano Penido / Votorantim Celulose e Papel (VCP)
2 Chen Hongguo / Shandong Chenming Paper
3 John Faraci / International Paper
4 A J Devanesan / ARIL
5 Jose Honorio / Portucel Soporcel
6 Dr Wolfgang Palm / Palm
7 RR Verderah / BILT
8 Teguh Ganda Wijaya / APP
9 Duncan Pollard / WWF
10 Cheung Yan / Nine Dragons Paper
Notable
mention at #50 was the Christian Church – the bible is the best selling
book of all time. An estimated 100 million copies are sold every year.
The American Forest & Paper Association reported early estimates
for June paper shipments in the U.S. as follows: coated mechanical
shipments fell 17.7% in June, as compared to June 2008, and declined
33.5% year-to-date, as compared to the same period last year. Coated
freesheet (woodfree) shipments were down 23.9% in June and 29.3%
year-to-date. Uncoated mechanical shipments decreased 30.3% for the
month, 29.7% year-to-date. Uncoated freesheet (woodfree) shipments
dropped 16.7% in June and 15.6% year-to-date.
report from CEPIFINE
The
Association of European Fine Paper Manufacturers announced a 24.3%
decrease in European coated woodfree paper shipments in May, as
compared to the same month in 2008. Year-to-date shipments fell 26.6%.
Exports declined 43.1% in May, 46.8% year-to-date. CEPIFINE reported
uncoated woodfree paper shipments were down 16.1% in May, 17.4%
year-to-date. Exports, however, were up 3.5% for the month, but fell
15.8% year-to-date.
Another reference on the advertising revenue for 2009-
Interpublic
Group’s Magna Global, the second largest owner of advertising agencies
in the U.S., has predicted that ad expenditures will fall 14% in 2009
and not recover until late 2010. (Competitor ZenithOptimedia Group, a
division of Publicis Group, forecast a decrease of 10.6% for the U.S.
in 2009.) Magazine advertising revenue was projected to decline 18%
this year, continuing to fall at a compounded annual basis of 3.3% per
year from 2009 through 2014. Magna forecast growth in direct mail,
however. Though the sector is predicted to loose 11.2% in 2009, it is
seen as increasing 2% annually between 2009 and 2010.
Shipments and pricing remain
depressed for publication coated papers. Most buyers report prices fell
$15/cwt in June (note, May also saw $15 decline - April down too).
Printers report reduction in orders BUT, also they trimmed of inventory
- this should help - but year to date demand is down approximately 35%.
The catalog season should help.
As reported by MediaWeek July 10,2009
Magazine
ad revenue tumbled in the first half of 2009 as the recession continued
to take its toll on marketing spending, according to new figures from
Publishers Information Bureau, a service of Magazine Publishers of
America.
Rate-card reported ad revenue declined 21.2 percent to
$9 billion on a 27.9 percent decline in pages in the first half,
reflecting declines across the 12 categories that make up more than 85
percent of total magazine ad spending.
Categories seeing the
sharpest declines were finance (down 48.8 percent), auto (off 47.8
percent) and retail (down 34.2 percent).
The scant good news:
within the broader ad categories, there were upticks in ad spending for
certain food products; soaps and hair products, which benefited titles
with a focus on lifestyle, fitness and celebrities.
The struggling BusinessWeek
Magazine is looking for a new owner. This is the last of McGaw Hill’s
portfolio of magazines. Recent circulation is slightly under 1million
and advertising pages has fallen 37% so far this year. Given the fact
the publishing industry is doing poorly – school is out as to who might
have the cash to purchase BusinessWeek.
Bangor Daily News recently
released an interview with Keith Van Scotter, the CEO of Lincoln Paper
and Tissue. He commented on the paper industry and specifically which
facilities in Maine will survive. His picks included Verso of Jay and
Bucksport – producer of supercalender and coated publications papers;
SAPPI in Skowhegan and Westbrook – producer of coated free and
technical papers; New Page of Rumford – producer of coated papers; and
of course his mill Lincoln (in Lincoln)– producer of tissue paper.
Kruger will shut down three
machines and two coaters at its Trois-Rivieres mill in Quebec. The
machines had a capacity of approximately 230,000 TPA of coated
publication papers. Newsprint and supercalendered paper production will
continue at the mill and Kruger will also keep making approximately
258,000 short tons per year of coated mechanical paper at its
Wayagamack mill.
Beyond the struggle for revenue that most newspapers currently battle,
purchasing departments site resistance to a price increase for the
paper - one of their biggest costs. Most confirm that even though the
trend continues for decreased readers and all agree supply from
newsprint producers is down - but they have been unsuccessful reducing
inventory. That is, demand for newsprint is falling faster than
manufactures can curtail production.
International Paper Co. Chief
Executive Officer John Faraci , stated he expects a “modest” increase
in pulp demand this year as Chinese orders make up for declines in most
other markets, “Most of the growth is being driven by demand in China,”
Faraci said. The growth will be in the “single digit” percentage range,
he said.
Nielsen’s Global AdView Plus reported that ad expenditures decreased by
7.2% for the first quarter of 2009, as compared to the same period last
year. Spain, with a 28.2% drop in ad spending, led the way in making
Europe the hardest hit region. Sales in the U.S. fell 12.7%. The Asia
Pacific area announced a decrease of only 2.3%. Magazine advertising
was down 17.4%, 22.2% in North America, and newspaper ad spending fell
9.1%.
We reported earlier this year, St.
Mary’s Paper was closing two of three paper machines in their Sault
Ste. Marie, Ontario mill in May. These machines remain curtained. The
company produces supercalender paper.
Most catalogers report flat sales for 2008 versus 2007, top print and online catalogers include (account/catalog sales)-
Dell $51,936,000
Thermo Fisher Scientific $10,500,000
IBM $9,076,000
Staples $8,900,000
CDW $8,100,000
Henry Schein $6,400,000
Wesco $6,110,000
United Stationers $4,986,900
OfficeMax $4,310,000
Office Depot $4,145,700
After six straight quarters of
paper price increases in 2007 and early 2008, we than witnessed
aggressive discounts through the first half of 2009. Many now are
beginning to think that inventories are low, manufacturers have
curtailed production, and the catalog season is about to begin. If the
paper companies maintain a policy of balancing supply with demand, ship
dates and prices could advance. Perhaps by Spring of 2010?
Paper Industry Magazine just published a survey on the paper industry and highlights included
Paper and Paperboard capacity has contracted 7.3% since its 2000 peak.
-18 USA mills were permanently closed in 2008; shuttering 27 paper machines – 14 more machines were shut down at other mills
-In 2007, 17 mills and 38 machines were permanently closed.
-Paper and Paperboard are forecasted to decline another 1.8% in 2009
Magazine closings outpaced
launches in the first half of the year as publishers were squeezed by
the advertising recession. A total of 279 folded while only 187 made
their debut.
I was doing some research of the Book Publishing Industry, a few notes of interest -
Of the 2600 book publishers in USA, the five biggest command 45% of the market share
15.5% Pearson
9% Houghton Mifflin
9% McGaw-Hill
6% Scholastic
5% Bertelsmann
Major American Book Segments
The major Book Segments by revenue include
71% Trade Book
10% Professional Books
9.5% Religious Books
6% Elementary / High School Books
2.5% College Books
1% University Books
The AF&PA confirmed that in 2008, the paper industry recovered
57.4%, up from 56% in 2007. The trend has been up for years; however,
the current recession is allowing for less paper demanded and
therefore, less paper will be available. The value of recycled paper
has also declined. Note: paper and paperboard capacity in USA has
decreased nearly 1% to 96.3million tons. AF&PA forecasts capacity
will drop another 1.8% in 2009.
Following a seven-week shutdown,
Domtar is restarting its 398,000TPAnorthern bleached hardwood market
pulp mill in Woodland, ME. All of the Woodland NBHK output for at least
the next three months has been sold to China.
Shandong Huatai Paper, China’s
biggest producer of newsprint, has ordered an 800,000 TPA coated
woodfree paper machine from Metso Paper. The machine, will be 9.9
meters in width with a design speed of 2,000 meters per minute. A late
2010 start up is planned.
As reported in our past releases, newsprint prices have fallen around
$195/ton or 28% so far this year. Demand has also steadily declined,
but, Kruger, Catalyst, Tembec, and White Birch announced a $50/ton
increase for August shipments, despite the weak market.
Newsprint
demand in North America fell nearly 29% in May – vs. 2008 and 31.7% so
far this year vs at this time in 2008. Furthermore, consumption at US
dailies fell 26% and paper mills only are operated at 67% of capacity
(vs. 94% in May 08).
Note: we continue to report producers continue
to take downtime (693, 000tons or 27% of North America quarterly
capacity during 2Q2009), the reality is that more permanent closures are
inevitable.
The U.S. Postal Service reported a $677 million net loss for May which
yields a year-to-date loss total of $3.4 billion. Also, reported was a
20% drop in overall volume for May and a 13% decline year-to-date.
Periodicals volume dropped 13% for the period and 7% year-to-date.
The Gannett Co. confirmed it will
reduce its workforce. The company is preparing to lay off more than
1,000 employees as the largest newspaper publisher's workforce
continues to shrink along with its advertising sales. Note, we reported
in past that Gannett reduced its workforce 3,600 from 2007 to the end
of 2008.
Vibe, a staple of music journalism
since 1993 and one of the most influential publications has folded. The
company was unable to secure financial backing, or to restructure its
debt. Declines in the music industry and in advertising worked against
the business. It had been a tough year for Vibe, which faced a steep
drop in ad pages and circulation. The magazines circulation base was
600,000 from 800,000. Vibe also had reduced its frequency from monthly
to 10 times a year.
The maker of Kleenex tissues,
Huggies diapers and many other household items plans to cut 1,600 jobs,
of its global work force, as it slims down in the tough economy.
Kimberly Clark does not plan on closing any plants.
Shoppers
have cut back on spending because of the recession, high unemployment
and the housing downturn. Meanwhile revenue, which had been steadily
rising, began to fall late in 2008.
Although the USA tag and label
segments fared better than most in the Pulp and Paper industry, with
2008 growth at 2.1% - this was down from forecasted 5%. Many believe
this segment will begin to witness consolidation. Top ten converters
include-
RR Donnelly
Avery Denison
CCL
WS Packaging
Fort Dearborn
Multi Color
Nashua
York
Spear
MPI Labl
The Erving Paper Company, which has a 40,000TPA operation in
Massachusetts, continues to produce recycled tissue under Chapter 11.
Management sited increased competition, and an underfunded pension plan
as reasons for this protection.
Catalyst Paper will extend
downtime at its recycled newsprint mill in Arizona by an additional 10
days. Catalyst’s Snowflake mill consumes more than 480,000 tons/yr of
recycled paper that would otherwise end up in landfills
The Chicago Tribune Magazine will
cease as a weekly publication after July 28, as part of a series of
changes to the Sunday paper to cut costs.
In
a note to readers, Tribune editor Gerould W. Kern said the magazine
will "appear as a series of themed magazines throughout the
year—roughly once a month beginning in September."
Kern said declining advertising and high cost made weekly publication "unsustainable."
International Paper announced the expansion of its Forest Stewardship
Council (FSC) Chain-of-Custody certification to include a majority of
its U.S. pulp and paper mills. The company will be the largest FSC
manufacturing platform across the globe..
With
its expansion, International Paper's FSC Chain-of-Custody certification
worldwide includes: three Coated Paperboard mills and its six
converting facilities; four Pulp operations; six Industrial Packaging
mills; seven Printing Papers mills and its sheeting operations; and a
number of Foodservice and Shorewood manufacturing facilities.
Although Coy Paper Company continues
to witness price corrosion for Uncosted Free, the price declines appear
to be leveling off. So far, for June, we only hear $5-10/ton discount
from May. This results in 50lbs roll price $810-855, with spot pricing
slightly below $800/ton,. Cutsize office paper transacts $120-1080/ton
(spot below $1000). The two major producers of this grade,
International Paper and Domtar, continue to take down time. May demand
was down nearly 15% from May of 2008.