The Coy Paper Company has always focused on the specialty paper market and now has included chemicals to its product offerings. The company has technical support and blending facilities and will market and distribute the Hartindo Anti Fire chemicals to include AF 21, AF 11E and AF 31.
Many paper mills and coaters are evaluating Coy's product to include in their product lines. Imagine, a fire proof paper and a flame proof paper!!
The chemical offers permanent protection from fire once applied, Hartindo AF21 will protect your home and family, hotels, night clubs, schools, Hospitals 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.

Even with a slightly improved demand at the end of 2009, coated publishing paper prices are almost $150 below their mid-2009 peak. Despite the combined rising costs of raw materials and the loss of black liquor credits, pressure continues on margins for the producers of coated groundwood publication papers. The forecast is for coated paper prices to continue to trend upward and producers to look for more improvement throughout the second half of 2010, assuming the economy does not enter another dip.

While it was true that during 2009, coated paper prices declined, but, in the first half, so did production costs. Unfortunately, the price slide continued despite the return of increased costs toward the end of the year. Pulp costs increased such as softwood pulp, up $200 per ton since their 2009 low, while coated publication prices fell $130 over the same time frame. Producers are also facing further pressure from the rising costs of energy, chemicals, transportation, and other cost components.

The challenge remains for mills due to rising fiber costs and the elimination of the black liquor credits (which will not be renewed). These credits reached as much as $100 per ton of paper. Combined with the other cost concerns noted above, producers will face tremendous margin pressure in 2010 if prices remain at their current levels. Accordingly, look for producers to introduce increased pricing thorough 2010.

The index known as the Pulp & Paper Week composite (includes 23 USA companies) reported forth quarter 2009 earnings up 60% (vs. 4Q08) with sales down 7.5%. For all of 2009, the group’s earnings were down 34.2% with sales down 11.4% when compared to 2008 results. It was noted that 15 of these companies benefited by the alternative fuel black liquor tax credits which offset losses, improved balance sheets, and substantially boosted earnings.

Worldcolor will close its plant in Carroll, IA which will be the fourth closure in the last 12 months. Other shutdowns previously reported on Current News on the Pulp and Paper Industry were located in Oberlin OH, Bromont QB, and Richmond ON.

So many of our readers mail publications or print direct mail marketing pieces; accordingly, a summary of the newest USPS plan. Mail volume is forecast to drop 15% from 177Billion pieces to less than 150Billion by 2020. If no action is taken, this will result is a deficit of -$240Billion by 2020.
Proposed plan is to
-Restructure retiree health benefits
-Fewer delivery days; more locations, more self service kiosks, more user friendly website
-Establish more flexible workforce
-Review pricing on each program, to include a price increase in 2011
-Introduce more products

Notes on report from Business Wire
The Institute for Supply Management (ISM) reported that US economic activity in manufacturing expanded in February for the 7th consecutive month, with the overall economy growing for the 10th consecutive month. New orders and production showed significant month-over-month growth, with the Employment index increasing for the 3rd consecutive month. The paper and printing sector indicators are summarized below.

The Finnish Transport Workers’ Union went on strike this week. If the strike effects the Finnish ports, mills such as UPM Kymmene will lack raw materials, paper storage, and a means to export paper. The mills will have no choice but to shut down. Note, almost half of UPM’s paper production capacity is in Finland, but they plan to deliver orders from mills in other countries.

USA Department of Commerce reported on their preliminary results in its countervailing duty investigation of coated paper from China and Indonesia. They announced a preliminary duty of 12.83% on products from China, and 17.48% on products from Indonesia. Asia Pulp & Paper (APP), a major exporter of coated paper from China and Indonesia to the USA, expressed disappointment with the initial findings.

Department of Commerce’s final ruling is expected to be released in September along with the final ruling on anti-dumping. The last phase of this investigation will occur in October or early November, when the USA International Trade Commission will determine if the domestic paper industry has been harmed.

USA Printers share in the foreign producers disappointment on this ruling. Their coated paper costs will surely increase in a challenging market.

?International Paper, the world's largest producer of paper, will permanently shut down the two remaining paper machines at its Franklin Virginia plant.

To date, electronic books only make up less than 2% of all books sold. Trade books, both hard and paperback, are 35% and mass market printed books are 21%. As far as distribution is concerned, Book chains sell nearly 30% of all the books sold, followed by e-commerce sites at 20%, and the independent shops account for 5%. I would image the digital distribution will be a new channel and experience robust growth once the EReaders start hitting the market in a bigger way.

Condé Nast, Hearst, Meredith, Time Inc. and Wenner Media with the support of Magazine Publishers of America and Bonnier Corp.; National Geographic; ESPN; and New York Media, have reported they will place front-of-book advertisement placements to answer tough questions about their relevancy. In all, close to 100 titles are planning to give up prominent space in their issues for an industry ad campaign that aims to promote magazines as vital.
The community is ferociously determined to correct the misconceptions that have been swirling around the advertising industry. The primary objective is to confirm that printed magazines are still exciting, Mobile, and will still be a strong presence for all to read 'the printed word'. The publications will also educate the public on how, long term, electronic media will devalue its product by offering its content for free online.

Just reading another report confirming producers of Paper and Board in Europe were down nearly 11% to 90Million tons, from 2008. This is the lowest level of shipments since 2001. Similar to the USA, the European manufacturers experienced weak demand and several capacity closures.

The last decade yielded only limited new domestic capacity for the paper industry and an unprecedented number of plant and equipment shut downs. The industry is entering 2010 with a slight breeze to our backs with many markets witnessing small increases in order books from end users that most likely had to restock. Unfortunately, the economy is still not improving to a point that housing starts, bank credit, nor consumer buying has returned with any sustainability. Many of the raw materials consumed in paper making have increased and the black liquor alternative fuel credit is gone. NBSK pulp may raise to almost $880/MT – a 16 month high - and come close to matching the August 2008 peak.
Newsprint continues its challenge into 2010, with both advertisers and readers down, although pricing has improved for the producers. The price has steadily risen from a recent low of $450 to nearly $530/MT. The forecast is for still more shuttering of equipment to balance, the declining demand, with supply.
Uncoated Freesheet producers have announced an increase of $40/ton on business papers and demand appears to be stabilized (although current base is low). The major producers reduced capacity in 2009 and this will balance the market.
The manufactures of Coated Freesheet and Groundwood are still experiencing challenges from the a reduction in both advertising pages and over all circulation. The manufactures have announced price increases, but printers continue to push back citing fear of alienating their customers with advanced pricing.
Virtually all products for Containerboard have increased prices, and converters are paying the new levels. Current order backlogs are OK at best, with export shipments doing well. Real challenge is if the economy does not improve, no one will consume goods that go into boxes.
Our forecast is for a gradual recovery for the paper industry, and trending up from a poor 2009.

As of today, all the major producers of ContainerBoard including International Paper, Georgia Pacific, and Temple Inland have increased pricing. These three leading producers are digging their heels in on the $60/ton announcement for April 1. More than likely, this second increase of the year will happen, despite persistently weak demand. Key issues include tight supply/demand balance, lean inventories, and surging fiber costs.

As we assumed, White Birch joined AbitibiBowater in announcing they will file for bankruptcy protection. White Birch is the second-largest newsprint manufacturer in North America with newsprint mills in Quebec City, Riviere-du-Loup and Gatineau. The company expects operations to continue producing paper for end users.

From recent report by American Forest and Paper Association
The AF&PA reported that USA printing and writing paper shipments went up 9% in January vs. 2009. This is the third consecutive monthly increase when compared to the year before. All paper classifications grew, with coated fee and groundwood - publication having double-digit growth. US purchases (shipments + imports - exports) also went up by +4%, and inventory levels increased 1%, by 9,800 tons from December.

RR Donnelley will acquire Bowne & Co.for $481Million and is expected to close in the second half of 2010. Bowne had revenues of $675Million in 2009 and offers digital print services for healthcare, financial services and others.

Most CEOs running pulp and paper companies believe the ‘worst is over’ and now look for a slow recovery over the next 2+ years. Most admit the industry cycle is mature or even declining and much of the lost demand may not return. The paper, pulp, and packaging industries all need to review their models for long term survival. The last two decades illustrated a trend of mergers, acquisitions, consolidation, and plant and equipment closures. This assisted with the over supply challenge, but if demand continues to be decreasing, a transformation must occur.

The paper companies will need to review other segments and models to be viable as a long term entity. Areas of focus perhaps should include, Chemicals, water treatment, energy, logistics, forest management, and recycling. The paper companies all currently have expertise in these areas as a normal course of business. Now, maybe they should evaluate if these areas could generate new streams of revenue and recreate a ‘new’ entity.

The USA printing industry continues to lobby against the coated paper manufactures that have asked the US International Trade Commission to levy a tariff on Chinese and Indonesian producers. Overall demand for printing is down and the continued competition from electronic communication is fierce. Reports confirm over 73,000 workers in the printing industry lost their jobs in the past 2 years. The printers feel that the imported paper maintains a competitive market, and without China and Indonesian paper, the cost of the largest component for printing costs, would increase. Increased raw material costs will further drive clients away from the printed media and potentially close down printers.
The printing community is fighting to keep the imported coated paper coming into the USA without a penalty tariff.

We often report on the financial conditions for the paper and pulp producers as well as printers, but the entire supply chain has been negatively effected. Poor demand from the printing community negatively effected the latest set of financials from global paper distributor giant PaperlinX. The merchant's sales for the six months to December 2009 fell across the board, with Australian, New Zealand, European and North American operations showing double digit declines; meanwhile, Asia did illustrate some positive results.

We reported earlier in the year, that PaperlinX was successful in the sale of their Tasmanian paper manufacturing operations to Nippon Paper; however, the company is still looking to sell its Burnie paper manufacturing plant, and, if no buyer is found it will close in June 2010.

For the first half of the 2009-10 financial year PaperlinX reported a loss of $175Million, the bulk of this coming from costs associated with its exit from paper manufacturing. The company recorded a 28% drop in group revenues to $2.7Billion, as well as a 24% drop in paper volumes, which the company attributed to its exit from paper manufacturing operations in Australia and the impact of weak markets.

International Paper just announced a $60/ton price increase on containerboard for shipments starting in April. We assume fellow producers will follow such as Temple-Inland, Packaging Corp, Rock-Tenn, Greif, and Sonoco. Also, Boise and Kapstone.

Although inventories for containerboard are down from historical highs for the month of January, they DID increase from January 2008. Prices have increased, but demand for boxes appears stagnate, at best. In fact, Deutsche Bank reported shipments were down over 4% and inventory rose 67,000 tons. The past price increase went through, will the April pop also be successful?

The Reader’s Digest Association has officially emerged from Chapter 11 protection. As part of its restructuring, the publisher reduced its debt by 75% (from $2.2 billion to $525 million). Holders of senior secured debt transferred ownership of Reader's Digest to the lender group and will effectively receive equity.

Most of the major paper sectors have announced price increases, and end users are paying the new price. It appears many of the raw materials including chemicals, pulp, energy, and transportation have all increased, and the infamous black liquor credit is gone. As we outlined in past releases, the forecast will be a slow one for paper producers to recover. Demand continues to be soft and the industry continues to have too much capacity.

The current challenging magazine industry on publication's revenues has resulted in many reviewing their membership to the Audit Bureau of Circulation (ABC). For decades, ABC was considered the bible of auditing over 750 consumer magazines for circulation. However, over the past few years, about 100 of the smaller (or shuttered) have dropped ABC. The most common reason relates to the $10,000 fee ABC charges each year for the audit.
Advertising pages have dropped some 23% from 2008 to 2009, and significant revenue along with it. Many of the smaller publishers are cutting cuts to merely survive.

Appleton, SAPPI, and NewPage continue their efforts with the USA International Trade Commission to review coated paper imports from China and Indonesia. The USA paper producers would like the government to impose a 100% tariff because they feel the Asian governments are unfairly subsidizing the coated paper producers. Most believe the final ruling will not be awarded until the Fall of 2010; however, the USA Dept. of Commerce is to make a ruling by March 1.
Many of the domestic printers are fighting this hearing for fear that if the results support the USA producers, coated paper will cost more. During the past 18 months, although the paper markets have been poor, there were no significant increases in imports. Printers also cite domestic coated manufactures have not witnessed their market share to decrease.
Printers already are experiencing a challenge just with poor demand, the fear of coated paper increases will only produce a more depressed industry.
Comments?

The world’s largest paper producer of magazine papers, Kymmene, just announced it will temporarily reduce its work force at both the Kaukas and the Kymi mills in Finland. Management cited poor demand for the companies paper products and an objective to improve costs. UPM Kymmene has 64 plants in 15 countries.

The NewPage mill in Rumford Maine recently started up a paper machine that was shut down in September. This machine manufactures coated paper for magazines. The mill is now operating all equipment at the Rumford location

Lately, pulp and transportation cost increases have forced many mills to evaluate paper prices. Sappi will increase prices on coated woodfree paper sheets and rolls by 10% starting with March shipments. Also citing increased costs and unsustainable margins, Lecta, the second largest European coated woodfree paper producer, announced a 9-12% price increase on coated woodfree paper, effective with deliveries as of March 15th.

The workers at the Fraser Paper Madawaska paper mill in Maine agreed to have their paychecks cut by 8.5% as part of a new contract mill management says is needed to keep the facility from closing. This initiative will save the company $4Million in annual savings.

Reader’s Digest had historically controlled the top spot for the biggest selling consumer magazine. The Audit Bureau of Circulation’s latest figures reveal that
this is no longer the case.

Meredith's Better Homes and Gardens now holds that distinction, with a total circulation of 7.6Million, according to the ABC covering the June-December 2009 period. It should be noted, Reader’s Digest, now No. 2 at 7.1 million, deliberately cut its circulation in recent years to improve its profitability.

15 companies recently obtained Forest Stewardship Council certification for their management practices covering a total area of over 1.5Million hectares. Applicants, including AbitibiBowater, Domtar, and Kruger among others. The Rainforest Alliance’s Smartwood Program conducted the assessment. Sustainability and environmentally friendly initiatives continue to be important programs for the Pulp and Paper industry.

The major marketers are learning that traditional (mailed) direct mail becomes a more successful campaign when combined with digital marketing. The final figures for 2009 are not yet in, but, in 3Q 2009, US consumers received 5.2 billion pieces of direct mail, a drop of 27% from 2008. Marketers are finding that with reduced spending budgets they are sending fewer pieces, but more targeted. The companies are complimenting these efforts with emails and witnessing increased responses.

From a Pulp and Paper Week Report
Barclay's Capital analyst, Peter Ruschmeier, estimated US uncoated mechanical paper (groundwood containing paper used in inserts, paperback books, and certain magazines) is to increase 22.6% in 2010; coated freesheet to rise 14.4%; coated mechanical (publication papers) to be up 13.2%; market pulp up 2.0%; and uncoated freesheet up 1.1%; with newsprint down 7.2%. Many industry observers feel that demand will increase in 2010 and rising costs will squeeze margins. Most pulp, paper, and board producers will focus on raising selling prices to offset margin pressure.

Coy Paper might take some exception with the aggressive growth figures on both uncoated and coated groundwood papers as well as coated free sheet. Unless advertising dramatically improves, I would be hard pressed to forecast a growth of even half these figures. We DO agree that mills will attempt to increase pricing (for all grades) throughout the year in an effort to stay ahead of the cost curve.

After a punishing first half of 2009 for magazine sales at the newsstand, many of the industry’s biggest newsstand sellers witnessed sales declines begin to at least level out in the second half of the year.

Single copy sales declined 12.4% in the first six months of the year. It should be noted that results were partly affected by a disruption in the wholesaler delivery chain which led to delays in getting issues to stores. The challenging economy is also at blamed for a decline in single-copy sales.

In the second half, though, single-copy sales declines narrowed for big newsstand sellers like People, In Style, Glamour, Family Circle and Cosmopolitan.

Not all shared in the improvement. Good Housekeeping’s newsstand sales fell nearly 30% on top of a 17.7% decline in the first half. Vogue was down 15% and Men’s Health, 14%.

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%

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 market and 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.

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.

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.

Exempts from Deutsche Bank - Equity Research

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.

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.

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.

For the second time, Longview will increase its unbleached bleached kraft paper grades $50/ton.

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.

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

All new – you can now subscribe to Coy Paper’s News releases and have them come directly to your computer – for free. It's easy, go to http://psvallely.blogspot.com/ on the right side click on FOLLOW and you will automatically receive this blog. The Current News on the Pulp and Paper Industry is a daily read by hundreds of professionals in the industry as well as research analysis’s and investors.

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.

The Wausau Paper Mill just announced it will increase prices for Astrobrights (+$2.00/cwt); Exact Brights (+$2.00/cwt); and Astroparche (+$5.00/cwt).

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 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.

Excerpts from Forrest Research Study

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.

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 !)

The Audit Bureau of Circulations reported on 1H2009 advertising and we share a few

BusinessWeek
Total Circulation (09/08/%change) 921,423…….925,225….-0.4%
Single Copy (09/08/%change) 27,953….29,917….-6.5%

Forbes
Total Circulation (09/08/%change) 913,655….926,899…-1.4%
Single Copy (09/08/%change) 27,172….32,096….-15.3%

Time
Total Circulation (09/08/%change) 3.27M….3.29M….-0.06%
Single Copy (09/08/%change) 100,382….95,950….+4.6%

Newsweek
Total Circulation (09/08/%change) 2.64M….2.65M….-0.03
Single Copy (09/08/%change) 64,866….82,756….-21.6%

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 the last 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.

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.

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."

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 Corner Brook Pulp and Paper mill will start up. It was down since October 12.

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

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.

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.

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.

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 Paper safety 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.

The bankruptcy court approved the sale of the Sun-Times Media Group to STMG Holdings LLC, led by James Tyree.

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).

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%)